Carson Tahoe Health: Financially healthy, growing
October 30, 2017
Unlike too many small and medium sized hospitals these days, Carson Tahoe Regional Medical Center is financially healthy.
In just the first two quarters of calendar 2017, C-TH reported a net income of $14,618,805.
That's on track to slightly exceed the $27.4 million net income the hospital reported in 2016, according to reports filed with the state Department of Health and Human Services.
"Twenty-sixteen was a good year for us," said hospital CEO Ed Epperson. "Seventeen about two thirds of the way through is equally strong."
Contrary to what many think, the hospital operates on a tight margin to make that net. Epperson said healthcare experts target a 4 percent margin as healthy after all expenses are paid.
"We're right in there, maybe a little better," he said.
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From January 1 to June 30 of this year, the hospital reported a total of $521.8 million in billed charges plus $3.8 million in other revenues. But that was offset by $127.4 million in operating expenses and $383.6 million in "deductions."
Some of those deductions reflect the reduced rates the hospital has agreed to with certain health insurance providers. But Epperson said the vast majority are deductions outside the hospital's control — specifically payments by Medicare and Medicaid.
"They tell us here's what we're paying you," he said. "For the most part, Medicare pays hospitals a set fee. That's it. If your cost is lower, good for you. If not, too bad."
Medicaid, he said is similar, but pays "way less."
He said for Carson Tahoe's patients, the majority, nearly two thirds of the $383.6 million in deductions, is Medicare, the federal coverage available for those over age 65.
"Medicare plus Medicaid is a good 70 percent," he said.
Although Carson Tahoe is a federally registered nonprofit, he said, "it's important for us to have a healthy bottom line." In a nonprofit corporation, Epperson said that net income isn't profit.
"IRS requires that 4 percent or so margin has to be reinvested into the mission," he said.
For example, he said, because 2016 was a good year, Carson Tahoe was able to purchase its first robotic surgery system.
He said it cost the hospital $2.5 million, "just to have the robot show up."
"And like any technology, the maintenance and cost to operate it can add a lot to the cost," he said.
He said high-tech medical systems are extremely expensive.
Net income has to pay not only for new equipment but expansion not only of space but staff to cover Carson Tahoe's growing needs. He said the hospital's last physical expansion was a dozen years ago.
Having a positive net income at year's end, he said, is key because it helps maintain a good credit rating so they can get a good interest rate on any bonds to pay for expansion.
A major area of growth, he said, is outpatient services.
"We went from five years ago having zero to now having a retail clinic in all three Walmarts in the region seeing thousands of patients a year."
Also driving needs is the growing number of medical practitioners working either at or through the hospital.
"The physician community has come to the realization solo practices cannot exist in this economic environment," he said. "Increasingly, they are coming to the hospital for employment."
Carson-Tahoe has made it a priority to recruit those providers.
In addition to the hospital itself, Carson Tahoe operates Carson Tahoe Continuing Care. That's the hospital's long term acute care facility in the old hospital at Mountain Street and Fleischmann.
Epperson said the continuing care operation loses money — a bit more than $1.2 million in the first six months of 2017.
He said the patients there are 80-90 percent on Medicare and most have no insurance to help with the costs.
"It's a service that helps the system overall because it helps patients who otherwise would be lingering in the medical center," he said. "We think it still contributes positively to the system as a whole but, on it's own, it's a negative."
He said continuing care operations are a reality for hospitals at this point, "and few of those contribute to the bottom line."
Between the two operations, Epperson said Carson Tahoe has about 240 beds.
"We're not at capacity all the time but we're headed in that direction," he said.
He said the hospital has developed a 10-year master plan laying out needed upgrades and growth potential in the region.