Report shows high costs of North Port expansion
Opening a stand-alone emergency room in North Port has been both boon and burden for Sarasota Memorial Hospital, according to its 2011 budget plan.
The budget, presented to the hospital board Aug. 25, lays out next year’s spending plans but also sums up this year’s performance for the county’s biggest hospital.
Sarasota Memorial is losing less money on day-to-day operations, holding costs flat while increasing revenue from patients. And after including tax and investment income, it is about to turn its most profitable year in memory -- a projected $55.2 million in the black when it closes its books this month.
But deeper in the numbers is the story of the major change in the sprawling SMH system last year, the opening of the North Port emergency room.
Looking at just the first half of the year, the new facility brought 13,115 patients into the Sarasota Memorial system. Of them, 349 turned into inpatient admissions at the main hospital, which is much more profitable than emergency room or outpatient care.
The hospital system has been losing market share in Sarasota County, largely because of the growth of the orthopedic surgery program at Doctors Hospital of Sarasota and the heart surgery program at Venice Regional Medical Center.
But the North Port facility may be stemming that trend, and luring those profitable inpatients from the nearby Charlotte County hospitals. Charlotte Regional Medical Center and Fawcett Memorial Hospital both are seeing their share of the region’s inpatient admissions fall, according to state Health Planning Council data included in the budget report.
“We’re growing, and taking away business from other facilities,” said Bill Woeltjen, Sarasota Memorial’s interim chief financial officer.
It comes at a cost, though. North Port will lose about $5.4 million on its day-to-day operations this year, said Chief Executive Officer Gwen MacKenzie.
And Sarasota Memorial’s bad debt expense -- essentially, losses from uninsured patients who cannot pay their bills -- is projected to rise about $9 million, mostly because of the North Port facility, Woeltjen said.
But the budget document also shows that overall, Sarasota Memorial’s steady shift from a surgery-centric hospital to a network of outpatient centers is paying dividends.
As the hospital opened facilities along the I-75 spine, from central Manatee County to central Sarasota County to near the Charlotte County line, outpatient registrations surged, from 290,300 in 2005 to a projected 443,300 this year -- a 53 percent increase in five years.
That surge essentially transformed the system. In 2005, inpatient cases brought in about 62 percent of the hospital’s revenues, and outpatient the remaining 38 percent.
This year, the hospital projects the two to be dead even, each accounting for half the system’s revenues -- even though the typical inpatient case has roughly ten times the profit margin of an outpatient case.
“It’s really amazing that you can have that kind of transformational shift,” said David Verinder, the new chief operating officer.
In other results:
-- As previously reported, Sarasota Memorial plans to hold its tax rate at the current level, 1.0863 mills, which means about $109 in taxes for every $100,000 of a home’s value. Because of falling property values, though, the hospital will take in about $4.9 million less in taxes.
-- Sarasota Memorial projects a 6.2 percent increase in revenues next year, to $491.6 million. Most of it will come from more gains in outpatient services and from taking over the Cape Surgery Center. It formerly was a 50 percent partner in the facility.
-- The major pieces of the hospital’s 2010 bottom line are operating revenues of $483.2 million, operating expenses of $492.3 million, investment income of $18.6 million and $48.5 million in tax revenues.
-- The hospital has seen surgery cases continue to decline, down about 8 percent in 2010. It expects an increase next year, most of it from the Cape Surgery Center deal.
-- Two key measures of efficiency improved. Average patient length of stay fell to 4.83 days, and paid hours per adjusted admission fell to 143.