As Bayfront Health St. Petersburg steadies its finances, charity care takes a hit

Dr. Matthew Swick, left, performs ankle surgery on a patient recently at Bayfront Health St. Petersburg. New LED lighting fixtures, above, are part of a $5 million upgrade to the operating rooms. Bayfront has seen $60 million in upgrades in the last three years.
Dr. Matthew Swick, left, performs ankle surgery on a patient recently at Bayfront Health St. Petersburg. New LED lighting fixtures, above, are part of a $5 million upgrade to the operating rooms. Bayfront has seen $60 million in upgrades in the last three years.
Published May 1, 2016

ST. PETERSBURG — Behind the thick wooden doors of the operating suite at Bayfront Health St. Petersburg, surgeons use a new $2 million robot to perform precise movements inside a patient.

Look around and there is more: special lighting, new anesthesia machines, new instruments — just a few of the upgrades totaling $60 million that have been made throughout the hospital over the last three years.

In that time, Bayfront has transformed from a revered independent institution on the brink of bankruptcy to a sleeker, slimmed-down profit center with corporate headquarters in Tennessee. It has more staffed beds, fewer employees and a regional network of health centers to steer patients its way and enable it to buy in bulk.

But the changes have also produced a result that many feared and predicted when a for-profit hospital chain bought Bayfront in 2013, only to be swallowed up the following year by a larger one.

The hospital, which still sits partly on public land, provided nearly 20 percent less charity care in 2014 than it did in 2012, according to the latest available state records.

The turnaround formula was a familiar one. "It basically is growing volume, controlling costs, and billing and collecting that which is owed to you," said Bayfront CEO Kathryn Gillette. She and others say the strategies saved Bayfront from closing its doors for good, and enhanced its quality of care.

Ask around, however, and the feeling is that something important got lost in the process.

"To me, that's alarming," said former St. Petersburg City Council member Wengay Newton, lamenting the drop in charity numbers.

"Either they have a perfect model that should be patented, or they are cherry-picking their patients."

• • •

Bayfront traces its history back to 1906, when a local doctor built St. Petersburg's first centralized health facility.

Over time, Bayfront became one of the community's most vital institutions, building a reputation for providing quality care while also serving thousands of indigent patients. Meanwhile, it managed to remain independent and not for profit — a rare feat for any facility in the era of soaring costs and shrinking reimbursements from Medicare and Medicaid.

By the end of 2012, however, the hospital's occupancy rate had dipped to about 46 percent, state records show. Its operating losses that year topped $16 million.

The hospital needed a partner with deeper pockets and fresh strategies, said St. Petersburg Deputy Mayor Kanika Tomalin, who was Bayfront's vice president for strategic planning at the time.

Bayfront was sold twice over the next 12 months, first to a Florida-based for-profit hospital chain called Health Management Associates, and then to the Tennessee-based national hospital giant Community Health Systems.

A nonprofit organization called the Bayfront Health Education and Research Organization acquired a 20 percent stake in the hospital with the goal of carrying out Bayfront's civic mission.

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Gillette, the CEO, said Bayfront started saving money immediately because it became part of a larger network. HMA made Bayfront the hub of a seven-hospital system reaching from Brooksville to Punta Gorda — a structure the new owners kept in place.

Transfers of patients from its new sister hospitals boosted Bayfront's revenue, Gillette said. To build capacity, Bayfront increased the number of staffed beds from 395 to 480, state Agency for Health Care Administration records show.

At the same time, the hospital cut the number of full-time employees from 1,714 to 1,418, records show. (Counts do not include physicians, who may or may not be hospital employees.) Gillette said most of those workers were in housekeeping and food services, both of which were outsourced to a national company.

Jack Needleman, a UCLA health management professor who reviewed Bayfront's finances, said the employee reductions were key to the turnaround.

"Half of hospital costs are in labor," he said.

Bayfront had other cost-saving strategies, too. For example, it changed the anesthesia group to another provider that was less expensive, Gillette said.

Some of the savings were invested back in the hospital. Within three months of the initial acquisition, the new owners had spent more than $18 million on capital upgrades, Gillette said.

It paid off. By the end of 2014, the once upside-down Bayfront was $27 million in the black, according to the most recent public financial documents available.

• • •

When Bayfront was sold to Health Management Associates in 2013, charity care was a top concern.

Because the hospital is partly on city-owned property, the St. Petersburg City Council had to sign off on the deal. And the council, as well as then-Mayor Bill Foster, wanted a guarantee that Bayfront's new owners would continue caring for the poor.

"When they came in and were willing to make Bayfront the hallmark of their system, they committed to the charitable work," Foster recalled. "That was part of our deal."

In its lease with the city, Health Management Associates agreed to continue treating all patients with incomes below 200 percent of the federal poverty level regardless of their ability to pay. But the lease never specified a minimum amount of charity care the hospital would have to perform.

Charity care fell off when Bayfront morphed into a for-profit institution, state data shows.

While the hospital's revenues went up between 2012 and 2014, the amount of the charity care it performed dropped from $63 million to $51 million. Indigent care as a percentage of the hospital's business dipped from 5.1 percent to 3.2 percent, according to an analysis by Gov. Rick Scott's Commission on Healthcare and Hospital Funding.

The latter figure is lower than the average for hospitals across the region (4.2 percent) and less than half of the 7 percent reported by nearby St. Anthony's Hospital, a member of the not-for-profit BayCare network.

Put another way, St. Anthony's is a smaller hospital with about 90 fewer beds than Bayfront, but provided $31 million more worth of charity care in 2014.

St. Anthony's president William Ulbricht said both the overall volume and indigent care at his hospital had increased since the Bayfront sale. Despite the cost, he added, the hospital has no plans to scale back.

"That's the driving force behind what we do," he said.

When asked about Bayfront's figures, Gillette said the hospital had not changed its policy on charity care. She said the way hospitals classify their charity care is "not always consistent" — and said Bayfront had provided $75 million in discounts to other uninsured patients in addition to the $51 million in indigent care in 2014.

"There's no question in my mind that our charity care is as we obligated this hospital to do — and, in fact, is up," she said.

But Gillette did not bring up the $75 million during a June 2015 presentation to the City Council on charity care. Rather, she told council members uninsured discounts and indigent care were "two different things."

Later, in an interview, she said the hospital's new administration is "probably more aggressive than Bayfront might have been in the past at collecting what we believe is owed to us." Pinellas County court records show Bayfront filed more than 400 small claims cases against patients in 2015 — a contrast to previous years, when it rarely sued for payment.

Lawton Burns, a health care management professor at the University of Pennsylvania Wharton School, said Bayfront has followed a fairly typical playbook. For-profit owners come in, streamline management and purchasing, invest money and attract better doctors, he said.

"The downside is you are doing less charity care," Burns said. "The hospital loses money on that."

Foster, the former mayor, didn't see another option.

"I am convinced that they would not have survived if they continued to try to be a standalone," he said.

But City Council member Steve Kornell, who voted against the Bayfront lease because the charity care provision wasn't specific enough, said he was disappointed.

"I understand there are pressures on the hospital," he said. "Charity hospitals are difficult to manage. . . . But how was that profit going to come from anything other than how we treat charity cases?"

• • •

What about the quality of care?

Bayfront's rates of hospital-acquired infection, readmissions and complications were in line with national averages, according to the latest Medicare reports.

In a national survey, 54 percent of Bayfront patients said they "always" received help as soon as they wanted, compared to 62 percent of patients in hospitals across Florida and 68 percent nationwide.

Still, two-thirds of Bayfront patients said they would "definitively recommend the hospital." Statewide, the figure was 69 percent. Nationally, it was 71 percent.

"I often say that Florida patients seem to be more unhappy than the rest of the nation," Gillette said. "But we're in the ballpark. We really are. And we're always striving to do better."

There is more to come, she added. Bayfront is in the process of redesigning its emergency room, and refurbishing the patient care areas in its orthopedics and neuroscience departments.

Meanwhile, the Bayfront Health Education and Research Organization — now known as the Foundation for a Healthy St. Petersburg — is poised to award $4 million in grants to community organizations, CEO Randall Russell said. The grants seek to help improve community wellness and could fund ideas ranging from health clinics to exercise programs.

Steven Dupré, a Tampa lawyer who was vice chairman of the Bayfront board during the sale and now chairs the foundation, said he is "generally very happy with where things stand."

"If you've had the opportunity to tour the place, the bricks and mortar have been substantially improved," he said.

Tomalin, the deputy mayor, said she, too, was "pleased with Bayfront's progress." But the hospital "clearly has a legacy around charity care, and it is absolutely imperative that it continues on that commitment."

"As a community," she said, "we should definitely hold Bayfront and all providers of care accountable to our expectations."

Times computer-assisted reporting specialist Connie Humburg contributed to this report. Contact Kathleen McGrory at or (727) 893-8330. Follow @kmcgrory.