State: WVMC most profitable, least charitable
The hospital disputes the latter, arguing state methodology fails to capture its full contribution.
WVMC is one of only two in Oregon operating on a for-profit basis, joining the McKenzie-Willamette Medical Center in Springfield. All other Oregon hospitals operate on a not-for-profit basis, which extends a tax exemption to them in exchange for providing a “public benefit.”
The report lists the two for-profit hospitals as the state’s biggest margin generators by far, but says WVMC spends millions less on charity care than its not-for-profit counterparts, despite being able to marshal greater resources.
The Oregon Health Authority issued the publicly available report in July. It tracks hospital capacity, utilization and finances from 2009 to 2011.
It can be found under the “Documents, Reports, Presentations” tab on the Oregon Health Policy and Research website, located at www.oregon.gov/OHA/OHPR. The link is under the “Hospitals and ASCs” heading.
“Despite differences in tax status and ownership, both not-for-profit and for-profit hospitals must, over the long run, generate revenues in excess of expenditures (earnings or margin) to remain solvent,” the report notes. However, it said the size of that margin can differ markedly and does in Oregon.
The report lists the Willamette Valley Medical Center’s operating margin for 2011 at a state-leading 29.6 percent, 10 times the statewide average. It lists the McKenzie-Willamette Medical Center’s margin at 18.7 percent, the second highest. It lists the highest margin achieved by a not-for-profit at 10.8 percent, recorded by the Legacy Meridian Park Medical Center.
On average, according to the Health Authority, Oregon hospitals spent $13.5 million on charity care in 2011.
But the agency said WVMC spent well under $1 million, its outlay amounting to 0.3 percent of its gross patient revenue. It said that figure was the lowest percentage contribution of any hospital in the state, regardless of type or size.
According to WVMC CEO Rosemari Davis, the hospital’s impressive profit margin can be attributed largely to two factors — efficient management and a relatively young patient population. The latter makes a big difference, she said, as private insurance carriers pay more than Medicare and Medicaid.
She went on to note, “Ours is a relatively new hospital, one of the newest in the state. So when it was constructed, we did a lot of things that have reaped rewards in efficiency.”
In addition, she said, “Department managers treat their departments as their own business. We require them, and they take pride in, not only managing the best quality outcome but also fiscal outcome.”
Davis directly contested the state’s assessment of the hospital’s charity contributions.
“We definitely do as much, if not more, bad debt and charity care as our counterparts out there,” she said. “Always have.”
In April, The Lund Report, a website focusing on healthcare in Oregon, published an eight-part series on hospital finances. It noted Oregon hospitals commonly provide “emergency and critical medical care” free of charge to people with household incomes below 200 percent of the national poverty line.
The Lund Report cited state figures showing WVMC spent less than one percent of its total patient revenue on charity care in 2011, and termed that “a tenth the average of its peers.” But Davis said WVMC adheres to the same policy, regardless of what that assertion might suggest.
She said there is no legal definition of charity care, leaving hospitals free to create their own criteria. She suggested that might account for some of the discrepancy.
Dan Ordyna, who was serving as CEO at the time, subsequently published a response.
He said policy changes enacted in 2011 were not reflected in the state figures underlying the report. He said the hospital actually $7.2 million worth of charity discounts in that year.
In order to retain their favored tax status, not-for-profit hospitals are required to provide “measurable benefits” to their communities, such as “providing free or discounted care to persons living in poverty, education or research to promote community health, or donating funds or services to community groups,” according to the report. No such requirement is imposed on the state’s two for-profit hospitals.
Therefore, Ordyna argued, the taxes WVMC pays ought to be counted as a community benefit. So should debts the hospital has been unable to collect, which are listed separately in the state report, he said. Together, that would push the hospital’s total for uncompensated care in 2011 to 6 percent of gross revenue, he said.
Davis made the same argument in response to the latest report. She said bad debt and charity care should be lumped together for an accurate picture.
In a report to the community” published in 2012, WVMC said it provided “more than $16.5 million in uncompensated care last year, which included charity care, discounts for the uninsured and bad debt incurred, as we cared for many people without sufficient resources.”
WVMC’s 88 staffed beds nudge it into the largest size classification established by the state. Some 26 of the state’s 58 acute care hospitals fall into that classification.
The report noted, “Most hospitals do not operate all the beds for which they are licensed.” That being the case, it said it bases its classifications on the number of “staffed beds” — those for whom the hospital has nurses available.
McKenzie-Willamette features 113 staffed beds. It reported charity care spending of $3.6 million, more than four times what is listed for WVMC in the state report.
Yamhill County’s other hospital, the Providence Newberg Medical Center, falls into a category reserved for rural hospitals with 50 or fewer beds. It has 40 staffed beds, putting it near the top of its range.
Providence Newberg was listed with an operating margin of 4.5 percent — less than one-sixth that of WVMC — and charity care spending of $8.4 million — more than nine times that of WVMC.
Both WVMC and McKenzie-Willamette feature a staffing ratio of 1.5 full-time nurses per bed, according to the state. That’s on the low end of the scale, compared to other hospitals in their classification.
WVMC’s staffing rate decreased by 14.7 percent over the two-year study period, according to the report.
Statewide, staffing rose from 2.10 in 2009 to 2.19 in 2011, on the average, it said. It indicated Providence Newberg’s staffing ratio rose 3.1 percent to 3.2 nurses per bed — double that of WVMC.
Overall, the report said, Oregon has “one of the lowest ratios of staffed beds to population in the nation.”
It said, “In 2010, Oregon had 1.7 staffed beds per 1,000 population, compared to the United States’ average of 2.6 beds per 1,000 population.” By way of partial explanation, the state has historically had “one of the lowest lengths of stay in the nation,” it said.
Higher than usual charges for some procedures may help explain WVMC’s state-leading profit margin.
According to a state website comparing average hospital charges for patients covered by health insurance, WVMC’s rates often run several thousand dollars higher than those of nearby hospitals. The comparisons may be found on Oregon Health Policy and Research website, at www4.cbs.state.or.us/ex/ins/hit/.
The comparison shows that hip replacements averaged $29,098 statewide in 2009, the most recent year for which figures were available. It shows they averaged $34,963 at WVMC and $27,182 at Providence Newberg, a nearly $8,000 difference.
For treatment of kidney and urinary tract infections, Salem Hospital was listed at $5,534 and WVMC at $16,839. For knee replacements, Salem Hospital was listed at $23,623, Providence at $27,954 and WVMC at $29,500.
The age mix doesn’t come into play in those comparisons, because they exclude lower Medicare and Medicaid reimbursements.
In some areas, WVMC comes off better. In 2009, cesarean deliveries averaged $13,738 at WVMC, compared to $14,858 at Providence Newberg, while vaginal deliveries ran $6,462 at WVMC, compared to $6,808 at Providence Newberg. The state averages were $11,906 for cesarean deliveries and $6,424 for vaginal.
In WVMC’s defense, Davis noted it was ranked as one of the top 100 hospitals in the country earlier this year by a private company that ranks healthcare businesses —iVantage Health Analytics. The company says its report “measures more than 4,000 hospitals across 56 different performance metrics, including quality, outcomes, patient perspective, affordability and efficiency.”
She said it should not be penalized for simply operating more efficiently that some of its counterparts.