Las Vegas hospital industry still healing, not yet ready for discharge

Although robust by one measure, a thorough examination of the Las Vegas hospital industry’s financial health indicates that it is not ready for discharge, even after a lengthy convalescence.

Results for 2012 show a collective operating profit of $89.9 million, the best ever and the first in six years, according to reports the hospitals provide to the state’s Department of Health and Human Services.

This marked a sharp reversal from the $64.4 million the valley’s 13 acute care hospitals lost in 2011 and the $369 million in operating losses racked up in the five-year period of 2007-11.

Those years — and the combination of economic slump and expanded facilities — dispelled the long-standing nostrum that hospitals were recession-proof because people always get sick.

Much of the overall 2012 improvement — nearly 90 percent — stemmed from a $137.1 million year-to-year improvement at University Medical Center.

The public hospital took advantage of a new federal reimbursement program involving Medicaid and Medicare payments, according to CEO Brian Brannman, and part of the 2012 numbers it reported include a one-time bulge from retroactive payments for two prior years.

The improved hospital financial results, however, don’t mean the medical industry here has fully recovered.

“We are still in an economic recession compared to the period prior to 2007,” says Dr. Howard Baron, immediate past president of the Clark County Medical Society.

For example, the number of patients admitted to hospitals and the total number of days they occupied beds both declined last year. And eight of the 13 acute care hospitals in Las Vegas reported lower operating incomes than in 2011. Four posted losses.

MANY WITHOUT INSURANCE

A Las Vegas unemployment rate still slightly above 10 percent leaves many people here without medical insurance. And experts agree that many of them put off elective procedures because they cannot afford them.

In addition, says consultant Scott Weiss, people have even scrubbed checkups with primary care physicians, which can worsen health problems.

“They use the ER (emergency room) for primary care because they wait until they are so sick they have no choice,” says Weiss, an officer in the Southern Nevada Medical Industry Coalition.

So not only do they enter a hospital with little or no means to pay, they run up higher bills than would have been necessary with preventive care, he says.

Inpatient and outpatient bills written off as discounts for uninsured patients or bad debt and charity care hit $1.7 billion last year, a 42 percent rise since 2008. During the same span, revenues that the hospitals actually received rose only 12 percent to $3.1 billion.

These write-offs come on top of the deductions and discounts that hospitals routinely absorb from government programs and private insurers. The hospitals sent out bills for $18 billion at list prices — what people theoretically would pay without insurance — but collected just 17 percent of that.

On one hand, some in the industry point out, the overall results are depressed every year by an expense called “home office allocation,” by which an individual hospital sends money to support its parent corporation. This ran $154.2 million last year and has moved up and down in the recent past. Only county-owned UMC escapes this obligation, and nine of the other 12 hospitals belong to for-profit chains.

The industry’s financial performance, while largely unseen by the general public, can erode the quality of care over the long run, according to hospital observers. Brannman says much of the technology that forms the modern hospital’s backbone comes with big price tags, such as ultrasound machines at $50,000 to $90,000 each and CT scanners that top $1 million.

“To the extent we don’t have healthy (profit) margins, it makes it difficult to keep up with the technology and be able to provide the best quality of care,” he says.

TIGHER STAFFING

Hospital chains have long contended that they can offset the financial pressures because they can raise critical financing more easily than stand-alone hospitals. In addition, diverse geography and practice strengths help steady lagging properties with the cash flow generated by stronger ones.

For example, HCA, which owns Sunrise, MountainView and Southern Hills, said in a prepared statement, “(W)e are encouraged by the performance of all our facilities in 2012. This level of performance allows us to reinvest in our facilities and our people.”

Both Sunrise and Southern Hills posted operating losses last year, while MountainView improved sharply and has undertaken a major expansion and renovation project.

Baron, however, notes it can work the other way: “Maybe the mother ship is not going to be so generous with a hospital that is losing money.”

He adds that side effects have already shown up in the form of tighter staffing.

“Nurses are being called on to do more and more with less and less,” he says. “You see people scurrying around to keep up with their duties.”

At some hospitals, for example, people assigned to answer phones and monitor the desk at a nursing station have dis­appeared, so it may take many rings before someone picks up.

According to the state reports, three of the five hospitals owned by Universal Health Services finished 2012 with smaller staffs than a year earlier. The category is measured by full-time equivalent positions, and includes nurses, aides, orderlies and a range of other job descriptions.

The entire county finished the year with 39 fewer positions, including 23 nurses, out of 15,325 total full-time equivalent positions.

STIFF COMPETITION

Financial results for individual hospitals include some repeats of recent years. Both Southern Hills and the St. Rose Dominican Hospital’s San Martin campus posted losses, although Southern Hills moved closer to the break-even point.

Within sight of each other in the southwest corner of the valley, they were planned more than a decade ago when real estate developers projected that area would boom for years. Both hospitals, however, were left surrounded by too much desert when the housing market cratered five years ago.

The St. Rose-de Lima campus, located in a section of Henderson with high Medicaid and uninsured populations, also continued to lose money.

Sunrise Hospital and Medical Center, also with a high Medicaid and uninsured patient load, showed a loss after a profit in 2011.

MountainView, in the northwest valley, more than doubled its profit as it stepped up an emphasis on specialties that serve senior citizens in nearby sections of Summerlin. The hospital is now in the process of finishing a $70 million expansion and renovation project, including a revamped emergency room, new intensive care beds and more general beds.

St. Rose-Siena, Summerlin and Spring Valley hospitals remained in the top ranks of the financial performers, making profits in 2012.

Overall, Baron says, the competition to draw patients and boost financial results has heightened around the valley:

“You see it when you drive down 215 with all those billboards advertising ER wait times.”

Contact reporter Tim O’Reiley at
toreiley@reviewjournal.com or 702-387-5290.

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