Bon Secours has 'solid year' in Hampton Roads

SUFFOLK

Bon Secours Hampton Roads Health System's operating income dropped by 1.5 percent in its latest fiscal year due to the expense of adding physicians to its payroll.

The Suffolk-based health system is part of Bon Secours Virginia, a subsidiary of Maryland-based Bon Secours Health System Inc. The Catholic not-for-profit organization operates hospitals, nursing care and other health services serving people in seven states.

The Hampton Roads system reported $24.8 million in operating income on operating revenues of $718.7 million for the 12 months ended Aug. 31, according to audited financial statements released by Bon Secours. The sale of a laboratory business brought a one-time gain of $24.2 million.

The local health system reported $235.1 million in net assets as of the end of its fiscal year on Aug. 31. That was $39.2 million more than the prior year. The increase came from operating income and a favorable change in the pension plan, said Ernie Padden, interim chief financial officer for Bon Secours Hampton Roads.

"We had an OK year financially and a strong investment year," Padden said.

The parent Bon Secours Health System reported $851 million in net assets as of Aug. 31 and $85.5 million operating income on operating revenues of $3.3 billion for 2011. The Hampton Roads system's operating revenues accounted for 21.7 percent of the total.

Bon Secours Hampton Roads employs about 4,600 people and runs three hospitals - DePaul in Norfolk, Maryview in Portsmouth and Mary Immaculate in Newport News - as well as nursing homes, outpatient centers, a physicians group, and home health and hospice services.

Like its parent organization, the local Bon Secours system hired more physicians in 2011, adding 27 doctors to bring the medical group's membership to 134.

"We believe that health care reform and the health care model of the future is going to require a collaboration between physicians and other health care providers to the extent that employment is necessary in some cases," Padden said.

Income from the additional doctors helped boost Bon Secours Hampton Roads' patient service revenue by 8.4 percent to $672.6 million in 2011, Padden said. The number of days patients spent in its hospitals also increased, as did the number of surgeries - particularly orthopedic procedures at Mary Immaculate Hospital.

In 2011, the system also paid for more contract workers - including nurses - than the previous year, Padden said.

The sale of the outpatient laboratory business cost the system $12.3 million that it would have contributed to operating income, Padden said.

Bon Secours leaders decided to sell the lab business to take advantage of a good market, according to its financial statements. The system plans to use much of the $24.2 million proceeds to bolster neurology, urology and cancer care.

The cost of uncompensated care provided by the Hampton Roads system rose by 26.2 percent between its 2010 and 2011 fiscal years to $130.9 million, according to Lynne Zultanky, a spokeswoman. That figure includes charity care, the cost of patient care that is written off as bad debt and losses from Medicaid, which often pays rates below the cost of providing a service.

The health system also contributed $4 million in medical education, free health screenings, donations and other community benefits.

Bon Secours Hampton Roads' operating margin of 3.5 percent represented a "solid year," Padden said.

By comparison, Norfolk-based Sentara Heathcare reported a 5.6 percent operating margin for its fiscal year ended Dec. 31, 2010, the most recent available.

On tap for next year at Bon Secours: the expense of installing an electronic medical records system, hiring more physicians, and making other preparations for looming changes in health care.

"All health care entities are going to be tested, going forward, as we move into health care reform," Padden said. "It's going to be a challenging time for the health care industry."

Amy Jeter, 757-446-2730, amy.jeter@pilotonline.com