SILICON VALLEY: Most Hospitals a Picture of Financial Health
With the majority of California hospitals in the red last year, most Silicon Valley hospitals "bucked [the] statewide tend," the Business Journal of San Jose reports. According to state financial records, 62% of hospitals throughout the state lost money in 1999, compared to 36% of valley hospitals. Officials credit valley hospitals' success to increases in patient volume and reimbursements. The valley's population growth, coupled with a lower-than-average uninsured population -- 16% compared to the statewide average of 24.4% -- contributed to the increase in patient volume. Nancy Farber, CEO of Fremont's Washington Hospital, said that additional services, such as a joint-placement program, also helped attract more patients. Washington Hospital saw a net revenue per patient of $1,991 last year, up from $1,863 in 1998. Community Hospital of Los Gatos saw income increase from $6.6 million in 1998 to $10.4 million last year. Community Hospital officials attributed the increase to cost containment and an 18% boost in managed care revenue. However, industry experts predict the prosperous times for valley hospitals will be "short-lived," as most hospitals will continue to deal with cuts in Medicare reimbursements and escalating labor costs because of a shortage of health care workers. In addition, hospitals face huge expenses in the coming years as they must comply with new state-mandated seismic standards (May, 8/21).
The HCA Exception
Even though most Silicon Valley hospitals enjoyed financial health last year, three hospitals owned by for-profit HCA -- Regional Medical Center, San Jose Medical Center and Good Samaritan Hospital -- continued to lose money. The three hospitals collectively lost $18.5 million last year. Good Samaritan attributes its losses to poor reimbursement rates from managed care companies. It suffered losses of $9.7 million last year, compared to losses of $21.9 million in 1998. Regional Medical lost $5 million in 1999, compared to $3.8 million the previous year and San Jose Medical Center lost $3.8 million last year, compared to a $9.7 million in 1998. However, hospital officials predict that the hospitals' financial performance will improve over the next five years because of "huge investments in infrastructure and changes in operations." Darrel Neuenschwander, CFO of Good Samaritan Hospital, said, "I'm not positive when we'll have a bottom line, but I'm hopeful it will be in the next year or so." HCA said it will invest $166 million in capital improvements at Regional Medical Center "to absorb the clinical operations of San Jose Medical Center," which plans to close in five years. William Gilbert, CEO of Regional Medical and San Jose Medical Center said, "HCA is in this market for the long run" (May, Business Journal of San Jose, 8/21).