Becker's Hospital Review

15 CFO / FINANCE Key West Commissioner: CHS Hospital's Profit Margin 'Obscene and Unconscionable' By Ayla Ellison K ey West, Fla., commissioners are concerned about the high prices patients face at Lower Keys Medical Center in Key West, which is part of Franklin, Tenn.-based Com- munity Health Systems. However, hospital officials say improv- ing patient care is the top priority, not lowering prices, according to Konk Life. LKMC and Key West officials have had a contentious relation- ship since last year when city commissioners voted to explore reverting the hospital back to public ownership aer hundreds of patients complained of aggressive billing practices and poor care quality at the hospital. In December, Lower Florida Keys Hospital District Board Chairman John Padget sent a letter to CHS CEO Wayne Smith, asking if the hospital operator would consider breaking its lease of LKMC early, as CHS' 30-year lease of LKMC doesn't expire until 2030. CHS responded in January, saying it has no inten- tions to terminate the lease early. Although the issue over the lease has been settled, Key West commissioners' concerns over the hospital's prices have not abated. At a March 21 commission meeting, LKMC's former CEO Steve Pennington said the hospital hired an outside consultant to examine the hospital's prices. Mr. Pennington said the consul- tant determined LKMC's inpatient charges are "in the middle of the pack compared with South Florida hospitals," according to Konk Life. e consultant found LKMC's emergency room charges were lower than its peers and its imaging charges were higher. Although Mr. Pennington said the hospital was working to reduce its imaging charges, Key West Commissioner Richard Payne said the hospital needs to do more to lower costs, pointing out that CHS recorded a 32 percent profit margin on LKMC in 2015. "Your hospital has a monopoly. You're 50 miles away from your nearest competitor," Mr. Payne said, according to the report. "A 32 percent profit [margin] when the national average is 7 per- cent is obscene and unconscionable." Other commissioners agreed with Mr. Payne, saying lowering charges is critical. However, Mr. Pennington said the hospital is more concerned with patient care. "We think if we provide high patient satisfaction and invest in the hospital properly, the profit margins will be where they will. at's not something we should be penalized for or [praised] for either way," said Mr. Pennington, according to the report. CHS did not respond to Becker's request for comment. n Inova's Operating Income Plunges 92% as Investment Gains Boost Bottom Line By Ayla Ellison I nova Health's operating income plummeted in 2016 due to special charges, but the Falls Church, Va.-based system ended the year with higher net income than in 2015 after factoring in investment gains. Inova said revenue increased about 9.5 percent year over year to $3.3 billion in 2016, according to recently released bondhold- er documents. The revenue growth was attributable to higher patient volume. Inova said acute admissions, observation cases, deliveries and emergency admissions increased year over year. The system said expenses were up 13.6 percent, climbing to $3.1 billion in 2016. Inova's expenses related to salaries and benefits totaled $189.3 million last year, up about 14.2 per- cent from the year prior. The growth was primarily attributable to increased staffing to handle higher patient volume and a substantial increase in the number of employed physicians. Inova incurred several one-time charges in 2016, including a $64.5 million charge for terminating its pension plan, which was fully liquidated in December. The system was also hit with a $48.4 million charge related to the reduction in value of its Medicaid health plan. Inova ended 2016 with operating income of $18 million, down 92 percent from $221.4 million in the year prior. After factoring in a $265 million nonoperating gain, Inova report- ed net income of $283 million, up from $197.2 million in 2015. n 3 RD ANNUAL HEALTH IT + REVENUE CYCLE CONFERENCE September 21-23, 2017 | Hyatt Regency | Chicago, Illinois 150 Speakers from Hospitals and Health Systems – 255 Speakers Total THE BRIGHTEST CIOS, HEALTH IT AND REVENUE CYCLE EXPERTS IN HEALTHCARE REGISTER HERE www.beckershospitalreview.com/health-it-revenue-cycle-conference/ Registration@BeckersHealthcare.com OR 800.417.2035. KEYNOTES BY George W. Bush, 43rd President of the United States of America Sugar Ray Leonard, Boxing Legend, Successful Entrepreneur and Author, The Big Fight: My Life In and Out of the Ring

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