The proposed sale of Orange County hospitals by Tenet Healthcare Corp. grabbed its share of the headlines in the past year, but solid revenue growth at local facilities might be the bigger story.
Overall, OC’s 33 largest hospitals reported 7% growth in net patient revenue to $3.8 billion for the 12 months through Sept. 30, according to this week’s Business Journal list.
Last year’s group of top hospitals reported a 10% jump in revenue for the period ended Sept. 30, 2003.
Revenue growth was widespread, with 21 of the 33 hospitals reporting a boost in net patient revenue. No. 14 Kaiser Found-ation Hospital in Anaheim didn’t make its results available and is a Business Journal estimate.
The hospitals’ net patient revenue figures come from the Office of Statewide Health Planning and Development. Net income data for hospitals that declined to voluntarily disclose profit numbers also is taken from the state office.
Local hospital observers are watching what happens to the four OC hospitals that embattled Santa Barbara-based Tenet put up for sale.
Integrated Healthcare Holdings Inc. has offered to buy the Tenet hospitals: No. 10 Western Medical Center-Santa Ana, No. 17 Western Medical Center-Anaheim, No. 20 Coastal Communities Hospital in Santa Ana and No. 22 Chapman Medical Center in Orange.
The proposed sale has drawn heat from state Sen. Joe Dunn, D-Garden Grove, doctors and patients’ groups because of the involvement of Dr. Kali Chaudhuri. His KPC medical group collapsed five years ago, leaving area doctors with millions of dollars of unpaid bills.
In response to the criticism, Chaudhuri has cut his proposed investment in Integrated Healthcare and said he won’t have an active role in managing the hospitals. A revised deal was approved by Tenet about a week ago.
The state Department of Health Services was expected to sign off on the deal any day, after Sen. Dunn said Thursday he wouldn’t try to delay it.
Even after the sales go through, Tenet would remain among the larger hospital operators in OC, with five other facilities on the list.
Meanwhile, hospitals continued to battle on several fronts during the past year.
They’ve had to pay bonuses and higher salaries to nurses amid the ongoing nursing shortage. And investment in pricey medical gear also has eaten a bit into profits.
Overall, the hospitals reported net income of $273 million, down 8% versus a year ago. A couple of hospitals reported income for the 12 months through June 30 and one,No. 14 Kaiser Foundation Hospital in Anaheim,didn’t disclose results at all.
On the positive side for hospitals, Gov. Arnold Schwarzenegger used an executive order to delay for at least three years the start of stricter nurse staffing ratios (see story, page 25).
And hospitals have been able to win more workable contracts with health maintenance organizations and other insurers.
University of California Irvine Medical Center continued its run as OC’s No. 1 hospital after overtaking longtime leader Hoag Memorial Hospital Presbyterian in Newport Beach last year.
The Orange-based teaching hospital posted 13% growth in revenue to $459 million, versus a year earlier.
No. 2 Hoag, which is readying to open a seven-story women’s healthcare pavilion at the end of the year, saw its net patient revenue grow 9% to $435 million.
The results show that the three OC hospitals operated by Orange-based St. Joseph Health System continue to be in good financial health. They are No. 3 St. Joseph Hospital-Orange, No. 4 St. Jude Medical Center in Fullerton and No. 5 Mission Hospital in Mission Viejo.
St. Joseph, the Catholic health system’s largest hospital in OC, reported a 17% gain in net patient revenue to $358 million. St. Joseph’s net income prior to taxes was $44 million, up 141% compared to a year earlier.
St. Joseph, at the beginning of the decade, began removing itself from what it called poor paying managed care contracts, including a well-publicized dispute with Cypress-based PacifiCare Health Systems Inc.
But last year the hospital brought PacifiCare back into its provider network.
St. Jude saw a 20% revenue bump to $283 million, versus a year earlier. And the Fullerton hospital’s net income performance was high-octane,it reported a 175% hike to $46 million for the 12-month period ending in June.
“This is not an accident,” said Lee Penrose, St. Jude’s chief financial officer. “We don’t want to end up like 51% of the California hospitals, which are operating in the red.”
St. Jude’s performance, Penrose said, “is the result of diligent cost containment, growth in specific services and improved revenue management.”
St. Joseph’s third local hospital,Mission Hospital in Mission Viejo,saw its net patient revenue increase 16% to $247 million. Mission’s net income figure, which came from the state, was $24 million on a pre-tax basis for the period ended in September, compared with $11 million in the year-ago period.
Memorial Health Services Inc., the Long Beach-based hospital system, landed two of its three OC operations in the list’s top 10.
No. 7 Saddleback Memorial Medical Center in Laguna Hills had an 11% patient revenue gain to $200 million.
Saddleback closed its acquisition of No. 25 San Clemente Hospital and Medical Center last week. Terms weren’t disclosed.
Anaheim Memorial Medical Center, No. 9 on this year’s list, also posted an 11% net patient revenue gain to $156 million.
Children’s Hospital of Orange County, which is No. 6 on this year’s list, had a net patient revenue hike of 20% to $202 million.
But CHOC’s real story was a sharp net income turnaround. The hospital reported net income of $6 million in the period ended this past June, compared to just $900,000 a year earlier.
Higher patient volume and stabilization of workers’ compensation rates helped spur CHOC’s income growth, according to Kerri Ruppert, the hospital’s chief financial officer.
Ruppert also noted that CHOC already had adopted higher nursing ratios “several years ago, so we didn’t see a big hit.”
On the negative side, No. 8 Fountain Valley Regional Hospital and Medical Center saw its revenue decline 22% to $181 million. The Tenet-owned hospital also reported a 12-month net loss of $28 million, as opposed to net income of $36 million a year earlier.
A Fountain Valley representative didn’t return calls seeking comment.
No. 28 Brea Community Hospital filed for bankruptcy protection last week. The hospital’s owner, Brea Community Hospital Corp., said it’s in talks to sell the company. One potential buyer includes Spectrum Medical Center Partners, a unit of Sovereign Healthcare Consultants in Newport Beach.
The number of licensed beds in OC hospitals fell 1% to 6,485. Hospital employment rose 3% to 35,697. Of the biggest hospitals, St. Joseph reported the largest job gain, up 10% to 3,300 workers.
