Curry Health District is holding its own, despite challenges in physician retention, debt after building a new state-of-the-art hospital and changing health care in rural areas, an audit shows.

The audit almost lauded the district for what it has accomplished in those years.

The district convinced voters to approve a $10 million general bond in 2016 and obtained a $20.9 million loan from the USDA to build a new hospital in Gold Beach in May of 2017. Staffing it was challenging, primarily due to a lack of housing and the desire of some physicians’ families in living in such a remote locale.

The debt, however, enabled the district to build the hospital and modernize its clinic on Fifth Street in Brookings. The state fire marshal had given the district three years to either build a new hospital or it was going to shutter the old one, which was comprised of a few buildings and modular units and was far too small to provide services the district wanted for residents.

“The challenge and business focus are to make these assets productive,” the audit reads. “Results to date are favorable, with significantly higher net patient revenues.”

Last year, the district lost 3.5 providers — but acquired four more, including a urologist and a cardiologist in July 2017. They were joined by two primary care physicians this past summer.

“Since opening the new hospital and bringing on board the providers, the inpatient census, surgery volumes and ancillary service volumes have increased significantly,” the audit reads. “Consequently, net patient revenue was 19 percent higher than the prior year.”

Closure of the Rush center enabled the district to consolidate surgical services in the new General — with two new operating rooms and a special procedures room — resulting in higher surgical volumes, greater efficiency and “much improved quality of service,” the audit reads.

The new facility also has “significant space” for cardiac, physical, occupational and speech therapy services; net patient revenue in those departments has increased by more than $1.7 million, the audit reads.

The district’s services

The Critical Access Hospital saw 6,210 emergency room visits, 591 hospital admissions, 6,684 clinic visits, 1,631 surgical procedures and 25,688 ancillary service visits such as radiology, lab work or therapy.

Curry Medical Center in Brookings saw 34,283 visits in the clinic and 32,715 ancillary service visits. And the rural health clinic in Port Orford received 2,334 clinic visits and 1,100 ancillary visits.

To staff these sites, the district employed 13 physicians and 10 non-physician providers, with specialities in family practice, pediatrics, obstetrics/gynecology, urology, general and orthopedic surgery, anesthesiology and pain management.

In fiscal year 2018, 47 percent of the district’s revenue was from Medicare, 5 percent from Medicare Advantage programs, 30 percent from commercial insurers, 17 percent from Medicaid and 1 percent rom patients themselves, the audit reads.

Outpatient services comprised 86 percent of the district’s revenue. Of that, emergency services provided 16 percent of revenue, clinic and urgent/same day care services accounted for 23 percent, outpatient radiology and lab services represented 22 and 23 percent, respectively; and both inpatient and outpatient surgery represented 15 percent.

Patients from Brookings brought to the hospital 53 percent of its revenue, with Gold Beach bringing in 30 percent, Crescent City 8 percent, Port Orford 3 percent and out-of-area residents, 6 percent.

That fine line

That isn’t to say the hospital district has not been without challenges.

The district has a high level of long-term debt, the audit reads, which officials anticipated with the construction of the new hospital.

The city of Brookings entered into a $302,000 agreement for the development costs to upgrade its clinic on Fifth Street, the audit notes. The note bears a 3 percent interest rate and requires the district to pay $4,326 a month toward the debt through January 2020.

The $10 million general obligation bond to build the hospital, bears an interest rate of 3.63 percent and principal payments ranging from $280,000 to $335,000 through June 2025, at which point stipulations of the bond change, and could increase those payments to $360,000 to $595,000.

The USDA construction loan is slated to being paid off, at an interest rate of 3.5 to 3.625 percent, over 40 years.

Three notes penned in 2015, including two for $90,000 and a third for $210,000, to purchase land, are also outstanding and due to be paid off in the early 2020s.

“Its ratio of long-term debt to long-term debt plus net is .83, which is very high in comparison with industry benchmarks,” the audit reads.

The hospital went $1.5 million over its initial budget in building the facility, primarily to negotiate a settlement with the general contractor of the project. The settlement was finalized in October, and the hospital garnered $950,000 to be used to mitigate any future problems that might occur with the building.

Capital-related expenses — depreciation, interest, equipment rental — increased significantly, but the district expects cost reimbursements to correspondingly “significantly increase” in the future, the audit reads.

Changing face of healthcare

The district, like many across rural America, faces numerous financial risks, the audit reads. Some are derived from the health care industry itself, and some from the status of the district’s market and its own financial condition.

Industry challenges include that Curry Health District is “heavily dependent” on reimbursements from government payers, leaving significant uncertainty from year to year regarding the amount of method of reimbursement from those payers.

Recruitment of physicians, nurses and other providers is becoming increasingly difficult, the audit reads, with a “widely acknowledged shortage for which no end seems in sight.”

Exacerbating this shortage is the development of robust networks of larger organizations that compete for a limited supply of providers — a situation that particularly challenges rural areas across the nation.

And regulatory scrutiny is intensifying as the government deals with its increasing costs, political controversy and evidence of illegal activity in the industry, the report reads.

Locally, the audit cites Curry County’s small population of retired residents with modest, to low-average disposable income that is highly sensitive to macroeconomic troubles.

“And there has historically been a relatively large ‘out-migration’ of patients leaving the area for healthcare services,” the audit notes. “A primary business goal is to reduce and minimize that out-migration.”

Financially, the district’s cash position and its debt-to-income ratio “needs strengthening,” a goal to which the district has been striving for since hospital construction began.

“The extent of the district’s strategic initiatives has put pressure on cash flow, cash reserves and debt capacity,” the audit reads. Taken together, the initiatives make business sense and can benefit the community, but require strong revenue growth to be financially feasible.”

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