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Sunday, February 13, 2011

St. Joseph Hospital, SNHMC attribute gains to region’s economy

By ALBERT McKEON

Staff Writer

Despite a rough economy and an increase in patients who can’t pay their bills, most New Hampshire hospitals turned a profit the last three years.

Locally, the operating profit margins at Nashua’s two hospitals was better in the first nine months of 2010 than they had been in the two previous years.

Executives at St. Joseph Hospital and Southern New Hampshire Medical Center attribute the fiscal gains to operating in a strong economic region.

The hospitals are among the largest employers in Greater Nashua. While jobs have been shed in nearly all economic sectors, the medical profession and the hospitals have avoided massive layoffs.

St. Joseph Hospital, with most recent annual revenues of $171 million, employed 1,481 people as of last year. SNHMC, with recent annual revenues approaching $200 million, had 1,837 workers.

And while the pace of physical growth at the two hospitals waned during the recession, they continued to focus on strengthening their level of care, the hospitals’ executives said.

Despite this apparent position of economic strength, the hospitals’ financial health may not be as good as it seems.

The New Hampshire Hospital Association recently issued a report warning of fiscal trouble in the industry.

Using distressing language, the report warns the economy has taken “a toll on the patients and communities hospitals serve.”

The increasing number of uninsured patients has contributed to a shrinking revenue stream for hospitals, according to the report.

Still, hospitals in the state managed to stay in the black. On average, hospitals in New Hampshire had a 2.9 percent operating profit margin in 2008, a 2.6 percent margin in 2009 and a 1.8 percent margin in the first nine months of 2010.

An operating profit margin is what’s left of a hospital’s revenue after production costs, such as wages and materials, but before taxes and costs, such as bonuses, interest or rent.

St. Joseph Hospital and Southern New Hampshire Medical Center are nonprofit ventures, meaning their remaining revenue isn’t considered true profit and isn’t distributed to shareholders. Those funds are instead reinvested in the organizations.

St. Joseph had a 1.7 percent operating profit margin in 2008, saw the margin dip to zero percent in 2009 and saw it rebound in the first nine months of 2010 to 3 percent, according to the report.

Last year, St. Joseph claimed $171.47 million in revenue before expenses, according to its tax filing. In 2008, the hospital’s revenue before expenses was $168.19 million.

David Ross, president of St. Joseph, didn’t offer details on how the hospital managed to keep a positive operating margin despite the rough economic picture painted by the state hospital association.

But Ross, in a statement, wrote that “the greater Nashua community is fortunate to have a strong economic base which contributes to the financial health of its two hospitals.”

He added later: “The economic conditions of the past two years have challenged all businesses. We expect these challenges to continue as the (community’s) need for quality health care services continues to grow.”

Southern New Hampshire Medical Center had a 1 percent operating margin in 2008, saw an increase to 3 percent in 2009 and a smaller jump to 3.2 percent in the first nine months of 2010.

For the tax period October 2008-September 2009, SNHMC claimed $197.78 million in revenue before expenses, according to its tax filing. In the previous tax cycle, the hospital had $191.39 million in revenue before expenses.

SNHMC also issued a press release about the association report. Chief financial officer Mike Rose echoed Ross in noting that Greater Nashua has “a strong economic base” that contributes to the city hospitals’ fiscal health.

“It is important to note that Southern New Hampshire Medical Center invests its resources to meet our community needs, using our limited capital dollars wisely and carefully, and by avoiding adding excess capacity or adding unnecessary costs to the overall system,” Rose wrote.

Last year, the hospitals’ chief executive officers gave extensive interviews to The Telegraph about their organizations’ growth in the past decade. In the interviews, Tom Wilhelmsen, president of SNHMC, and Peter Davis, then president of St. Joseph, said the recession had been difficult.

Davis said St. Joseph had no layoffs, but had to juggle the cost of services with revenue.

SNHMC had cut 50 positions, including those held by physicians, but said they were jobs that would have been lost through natural attrition. The hospital also froze its pension plan, scaled back programs and made cuts in vendor services, he said.

Before the economy fell into recession, the two hospitals had greatly expanded their footprint in the region with new facilities and medical services.

St. Joseph opened a $25 million ambulatory wing that included a new lobby and several outpatient services, including surgery, cardiovascular and oncology. And it renovated a wing with private rooms for cancer patients.

Other projects saw St. Joseph growing outside its Kinsley Street campus. The hospital expanded its Milford Medical Center and opened a 30,000-square-foot medical office in Hudson that offers rehabilitation, X-ray and laboratory services.

SNHMC doubled the size of its emergency department and added a cardiology center and three ambulance bays. It also opened a pediatric center and six new operating rooms, and retrofitted all inpatient rooms so they offer privacy with just one bed.

SNHMC also grew outside its main facility on Prospect Street.

Among several projects, it built a 12,000-square-foot medical office in Hudson, converted the former Newick’s Restaurant in Merrimack into a medical office and opened a rehabilitation center in Hudson, increasing the number of such facilities to eight.

The two hospitals have since largely stopped large-scale physical expansion and have said they’re focused on improving sophistication of care and technological services.

Hospitals still consider these to be uncertain fiscal times, judging by the state Hospital Association’s report.

Uninsured patients seeking treatment in emergency rooms have led to what the association considers an economic crisis. In fact, the report is titled, “The Economic Crisis.”

Fifty-two percent of the surveyed hospitals reported increases, from November 2009 to November 2010, in the number of uninsured patients who received medical treatment in emergency rooms.

Of those hospitals, 20 percent represented a “significant increase” from the previous reporting cycle, the report said. The association didn’t specify how many patients represent a significant increase; the report didn’t include supporting data.

Also, nearly half, or 48 percent, of the hospitals saw an increase in patients covered by Medicaid or other low-income health programs, the report said.

Of course, that means 52 percent of the hospitals saw little or no increase in this type of patient.

With a spike in this type of patient, hospitals have felt an economic crunch, the report said. Forty percent of hospitals in New Hampshire reported a “significant decline” in financial operations, the report said.

The association represents New Hampshire’s hospitals. Twenty-six community hospital CEOs participated in the survey report, including the leaders of St. Joseph Hospital and Southern New Hampshire Medical Center.

Albert McKeon can be reached at 594-5832 or amckeon@nashuatelegraph.com.