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Hospitals Slowly Recuperating from Long Recession

Add up the slow recovery, shorter hospital stays and low reimbursements from insurers and government programs – and it’s been tough for Valley-area hospitals. The financial challenge is clear from the Business Journal’s list of local hospitals ranked by second-quarter revenue, the latest figure available from the Office of Statewide Health Planning and Development. Of the 18 facilities on the list, 11 reported a decline in revenue in the second quarter compared to same period last year. The financial stress has prompted many hospitals to invest in niche specialties and extend their services beyond the confines of the hospital campus. Among the most successful at that: Valley Presbyterian Hospital, the No. 7 hospital on the list, which showed the most dollar growth over the period. The stand-alone nonprofit grew revenue by 36 percent to $72.4 million in the second quarter. It also saw its operating margin rise to 14.6 percent from less than 1 percent. Among the hospital’s primary drivers of growth are a diabetic amputation prevention program that opened in April of 2010, its Fritz B. Burns Valley Cardiac Cath Lab, and a pancreatic and liver disorder program. Those programs are aimed at a growing segment of the Valley population that is aging. “We are looking to bring the latest technology to our population, from early invention to open heart surgery,” said Gayathri Jith, vice president of operations. But the hospital is also seizing on a completely different demographic that is growing: women of child-bearging age. In June, the hospital opened a new $4.5 million maternity ward for high-risk babies. The “Little Treasures” ward has brought new business as referring doctors become aware of its services. “We see 400 births a month in our facility,” Jith said. “We feature special services for early delivery, high-risk infants, incubator babies and women’s services. And we’ve seen a lot of growth in that.” Jim Lott, executive director of the Hospital Association of Southern California, a major trade group, said there is no doubt that the path to profitability lies in greater specialization. Even with health care reform expected to lower the number of uninsured patients hospitals must treat, Lott said facilities will be hit hard by reductions in payments from Medicare and private insurers. “If you have a niche product, you’ll probably be OK,” he said. “We will always need children’s hospitals and specialized hospitals. But it you don’t have highly specialized service lines, you run the risk of becoming a commodity.” Follow-up visits Michael Rembis, chief executive at Providence Saint Joseph Medical Center in Burbank, the No. 1 hospital on the list with quarterly revenue of $104 million, said a source of growth has been extending care to patients after they leave the hospital. Providence St. Joseph is a member of Providence Health & Services, a nonprofit Catholic hospital chain based in Renton, Wash. Hospital care managers schedule follow-up visits to rehabilitation centers, nursing homes or hospice care – within the system. “In the past, a patient came to us for acute care, but now are seeing to preventive care, home care, and all the care they need,” Rembis said. Net patient revenue at the hospital was virtually unchanged at $104 million for the quarter, but the hospital more than doubled its operating margin to 11.4 percent in the quarter. (Also part of the system are Providence Holy Cross Medical Center, No. 3, on the list, and Providence Tarzana Medical Center, No. 9.) Still, Rembis worries that health care reform will trim hospital revenue as it encourages primary care doctors to handle more procedures and minor surgeries in their office. “I think we will see a slight reduction in utilization of hospitals for the next few years, but we also face growth of an aging population,” he said. “Over time, we’ll see an increased utilization of hospitals but that will lag several years while health reform is implemented.” This issue also includes a supplementary list of hospitals by number of staffed beds. Valley Presbyterian is the top-ranking facility on the list with 350. Download the 2012 VALLEY’S HOSPITALS list (pdf)

Joel Russel
Joel Russel
Joel Russell joined the Los Angeles Business Journal in 2006 as a reporter. He transferred to sister publication San Fernando Valley Business Journal in 2012 as managing editor. Since he assumed the position of editor in 2015, the Business Journal has been recognized four times as the best small-circulation tabloid business publication in the country by the Alliance of Area Business Publishers. Previously, he worked as senior editor at Hispanic Business magazine and editor of Business Mexico.
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