Profits jumped sharply at Carolinas HealthCare System in 2012, the hospital authority reported Tuesday, as busier hospitals and rising investments boosted the systems bottom line.
Total profits for the CHS system, including all owned, leased and managed facilities, rose to $501 million, up from $124 million last year. Much of that increase resulted from improvement in the value of the systems investments.
We had a good year, said CHS chief executive Michael Tarwater, at the organizations quarterly meeting. He said CHS will use that money to pay for new services and capital improvements, such as new and expanded medical facilities, and to weather the changes coming as the federal Affordable Care Act kicks in.
The initiatives we talked about this morning ... would not be possible if we didnt have the resources, Tarwater said. The pressures for change are coming from a lot of different directions now.
Total revenue for CHS topped $6.9 billion in 2012.
The CHS system is a public, nonprofit hospital authority. Unlike for-profit companies, which use their profits to pay dividends to stockholders, nonprofit hospitals must plow extra revenue back into their organizations.
Some advocates for patients questioned why the systems 2012 profits were so high. They believe the system should do more to hold down prices and provide charity care for people who cant afford soaring medical costs.
For-profit businesses would be overjoyed with those kinds of profits, said Adam Searing, director of the N.C. Health Access Coalition.
Carolinas HealthCares medical facilities were busy last year, executives said. At the core group of CHS hospitals, including Carolinas Medical Center in Dilworth, patient discharges jumped 9.8 percent over 2011.
Emergency room visits surged 32 percent to more than 550,000.
Sources of revenue
Adjusted discharges, an industry measure of patient volume, grew 17.4 percent. The number of outpatient surgical procedures was up 15.1 percent, and total physician visits increased 5 percent.
Some of the increase can be attributed to including CMC-Union numbers in the CHS results for the first time in 2012. CHS also had more than $331 million worth of non-operating income from investments.
In 2011, results were hurt by temporary investment losses. That year, the system recorded $6.1 billion in total revenue. On Tuesday, CHS said accounting rules changes in fiscal 2012 allowed uncollectible accounts to be counted as offsetting revenue instead of recorded as expenses.
Because of the change, CHS revised its previously reported 2011 revenue from $6.7 billion down to $6.1 billion.
Surge in patients
New freestanding emergency rooms have been busier than projected, executives said. CMC-Waxhaw, opened two years ago, has 65 percent more patients than expected, and CMC-Kannapolis, opened in January 2012, is seeing 77 percent more patients than projected. A pediatric urgent care facility opened last August in Blakeney is seeing 50 percent more patients than expected.
Hospital executives attributed the increase to the greater convenience of the centers, and said many of the patients using them drive from neighboring counties.
The systems provision for bad debt and charity care increased sharply from 2011, rising 27.6 percent to $982 million. Thats 9.3 percent of gross patient revenues, up from 8.7 percent of gross patient revenues last year.
Joe Piemont, chief operating officer, said high deductible insurance plans and the lingering after-effects of the recession are largely behind the rise in uncollectible accounts and charity care.
Costs and challenges
CHS spent $515 million on capital projects last year. The system is building two new freestanding emergency room facilities, including CMC-Morrocroft and CMC-Harrisburg.
The company also is building a new, 66-bed mental health hospital in Davidson and integrating the Cleveland County HealthCare System into its core hospital group.
Looking ahead, Tarwater said there are still many unresolved questions surrounding health care reform. Also, the sequester federal budget cuts will cut Medicare reimbursement rates by 2 percent.
Those will necessitate using new technology to become more efficient, Tarwater said. A major new Mint Hill facility coming online in May will allow specialists to remotely monitor about 500 critical care beds in different hospitals. Theyll use audio and video feeds to talk with doctors in those hospitals.
The old way of doing business, sort of continually raising premiums to cover costs, cant continue, Tarwater said.
Critic: Do more good
Some critics contend CHS should consider other changes.
With such large profits, Searing said Tuesday, the system could afford to help more indigent patients and stop suing patients who dont pay their bills.
An Observer investigation last year found that North Carolina hospitals have filed more than 40,000 bill-collection suits against patients over a five-year period and that most of them were filed by Carolinas HealthCare and one of the hospitals it manages, Wilkes Regional Medical Center.
As an advocate who talks to people whove been sued by Carolinas HealthCare, its a little disappointing that theyre not putting more of that profit toward helping people in need, Searing said. I know Carolinas does a lot of good. But it seems to me they should be thinking about how to do more good."