Healthcare

Growing Pains
Hospitals are expanding rapidly but many suffer
with soaring insurance premiums and other challenges

See a list of North Carolina's Ten Largest Hospitals
Read an op-ed column by N.C. Hospital Association President Bill Pully
Right: An emergency room trauma center 
at Pitt County Memorial Hospital in Greenville


By Kevin Brafford

Most people look at hospitals the way Dorothy thought of the Wizard of Oz.— as  powerful and mysterious forces capable of working miracles. But healthcare industry leaders say they wish we would pull aside the curtain for a more realistic look at hospitals and see them as we would any other business.

It requires that kind of cold assessment to understand that hospitals, which often are a community’s largest employer, are struggling for survival at a time when they need to prepare for explosive growth.

A quick look at some numbers helps us begin that assessment. North Carolina’s 137 hospitals provided 104,926 full-time jobs and another 31,480 part-time paying positions in 2000, the last year complete data is available, according to Don Dalton, public relations director for the North Carolina Hospital Association (NCHA). More people now work at hospitals than in the textile or furniture industries. Tar Heel hospitals in 2000 treated a staggering 961,312 patients who kept the 20,047 available beds unoccupied only long enough to change the sheets.

Other numbers boggle the mind, such as the $17 billion in gross revenue that hospitals took in during 2000. “It is big business,” says Dalton, “and it’s only getting bigger. The demand for services has never been greater, and it’s growing. As baby boomers age, we are looking at a demand in a decade from now that is off the charts. Statistics show that when people get to be 65, their healthcare demands double. Then if they live long enough to hit 80, it doubles again.”

That indicates hospitals have tremendous near-term growth potential. “Hospitals need to be investing now in the facilities that will be the infrastructure to meet the demand that’s 10 and 15 years out,” Dalton says. “If the commitment’s not made now, it will definitely be felt later.”

And hospitals are investing for future growth even as other industries pulled back during the weak economy of the past two years. Since January 2000 the state Department of Health and Human Services’ Certificate of Need office has approved 72 new construction and renovation plans for hospitals totaling more than $4 billion — creating thousands of construction jobs now and the demand for thousands more permanent positions when those facilities open.

But hospitals are confronting problems of staggering proportions. Their liability insurance premiums have doubled, labor costs are soaring and they had to write off more than $1 billion last year for treating the uninsured, according to NCHA figures. About a third of all hospitals in the state are running in the red and another third are struggling just to break even.


Growth Down East

Hospitals all across the state are struggling to remain profitable today while girding for explosive growth tomorrow, particularly those outside the state’s major urban areas. In Eastern North Carolina, the trend can be traced to 1975, when the General Assembly approved an academic medical center at East Carolina University. “It was a watershed event that’s created a medical hub (here),” says Tom Fortner, director of information for University Health Systems in Greenville. “Everything just took off from there.”

Pitt County Memorial Hospital, the largest subsidiary of the system, today employs 5,026 people and projects 2003 operating revenues of $531 million. “We’re the largest employer in the county,” says Fortner, “and our employees tend to have higher incomes than the traditional manufacturing-type jobs that we see in North Carolina. Ours is an educated workforce — many of them have advanced degrees.”

Tremendous growth also is evident at New Hanover Regional Medical Center (NHRMC) in Wilmington. With 4,715 total employees, the center, which includes Cape Fear Hospital and Pender County Hospital, “is the largest employer in the region by a good bit,” says Communications Director Scott Whisnant. “We’re adding jobs and we’re adding beds. Each year, we set a new record for patient visits.”

Like many hospitals, NHRMC is publicly owned and receives no local tax support. The main hospital strategically sits 17 blocks from the Cape Fear River — about a mile and a half from downtown and seven miles from the beach — and its 10th floor marks the highest point in Wilmington.

“The last five years has been a period of tremendous growth here,” says Whisnant. “In that time, our operations budget has increased by 133 percent, the medical staff by 66 percent and the employee staff by 34 percent.”

A $50 million-plus facelift has fueled the boon. The emergency room was doubled in size, a freestanding three-story cancer center constructed, and the visitor concourse completely renovated, creating a main hallway in the front of the hospital that alleviates traffic in the areas where patients are transported.

Whisnant says 170 new jobs were created in the budget for the 2003 fiscal year. “At a time when the economy as a whole is not performing as well as it has, we’ve been able to add positions and continue to increase pay to our employees,” he says.

“These are doctors and nurses and other skilled professionals,” he continues, “who make a significant contribution to this economy. They’re buying homes here and paying taxes here. Because of them, and the hospital’s growth in general, there are any number of other businesses that have sprouted up around here.”

Whisnant points to the Hampton Inn Wilmington-Medical Park, which by its very name makes no bones as to the market it’s catering to. Sandwich shops abound, plus doctor’s offices, a medical supply company and a pharmaceutical company — all in part driven by the hospital.

That impact, albeit on a smaller scale, may be felt one day in rural Pasquotank County, thanks to an estimated $21 million expansion and renovation that began Sept. 5 at Albemarle Hospital in Elizabeth City. The construction will add beds and provide new surgery and recovery rooms, plus expanded cardio-pulmonary diagnostics and treatment facilities to the hospital, which also serves Camden, Currituck, Dare, Perquimans, Gates and Chowan counties.

The three-phase project, according to Manager of Communications Chip Romanovich, also will provide an expanded cafeteria, ancillary and support space and a larger central energy plant that will utilize natural gas as a cost-saving energy source. The hospital’s north entrance will have a new look, with visitors entering the facility through an attractive glass atrium into a lobby featuring redesigned gift and coffee shops. “It’s a major project that will have a significant economic impact on the area,” says Romanovich. “The hospital has around 1,000 employees — we rival the U.S. Coast Guard Base in Elizabeth City as the county’s largest employer. So we’re a large consumer of local goods and services, and we try to outsource locally as much as we can.”


Catering To Customers

That Albemarle Hospital is devoting significant money to making a positive first impression to those entering its facility is a sign of the times, as the look of hospitals has changed drastically in the past decade. A focal point of renovations and new construction is to make hospitals more user-friendly and eye appealing.

One example is the main entrance at Duke University Hospital, which gives off the feeling that you’re driving up to a four-star hotel, complete with valet parking. Someone’s also there to park your car at UNC Hospitals, which has worked diligently to enhance its curbside appeal. Whereas visitors or patients once found inadequate parking and a bewildering maze of unmarked passageways, they now arrive to new parking decks and golf cart shuttles. A central atrium area then leads through one of five interconnected “gateways,” which are highlighted by signage and mapping that makes it difficult to lose your way. “We see approximately 3,000 outpatients per day,” says Eric Munson, the hospital’s president and CEO, “and we needed to have an environment that was more accessible.”

The changes create an ambiance designed to make a hospital stay — or even just a visit — comfortable. Hospitals believe this aids in a patient’s healing process. It also makes economic sense from a couple of standpoints: 1) A patient’s positive hospital experience decreases any hesitance to return the next time care is needed; and 2) family and friends relax in a pleasing environment and thus may stay longer. The longer they stay, of course, the more likely they are to eat in the cafeteria, make a purchase from the gift shop and pay more for parking in the parking deck.

There’s another factor at work, says Dalton of the NCHA. “Absolutely, people respond better to the treatment they receive in an atmosphere that’s more comfortable, and it’s a common understanding than an attractive facility not only aids patients but helps attract patients. What it’s easy to lose sight of, however, is that attractive facilities also help attract workers.”

Hospital administrators now realize that all of those components work together. Cutting-edge equipment and available services are necessary to compete for customers and employees. Around the state, great strides have been made. To wit:

Two new facilities opened at UNC Hospitals last fall that now house the North Carolina Women’s Hospital and the North Carolina Children’s Hospital. Built for $160 million, the two buildings emit convenience. “We’ve been able to consolidate services that had been widely dispersed throughout the campus,” Munson says. “There is now one-stop-shopping for women and children across the entire spectrum of their healthcare needs.”

Work that’s under way at High Point Regional Health System attracted the attention of no less than President Bush, who visited with the medical staff last summer. In the past two years, the facility has added more than 300 employees and opened a comprehensive $28 million regional heart center.

Rowan Regional Medical Center will soon complete an 18-month expansion and renovation of its emergency department, while also expanding its cardiology and women’s services. “We have grown from about 30,000 (emergency room) visits a year to about 48,000 visits a year,” says CEO Charles Elliott. “We really needed to expand that facility.”

Dalton believes hospitals are an underrated economic cornerstone of their respective communities. “They are a tremendous attractor for economic development, without question,” he says. “People who are looking to relocate a business, particularly a large business, take a hard look at what healthcare facilities exist in the area they’re considering.”

Bob Leak Jr., president of Winston-Salem Business Inc., the city’s economic development arm, agrees. His job is to  entice new business into wanting to come to Forsyth County.

With N.C. Baptist Hospital and Forsyth Medical Center ranking first and third as the county’s largest employers, Leak touts top-notch healthcare early in his recruiting speech. “It’s one of the strongest selling points I have,” Leak says. “You have those outstanding hospitals, plus the Bowman Gray School of Medicine at Wake Forest. Businesses today are so aware of the importance of quality healthcare — not just because it’s an important component for them in attracting employees, but also because the healthier they keep their workforce, the stronger their company will be.”


Weak Economy Impacts Hospitals

One might expect that hospitals are recession proof but that’s not so, says Dalton. “We’re not immune, but the effect is somewhat secondary. Hospitals have always had a reputation for having good stable employment, and that’s still the case. But hospitals have other problems.”

Most have to do with getting paid. A weak economy breeds job losses, which increases the number of people without health insurance. That, in turn, affects a hospital’s bottom line as more patients either self-pay or don’t take care of their bills at all.

The next time you walk into a convenience store, imagine grabbing a 20-ounce soft drink, a half-gallon of milk and a bag of potato chips and heading to the cash register. When it’s your turn to pay, you discover your pockets are empty. “That’s OK,” the clerk behind the counter says. “Go ahead and take those items with you. No charge.”

That’s akin to how hospitals operate. They’re open 24 hours a day, seven days a week, 365 days a year. “We don’t turn customers away, regardless of if they can pay or not,” says Dalton. “What other business does that?” It’s the right thing to do, but also a costly thing to do. Statistics show that roughly 17 percent of the state’s population lacks health insurance of any kind. “Hospitals were projected to spend over $1 billion in 2002 for the uninsured,” Dalton says. “It doesn’t matter whose perspective you look at it from, that’s a pretty substantial amount of uninsured care.”

Absorbing those costs, coupled with other rising cost factors — including liability insurance premiums that rose in some instances to as much as 400 percent, according to Dalton — makes it easy to understand why more than 30 percent of North Carolina hospitals currently operate in the red and another 35 percent make only a minimal profit.

“Two-thirds of hospital revenues come from government payers, primarily Medicare and Medicaid,” Dalton says. “In the aggregate, hospitals in our state get about a 10th of a percent above their cost in serving Medicare patients and they lose money serving Medicaid patients. So if a hospital’s going to have a positive bottom line, that cost has to be shifted, and it gets shifted to business.”

That’s a stinging fact, to be sure, but it’s a sting that the business community can take because he formulas for measuring a company’s economic impact don’t apply to hospitals. “The impact of hospitals goes beyond just the number of jobs that are provided and dollars spent,” says Dalton. “Given the number of lives that we’re touching in a hospital — hopefully positively affecting a person’s health to the point of being able to return to work — that points to an economic impact of hospitals that can’t be calculated.”


North Carolina's Ten Largest Hospitals

1. Duke University Hospital, Durham
Staffed beds: 948
Licensed beds: 1,124
Number of employees: 8,114 (entire system)
Operating budget: $1.2 billion

2. Carolinas Medical Center, Charlotte
Staffed beds: 834
Licensed beds: 843
Number of employees: 23,000 (entire system)
Operating budget: $3.6 billion (entire system)

3. Moses H. Cone Memorial Hospital, Greensboro
Staffed beds: 792
Licensed beds: 954
Number of employees: 7,000
Operating budget: N/A

4. WakeMed, Raleigh
Staffed beds: 752
Licensed beds: 752
Number of employees: 5,600 (entire system)
Operating budget: Estimated $500 million

5. N.C. Baptist Hospitals, Winston-Salem
Staffed beds: 735
Licensed beds: 830
Number of employees: 11,000
Operating budget: Receives more than $140 million annually in outside grants to support research.

6. Pitt County Memorial Hospital, Greenville
Staffed beds: 723
Licensed beds: 731
Number of employees: 5,000
Operating budget (gross patient revenue for 2003): $750 million

7. Mission St. Joseph’s Health System, Asheville
Staffed beds: 707
Licensed beds: 724
Number of employees: 5,300
Operating budget: $448 million

8. UNC Hospitals, Chapel Hill
Staffed beds: 688
Licensed beds: 688
Number of employees: 4,892
Operating budget: $535.7 million

9. Forsyth Medical Center, Winston-Salem
Staffed beds: 647
Licensed beds: 849
Number of employees: 5,950
Operating budget: N/A

10. New Hanover Regional Medical Center, Wilmington
Staffed beds: 520
Licensed beds: 628
Number of employees: 4,443
Operating budget: $468.7 million


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