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Obici ‘a profitable hospital’

Hospitals in metropolitan areas, including Sentara Obici Hospital, are doing fairly well, even as hospitals in rural areas suffer from increased regulations and mandates and low reimbursement rates, according to a press release from the Virginia Hospital and Healthcare Association.

The association says about 25 percent of Virginia’s acute care hospitals — and 42 percent of rural hospitals — operated in the red during calendar year 2014.

“The ongoing trend of numerous hospitals operating in the red has alarming implications for access to health care, and Virginia’s economy,” a recent press release from the organization stated.

“The latest batch of data is evidence of hospitals around Virginia struggling with the pressures of longtime federal government care mandates that leave providers to deliver significant treatment volumes at free or discounted rates, as well as the pain inflicted by federal funding cuts that affect health care,” the press release stated.

Reimbursements to hospitals for care provided to Medicare and Medicaid patients “fall far short of actual treatment costs,” according to the VHHA press release.

In addition, cuts due to the Affordable Care Act and sequestration stand as additional threats.

In spite of those challenges, Obici and the entire Sentara system are doing well, said Chief Financial Officer Robert Broermann.

“Obici’s hanging in there OK,” he said. “Our numbers over a three- to four-year time frame have been a bit on the uptick. That’s a good thing for us. Obici is a profitable hospital — at least in 2014, all Sentara hospitals were.”

For calendar year 2014, revenue and gains in excess of expenses and losses topped $13.3 million at Obici.

That’s in spite of the fact that the hospital provided nearly $54 million in charity care and wrote off more than $12 million in bad debt, according to statistics on the Virginia Health Information website, www.vhi.org.

The hospital spent $81 million on labor and collected about $617 million in patient revenue.

Broermann said money left over after expenses goes into capital improvements for the Sentara system.

“We’ll end up reinvesting that amount, and that’s a good thing for the community,” Broermann said. “That’s means we’re going to be able to take care of folks regardless of their ability to pay and keep fresh with equipment and new technologies that come along.”

But there are limits, Broermann noted.

“This is a capital-intensive business. Hospitals are expensive. Equipment is expensive. New technologies are expensive. If hospitals get to the point they can’t keep up, then we begin to slide down a slippery slope, and that could be problematic.”

Broermann said there are some hospitals in the state — mostly in rural areas and not affiliated with large health systems — that are already in danger of sliding down that slope.

“They’re out there by themselves, and they don’t have economies of scale,” Broermann said. “It’s tough sledding.”

Hospitals in rural areas tend to serve older and more economically depressed communities, so they end up providing a lot of charity care and suffer from the low Medicare and Medicaid reimbursement rates. And that problem doesn’t look to be reversing anytime soon as more people age.

“The vast majority of those people, the day that they turn 65, are coming off of a commercial insurance plan,” Broermann said. “It’s the same volume of activity, but (hospitals are) paid less for that volume going out.”

That’s why organizations like the VHHA are trying to get ahead of the issue, he said.

“While Virginia hospitals collectively right now have reasonable financial footing as a whole, there are a number of them that are not blessed with that,” Broermann said. “There are things already written into the law that will provide future challenges to the hospitals.”