Sun Sentinel Palm Beach Edition
Hospital systems going different ways
Broward Health income drops; Memorial makes profit
Broward County’s two publicly owned hospital systems continued to move in opposite financial directions in 2016, with net income of troubled Broward Health dropping to $15.9 million, while Memorial Healthcare posted a $226 million profit — $85 million more than in 2014.
Those results, along with those of Fort Lauderdalebased Holy Cross Hospital, were included in a new financial report released this month by health market analyst Allan Baumgarten.
The report, Florida Health Market Review, is published every other year by Baumgarten, an independent analyst based in Minnesota who publishes reviews of health markets in Florida and seven other states.
The newest report observed that hospital profits throughout the state remain strong, thanks to industry consolidations, partnerships and expanded insurance coverage.
Combined profit for 46 South Florida hospitals exceeded $1 billion for the third straight year in 2016, the report shows. Their combined net income of $1.05 billion fell short of the 2014 total of $1.15 billion, but Baumgarten said in an interview that the latest profit total shows South Florida’s hospitals remain financially strong.
“When you’re in the level of atmosphere above $1 billion, I think you’re doing pretty well,” he said.
The combined profit margin for South Florida hospitals increased from 6.8 percent in 2014 to 7.5 percent last year, the report said.
All six of the region’s largest hospital systems were profitable, but not all individual hospitals.
Three of Broward Health’s four hospitals were money losers in 2016: Coral Springs Medical Center (-$4.8 million), Imperial Point Medical Center in Fort Lauderdale (-$5.1 million) and Broward Health North in Pompano Beach (-$661,044).
Only Broward Health Medical Center in Fort Lauderdale turned a profit: $26.5 million on revenue of $434 million.
The overall profit of $15.9 million for Broward Health — formally called North Broward Hospital District — was based on revenue of $872 million for a margin of 1.8 percent. Its net profit in 2016 was nearly a 50 percent drop from the $31.5 million reported for 2014.
Heading in the opposite financial direction was Broward Health’s sister system, Memorial Healthcare, formally called South Broward Hospital District.
The $226 million net profit reported by Memorial Healthcare was 13 percent of $1.73 billion in revenue. In 2014, the southern Broward hospital system reported $141.1
“When you’re in the level of atmosphere above $1 billion, I think you’re doing pretty well.” Allan Baumgarten, health market analyst
million in profit — or 9.4 percent of $1.5 billion in revenue.
The northern Broward system has suffered from managerial turmoil and competition, while its southern sibling has the south Broward County market nearly to itself, said Linda Quick, president of the consulting firm Quick Bernstein Connections Group and former president of the South Florida Hospital and Healthcare Association.
“I’m not surprised that one is going up while the other is going down,” Quick said in an interview. “Broward Health has had no stability in leadership, from the governing board to the CEO, and even the hospitals’ CEOs. Only one of its four facilities still has the same CEO as last year at this time.”
That leadership instability “doesn’t necessarily impact the competency and quality of individual care, but it does clearly have an effect on morale.”
The turmoil could also be affecting physicians’ willingness to refer patients to Broward Health facilities as well as hospital choices by patients, said Mark Cherry, principal analyst with health care research and data provider Decision Resources Group.
Asked about his system’s financial results, Alan Goldsmith, Broward Health’s executive vice president and chief financial officer, said in an email: “Over the past year, we have focused on ensuring financial stability and reducing the burden on taxpayers. We look forward to improved performance being reflected in future reporting years.”
Cherry and Quick each pointed out the competitive pressure Broward Health faces from companies with hospitals north of Interstate 595, including HCA Healthcare, which owns two hospitals in Plantation and one in Margate, and Tenet Health, which owns hospitals in southern Palm Beach County within driving distance of northern Broward residents.
“Broward Health has to not only draw patients away from nearby competitors but also has less leverage in contract negotiations with insurers,” Cherry said.
Memorial, by contrast, “basically has a lock on inpatient services in southern Broward,” Cherry said.
Just one of Memorial Healthcare’s four hospitals lost money in 2016: Memorial Pembroke, which reported a net loss of $6.7 million off revenues of $128.7 million.
Memorial Healthcare’s former president and CEO Frank V. Sacco, which oversaw the system for 41 years before retiring in February 2016, “created a big fish in a small pond,” Quick said. “If it’s not entirely a monopoly, it’s a large presence. If you are in southern Broward and need health care, you’d be hard-pressed to find it anywhere else.”
During Sacco’s tenure, Memorial Healthcare expanded from a single hospital to the nation’s thirdlargest public health-care system.
Between 2014 and 2016, admissions and surgeries each increased by 6 percent while outpatient visits increased by 4 percent, according to figures provided by Kerting Baldwin, Memorial’s administrative director of corporate communications.
The system “consistently reinvests” its profits, Baldwin said. Over the budget years ending April 30 in 2017 and 2018, Memorial invested more than $500 million into projects such as a new inpatient tower and graduate education facility at Memorial Hospital West in Pembroke Pines; addition of ICU beds; expansion and renovation of its interventional radiology surgical rooms; and new urgent care centers, Baldwin said.
Holy Cross, meanwhile, lost $11.7 million in 2016 off revenue of $322.1 million, after profit of $2.7 million in 2015 and $18.7 million in 2014.
Christine Walker, director of marketing, public relations and business development for Holy Cross, said the loss includes an adjustment of $10.5 million resulting from “a change in accounting estimates and accounts receivable reserve methodology” after parent Trinity Health’s 2013 merger with Catholic Health East.
Yet a need to “more efficiently structure leadership jobs” resulted in layoffs of 23 employees in June, Walker acknowledged in August.
Cherry said that even though the hospital is part of a national health system, “Holy Cross is in many ways a solo player in the region, and it’s harder for those to survive without finding a niche, like University of Miami being an academic medical center or Mount Sinai catering to an affluent clientele.”
Competition and market pressures are forcing more independent hospitals to seek mergers with larger hospital systems — not only to increase their purchasing power but also to improve access to specialists and up-to-date technology, Baumgarten said.
Independent Boca Raton Regional Hospital, despite a net profit of $20.6 million in 2016, announced in June that it was exploring the possibility of a “strategic partnership with another provider.”
Once-independent Bethesda Hospital in Boynton Beach lost more than $20 million in both 2015 and 2016 as it was working out terms of its merger into Baptist Health South Florida, which was finalized in October.
Asked whether financial pressures on Bethesda played a role in its merger decision, Baptist Health spokeswoman Dori Alvarez said by email: “Industrywide, health care organizations are experiencing pressures on reimbursements and total revenue, especially from government payers. This environment is most challenging for standalone hospitals and smaller systems, such as Bethesda, and it is why there is a trend of consolidation in the industry.”