BROOKSVILLE — Since moving into Hernando County nearly 15 years ago, Health Management Associates has transformed two bankrupt hospitals into modern facilities with whopping profit margins.
Brooksville and Spring Hill Regional Hospitals are a success story for the for-profit chain, which cites them as an example of how it turns around troubled institutions while providing high quality care and serving the poor.
It's a track record the Naples-based company has urged St. Petersburg officials to examine as HMA seeks an 80 percent ownership stake in Bayfront Medical Center. Bayfront handles some of the region's most complex cases, as well as many of its poor and uninsured. The not-for-profit has struggled financially for years.
"We truly hold our hospitals up as who we are," company senior vice president Alan Levine told the St. Petersburg City Council last month.
The Tampa Bay Times reviewed public financial, charity and quality records for HMA's 22 Florida hospitals. The complex picture that emerged suggests city leaders, who must approve any ownership change because the hospital sits on city-owned property, could have much to weigh. Among the findings:
• The two Hernando HMA hospitals last year posted a remarkable 21.5 percent operating margin — more than four times the state average. Bayfront had just a 0.4 percent margin.
• Compared with Bayfront, most HMA hospitals in Florida provide low levels of care to poor people who have no insurance, according to state records. HMA hospitals do treat many patients on Medicaid, government insurance for the poor, which the company says ought to count as community service.
• HMA executives tout quality awards for following best practices. Yet many HMA hospitals have been penalized for readmitting too many Medicare patients too soon after discharge, part of a federal effort to improve care.
In a recent report by 60 Minutes, former employees said doctors at some HMA hospitals outside Florida were pressured to admit patients solely to increase revenues. Company officials denied that, but acknowledge ongoing federal investigations into issues such as the medical necessity of emergency room tests and patient admissions. Similar accusations are the focus of whistle-blower and class action lawsuits.
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HMA quickly got to work after acquiring the two bankrupt Hernando hospitals for nearly $70 million in 1998.
In Spring Hill, it expanded the emergency room and added a critical care unit for newborns. In Brooksville, it abandoned an old hospital downtown and built a 120-bed facility near the new Suncoast Parkway, with centers for chest pain and strokes.
"HMA had the wherewithal to come in and deal with the problems that the hospitals had developed," said longtime Hernando resident Mary Beth Gary, a CPA and chairwoman of the hospitals' board of trustees.
HMA leases the county-owned buildings, paying $3.9 million last year. It doesn't pay Hernando property taxes directly, as it would in St. Petersburg.
Over the past five years, HMA says it has invested more than $16 million in the hospitals, which report finances jointly.
Last year, the two posted a 21.5 percent operating margin, dwarfing the state average of 5.4 percent. Only two of HMA's other Florida properties did better; a half dozen operated at a loss.
Executives attribute the Hernando success to the buying power of a 70-hospital national chain, as well as targeted marketing efforts and data collection that aids investment decisions. Much of the staff and overhead are shared between the two hospitals. HMA's position in the community — there's just one other hospital in Hernando — has helped it negotiate "advantageous" contracts with private insurers, said Conrad Deese, north Florida division chief financial officer.
Similar benefits could come to Bayfront, slated to become the referral hub of a network of six other hospitals stretching from Hernando to Port Charlotte. HMA plans to add a comprehensive stroke center at Bayfront and to promote lucrative services in the neurosciences and robotics.
"Our formula is not rocket science," HMA's Levine said, explaining that it combines aggressive cost controls with growth-oriented investment, while keeping patients and doctors happy. "If you do all of those thing well, then you will be successful."
HMA's other bay-area hospital, Pasco Regional Medical Center, posted a more modest yet still impressive 8 percent operating margin last year. Levine explained that a large physician group that is particularly cost-conscious accounts for the difference.
Bayfront officials said it's premature to discuss financial targets.
"At this point, we're still looking at generalities and big picture as opposed to the tactical piece," said Bernie Young, chairman of Bayfront's board of trustees.
Is there a profit level so high that Bayfront believes returns should be invested in the community rather than benefit HMA shareholders?
"Bayfront does not agree with the assertion that healthy financial performance in any way impedes a hospital's ability to care for the community," said Kanika Tomalin, vice president of strategic planning. "In fact, Bayfront believes it is just the opposite and has high expectations that with improved financial performance, our ability to care for those in need will be elevated."
Asked about the Hernando profits, Gary demurred.
"Obviously, the entity must make a profit," she said. "The specific percentage they should or shouldn't make is another issue."
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As part of its deal with Hernando, HMA agreed to maintain charity care practices, as it has pledged at Bayfront.
But assessing commitment to charity care is not simple.
In 2011, just 2 percent of charges at the Brooksville-Spring Hill hospitals met the state's definition of charity — uncompensated care provided to patients who earned 200 percent or less of the federal poverty level.
That ranked in the bottom third of the region's approximately 30 general hospitals.
Bayfront placed in the top third, with 5.7 percent charity. But that fact alone doesn't explain Bayfront's struggles.
St. Anthony's Hospital, a not-for-profit less than 2 miles from Bayfront, posted a 10 percent operating margin in 2011. And it provided slightly more charity care than Bayfront.
The only Florida HMA hospital reporting Bayfront-level charity — one in Key West — boasted a 28 percent operating margin.
Levine called the state's charity statistic misleading — though it comes from the Agency for Health Care Administration, which Levine headed under former Gov. Jeb Bush.
By including Medicaid patients, he can say that 27 percent of the care delivered at the Hernando hospitals in 2010 went to the poor. At Bayfront, the combined figure was 29.5 percent.
Medicaid reimbursements are low, so the company loses money on the service, officials said. In Hernando, its figures show that Medicaid childbirth and neonatal care services last year operated at a 43 percent loss.
Yet officials declined to detail how they made up those losses to post high profits.
"It just depends on a lot of variables" in hospitals and communities, Levine said.
HMA's own policies may contribute to the low charity numbers, officials said. Self-paying patients receive a 64 percent discount regardless of income, saving the expense of verifying they qualify as charity cases.
But outside experts say Medicaid and charity are not the same. Even if Medicaid isn't as generous as hospitals might like, it helps the bottom line.
"HMA cannot go around redefining statutory definitions of charity care to make it appear they are providing more than they actually are,'' said Jay Wolfson, a professor and health policy expert at the University of South Florida. "It's a disservice to the community, and it's a disservice to other health care institutions."
Calling Medicare charity is "an old trick. We used to catch hospitals doing that years ago," he added. "It's not right."
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The Joint Commission, which accredits hospitals, grades institutions on measures known to improve patient outcomes, from timely delivery of beta-blockers to appropriate use of antibiotics and administration of flu shots.
Forty-one of HMA's 70 hospitals earned top honors in the most recent report — compared with 18 percent of U.S. hospitals evaluated, a fact the firm touts.
HMA's three local properties earned the recognition. Bayfront did not.
Such quality checks are important, even if they don't measure actual outcomes, experts say. But the federal government is also interested in another standard.
With nearly one in five Medicare patients returning to the hospital within a month of discharge, the government this fall began penalizing hospitals for high readmissions. Around two-thirds of the hospitals evaluated were penalized, including many top-tier institutions.
The Hernando hospitals did better than many HMA facilities, and were penalized just 0.16 percent. Bayfront was penalized 0.35 percent.
But like most facilities, the Hernando hospitals have had complaints. In May, the state fined Brooksville Regional $3,000 in the case of a woman sent home after a complicated colonoscopy, despite complaining of extreme pain. She turned out to have a perforated bowel and eventually died. Records failed to show staff had fully assessed the woman's pain before discharging her.
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After watching the 60 Minutes investigation, St. Petersburg City Council member Charlie Gerdes says he plans to "be a lot more suspicious" about HMA.
"I want to listen to how independent is Bayfront going to be from the rest of the HMA organization," he said. "Bayfront itself has a very stellar record of compliance and charity work, all the things that we want to continue."
Council member Wengay Newton said he'd prefer to defer a decision until the federal investigation concludes.
"It's bad to have things that just keep popping up," he said.
Letitia Stein can be reached at email@example.com or (727) 893-8330.