By Colleen Lamay, The Idaho Statesman, Boise
Jul. 13–Boise’s two big hospitals haul in more money — and sock away more of it for reinvestment — every year.
Nonprofits both, St. Luke’s Health System and Saint Alphonsus Regional Medical Center are two of the biggest businesses in the Treasure Valley, with thousands of workers and revenues in the hundreds of millions of dollars each.
And they operate much like businesses. They market themselves like businesses, spreading their logos across the Treasure Valley and beyond, on billboards, medical clinics, mammogram centers and more.
Revenues have grown rapidly. They topped $600 million at St. Luke’s last year and will fall between $400 million and $500 million at Saint Al’s this year, hospital officials say.
As health-care costs continue to outpace inflation, burdening businesses, workers and taxpayers, the hospitals’ spending has raised questions.
Some critics say the hospitals in Boise, along with many of their nonprofit counterparts nationwide, make too much money and hoard it or don’t spend it where their communities need it most.
Boise-area hospitals say they’re doing their best to keep up with growing health-care needs — including charity care and other community services — and are spending prudently.
“Every red cent we make goes back into the organization,” said Gary Fletcher, chief executive officer of St. Luke’s hospitals in Boise and Meridian.
St. Luke’s now has four full-service hospitals — one each in Boise, Meridian, Twin Falls and Ketchum — and in 2006 created a new corporation, St. Luke’s Health System, to reflect its growth beyond the Valley.
Saint Alphonsus Regional Medical Center is growing, too. Its main Boise campus has a new, nine-story tower with sweeping views and the latest technology and comforts. Saint Alphonsus also offers outpatient surgeries and other services in Meridian. Its Eagle Health Plaza has the only emergency room in Eagle.
The hospitals say they must anticipate growth and must meet patients’ expectations for high-quality care. That includes the latest technology — implants, lasers — and private rooms.
“People don’t want to have second-rate health care,” said Brent Lloyd, chairman of the Saint Alphonsus board and chief executive officer of Futura Corp., a family-held holding company in Boise. “People don’t want to choose a Chevy when there’s a Mercedes out there.”
St. Luke’s bought land in the Caldwell area, expected to be the epicenter of the next growth spurt, although both Caldwell and Nampa already have full-service community hospitals of their own that also are growing with the population.
But talking about the money that nonprofit hospitals make is tricky. Technically, you can’t call the money left over after operating expenses are paid “profits,” as the hospitals have no owners or shareholders seeking returns on their investments.
The hospitals call the “profits” operating income or operating margin.
In the past five years, St. Luke’s in Boise and Meridian, along with its Mountain States Tumor Institute, posted operating margins ranging from a low of 4 percent in 2004 and 2005 to a high of 8.5 percent in 2006.
At Saint Al’s, the margins have ranged from 5.3 percent so far this year to 12 percent in 2007. St. Al’s expects margins to slip to 3 percent to 4 percent this year.
Hospitals need a margin of at least 5 percent to provide needed services to their communities, Saint Al’s President and CEO Sandra Bruce said. She said for-profit companies that make some medical supplies the hospitals need have margins around 20 percent.
And while the growth in revenue may seem high, it isn’t nearly high enough to keep up with projected growth, St. Luke’s officials say.
They expect the Valley’s population to grow 53 percent by 2020. They say they will need money for Baby Boomers who are living longer, for constant and expensive advances in treatments, and for the rising costs of caring for people who fall through the cracks of public safety nets, who lack insurance or who have inadequate coverage.
St. Luke’s says it will need to generate about $1 billion over the next 10 years for buildings and new technology to maintain its share of the health-care market. That is about twice as much as in the previous 10 years.
“The population is growing, and we want to take care of the people who want to be taken care of at St. Luke’s, and we think we’ve done a good job historically,” Fletcher said.
Annual health care spending in the U.S. has been increasing two to five times the rate of inflation since 2000, according to the nonpartisan National Coalition on Health Care.
The cost elicits strong feelings among patients, who may either love their hospitals, no matter the price, or are bitter about the price of their care.
“I just got nailed by St. Luke’s for $4,500 for a three-hour visit,” Boisean Eric Lee, 50, said recently. He says he was not allowed to leave when he wanted after treatment for kidney stones, a problem he was familiar with because he’d had them before.
St. Luke’s officials said they cannot discuss specific patients’ cases. But they said patients are free to go when they want, even against medical advice. Some doctors may be more aggressive than others about encouraging patients to stay until they can safely leave.
Many patients and their families believe no price is too high to save themselves or their loved ones, but most nonprofits nationwide have come under fire in the past few years for the amount of money they make and the ways they spend it.
The combined operating income of the 50 largest nonprofit hospitals in the U.S was more than $4 billion in 2006, up from less than $1 billion in 2001, according to a recent front-page story headlined, “Nonprofit hospitals, once for the poor, strike it rich,” in The Wall Street Journal.
“The profits being made in the not-for-profit hospitals are huge, and they are driving up health-care costs,” said Joe Novak, a consultant in Chicago and irreverent blogger on nonprofit hospitals nationwide.
Boise hospitals are more profitable than the national average, said Bobbie Kale, a Nevada consultant for the for-profit Riverside Medical Center planned for the corner of 27th Street and Fairview Avenue.
An analysis conducted for Riverside of zip codes within a 25-mile radius of the hospitals puts the Boise area in the top 8 percent of medical markets nationwide, said Michael O. Browning Jr., vice president of research and development for Montecito Research and Analytics, in Irving, Texas.
Boise ranks high for reasons including household wealth, health insurance and propensity to use medical services more than people in most markets, Browning said.
But local experts have few words of criticism for St. Luke’s or Saint Al’s. A half-dozen local health-policy experts reached by the Statesman either declined to comment or offered praise for the hospitals’ services.
Dr. Karl Watts, a Boise physician who has spoken publicly about reforming health care, says Saint Al’s and St. Luke’s help the poor in numerous ways.
“We get lab services for no charge, and X-ray services for no charge,” Watts said. “(We) get surgical procedures at no charge through the hospital.”
In addition to his medical practice, Watts is president and chairman of the board of Genesis World Mission, a nonprofit Christian organization dedicated to meeting medical and other needs of the poor around the Valley and around the world.
One patient suffered from painful spinal stenosis that kept him from working, said Steve Reames, executive director of Genesis World Mission. Doctors performed surgery at no charge in a free operating room, and the patient recovered enough to return to work.
“Without that surgery (suite), there’s no way the surgeons could do what they needed to do to make it right,” Reames said.
Both hospitals also provide unreimbursed care. Saint Al’s said it spent $8.6 million to write off all or part of patients’ bills in 2007, about 2 percent of $373 million in revenue. The hospital spent $36.5 million that year on programs for the poor, services that make little or no money, unreimbursed Medicare and Medicaid fees, bad debt and community programs, Saint Al’s says in its report.
St. Luke’s says it provided $8.4 million in charity care in 2007, a little more than 1 percent of its total revenue of $615 million.
The two hospitals, while competitors, collaborate on some health-care projects like the Humphreys Diabetes Center in Boise, which they co-own, and recruiting a gynecological cancer specialist.
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