Budget shifts at hospital

CPH sees increase in bad debt, charity cases, gross revenue

In the first two quarters of its current fiscal year, Central Peninsula Hospital has seen significant increases in patient revenue combined with increases in bad debt and charity care compared to the first two quarters of its last fiscal year.


From July through December of 2011, CPH saw a 24.6-percent increase in gross patient revenue from the same period in 2010. Gross patient revenue for those two quarters totaled $95.6 million, compared to $76.7 million last fiscal year.

However, net patient revenue — the amount of money the hospital actually collected after discounts, contractual obligations, bad debt and charity care — saw a 13.2 percent increase. That revenue totaled $59.3 million, up from $52.4 million from the prior fiscal year.

CPH officials recently discussed their finances during a quarterly presentation at the Kenai Peninsula Borough Assembly meeting.

CPH Chief Executive Officer Rick Davis said Thursday those increases are typical from a historical point of view.

“I think that is pretty typical over the last several years because we have been growing a lot, been adding new services, new pain (management) positions, neurologists and quite a few different service lines over the last few years,” he said.

Simply put, Davis said the increases mean CPH is just busier — more cases and more patients. Davis also mentioned the July start of CPH’s spine surgery program as another possible reason for the increase. From July through December, CPH performed 93 spine procedures.

“A lot of that growth could be directly attributed to that,” Davis said.

However, the hospital’s net income — the amount it makes after expenses that is used for paying off debt and funding the Plant Replacement and Expansion Fund — increased only by 8 percent from last year.

Through December of 2011, that income totaled $4.4 million, compared to $4.08 million in the same two quarters of the prior fiscal year.

CPH’s charity care and bad debt increased a combined 19.3 percent in during those quarters over the last fiscal year. Charity care — free care patients apply for — totaled $3.4 million the first two quarters of this fiscal year compared to the $2.7 million in the same period last year. Bad debt — care the hospital couldn’t collect on for whatever reason — increased from $3.3 million last fiscal year to $3.8 million through December this fiscal year.

“I’m not sure I could say what’s been causing it,” Davis said of the increases in charity care and bad debt. “It could just be less people having insurance probably.”

However, Davis said he isn’t alarmed by those increases because increased gross and net revenues offset them and essentially “the whole pie got bigger.”

“It is a little bit of a mixed message,” he said. “Nobody likes to do things for free, but on the other hand we are owned by the community and we are here to serve the community. If people aren’t able to pay, we still want to be able to provide the service for them.”

In general, the hospital’s finances are doing well, he said. The Plant Replacement and Expansion Fund continues to grow and was at $9.4 million at the end of December.

“We want to continue to grow because growth for us just means a new service that doesn’t have to go to Anchorage anymore,” he said. “We want to keep on adding services and allow more people to stay on the Peninsula for their health care.”

Central Peninsula General Hospital Board, Inc. President Lore Weimer agreed, adding the hospital’s financial stability takes on added significance in the face of health care reform.

“We continue to be in good financial shape as we navigate the chaos of winding down fee for service and we get ready for value based purchasing,” she said. “I’d say we are trying to do what everyone is trying to do, which is continuing to navigate what created this unsustainable economics of health care, which is the fee for service model — what everyone has been doing all along. 

“Now health care reform is demanding that we move to value-based purchasing and in that you get paid for quality and customer satisfaction.”

Weimer said hospitals across the nation are trying to benefit from the old model and prepare for the new.

“Right now we are doing both pretty well,” she said.


Brian Smith can be reached at brian.smith@peninsulaclarion.com.


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