1. Archive

Once-ailing hospitals make dramatic financial recovery

Centurion Hospital in Carrollwood had been losing money for years and had filed for protection from its creditors in bankruptcy court when University Community Hospital bought the facility last November.

As Centurion, the hospital lost $3.6-million in fiscal year 1993. But in the past 10 months, the hospital, now known as University Community Hospital of Carrollwood, has earned a profit of about $200,000.

"That's a $4-million turnaround in one year's time," said John Andreas, spokesman for University Community. "Not bad."

The Carrollwood hospital is one of the more dramatic examples of hospitals nationwide that are coming out of the financial doldrums of the 1980s. After more than a decade of failing financial health, many hospitals are getting better.

Some, like the Carrollwood hospital, are finding their financial salvation in mergers, while others are aggressively seeking ways to operate more efficiently.

"Not all hospitals, but many of them, are doing better," said Ed Towey, spokesman for the state Agency for Health Care Administration.

The latest figures from the health care agency show that 29 of the 51 hospitals in Pinellas, Hillsborough, Pasco, Hernando and Citrus counties earned more money, or at least lost less, in 1993 than in the previous year. Only 15 of those 51 hospitals lost money in 1993, the figures show.

With more pressure to keep costs low and quality high, Towey said, hospitals have been forced to change their operating methods. Hospitals began suffering in the mid-1980s, when Medicare started restricting the amount it would pay hospitals for services in specified Diagnostic Related Groups. Since then, managed-care providers such as HMOs and PPOs have started doing the same.

In the past, "there were no incentives at all," Towey said. "The incentives were in the opposite direction. It was use, use, use and spend, spend, spend."

The incentives have led hospitals like Clearwater Community and Tampa General to evaluate every aspect of their management and tighten their administration.

Clearwater Community, which lost $1.5-million in 1991, turned a profit of $5-million in 1993. Part of that turnaround can be attributed to debt restructuring and repayment, said chief financial officer Tom Mathews, but some of the profit resulted from streamlining.

"The health care dollar, as far as what the providers, the insurance carriers and even the private payers can afford to pay, keeps shrinking," Mathews said. "So in order to continue to provide quality care, which includes purchasing all the latest technology, you have to be profitable. And the only way to be profitable is through cost containment."

Streamlining is something hospitals won't be able to avoid if they want to survive, Mathews said.

In fact, one of the hospitals among the top five earners for 1993 has been involved in cost-cutting strategies longer than most. HCA Bayonet Point-Hudson Regional Medical Center in Pasco County started six years ago by involving employees in seeking out ways to improve quality and lower costs, said hospital vice president Alan Levine.

Levine said the move earned the hospital a commendation for excellence from the Joint Commission on Accreditation of Healthcare Organizations. It has also helped the bottom line. The hospital showed a profit of $9.7-million in 1993, compared with $3.8-million two years earlier.

"We let employees identify opportunities to improve the way they do things every day," Levine said. "We empower them, which really improves quality for our patients and improves costs."

Kim Streit, who analyzes data for the Florida Hospital Association, said preliminary 1993 figures show that hospitals statewide were able to lower their costs. For several years, hospitals had been averaging a 10 percent increase in the cost of services, she said, but the estimated cost increase in 1993 is about 7 percent, she said.

Cost control has helped Mease Healthcare produce a dramatic turnaround since 1990 in the financial health of the two hospitals it operates: Mease Hospital and Clinic Dunedin and Mease Hospital Countryside. The two hospitals lost a total of $6.7-million in 1990, but their finances have been improving since then.

Operating profits for 1993 stand at $1.7-million for the Dunedin hospital and $4.5-million for the Countryside hospital, according to Mease Health Care president Philip Beauchamp. Beauchamp said he expects 1994 profits for both hospitals to be even higher.

State figures show a bottom-line loss for the two hospitals, but those figures include a onetime $15-million loss that is on paper only. The figure represents money Mease borrowed when it refinanced bonds at a significantly lower interest rate, Beauchamp said. Because of the lower interest rate, the move will save Mease about $17-million over time.

Beauchamp attributed the hospital's success to a streamlining of administration and the acquisition of profitable new services, such as a transitional care unit. The organization also has been successful in signing contracts with HMOs and PPOs because it has forged new alliances with primary care doctors, in some cases by purchasing physician practices.

"Mease has had a remarkable turnaround in the past three years," Beauchamp said. "And we have not increased our prices in the past two years. We are learning to do more with less."

For the third year in a row, the biggest earner in the five-county area was St. Joseph's Hospital in Tampa. Yet the $15.4-million the hospital earned in 1993 was significantly lower than the $21.9-million profit it reported in 1992.

Earlier this year, St. Joseph's merged with St. Anthony's Hospital in St. Petersburg, a move hospital officials hope will help both facilities continue to reduce costs. St. Anthony's had started along that road already, and in 1993 it managed to post a profit for the first time in several years, albeit a modest $75,906.

With the merger, the hospitals expect to scale back administrative salaries by eliminating duplicate jobs and to save money through better purchasing power. Already, more than 20 management positions have been eliminated.

"When you think about health care reform, it's really about cost containment," said Revonda L. Shumaker, who was appointed president of St. Anthony's in September. Shoemaker said salaries account for more than 50 percent of the cost of running a hospital, which is one reason hospitals are finding mergers and alliances increasingly attractive.

Other hospitals that showed significant financial improvement include All Children's Hospital in St. Petersburg, which reported a profit of $8.4-million in 1993, compared with a 1992 profit of $4.9-million. Morton Plant Hospital in Clearwater earned $9-million in 1993, compared with a profit of $5.2-million the year before.

The state's figures show the biggest regional loser in 1993 was Brooksville Regional Medical Center in Hernando County, a hospital that has been in financial straits for several years. The company that operates the hospital, Regional Healthcare, filed for Chapter 11 reorganization in early 1993.

Brooksville Regional also reported in 1993 the lowest occupancy rate in three years: 48.5. Occupancy rates are still a major problem for many hospitals and remain low statewide, the state's Towey said. The state average has been hovering slightly above 50 percent, he said.

Only 15 of the 51 hospitals in the five-county region reported a higher occupancy rate in 1993 than in 1992. Twenty-two hospitals reported 1993 occupancy rates below 50 percent.

Towey said health care analysts expect that to change in coming years as more hospitals look for ways to save money. More hospitals are likely to close or at least close wings or reorganize to reduce the number of empty beds.

"With half of the beds empty, that's only logical," Towey said. "Ultimately, you're going to see hospitals close down."

Health of many hospitals improves

Many hospitals are beginning to get well financially, although some are still having problems. The Times looked at the bottom line of hospitals in Citrus, Hernando, Hillsborough, Pasco and Pinellas counties to find out which did the best and the worst.

The five hospitals that earned the most in 1993

Net income

Beds 1993 1992

St. Joseph's Hospital (Hills.) 649 $15,397,782 $21,931,848

Largo Medical Center (Pinellas) 256 $12,427,701 $12,081,894

Tampa General Hospital (Hills.) 819 $10,785,937 -$224,968

Bayonet Point/Hudson Regional

Medical Center (Pasco) 256 $9,739,984 $7,146,921

Morton Plant Hospital (Pinellas) 529 $9,097,648 $5,204,714