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Transformation | Tahoe Forest Hospital Report

After nearly a decade of taxpayer-funded growth, is Tahoe Forest Hospital positioned to succeed in a rapidly changing healthcare environment?
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Editors’ Note: The Tahoe Forest Hospital District Board of Directors held a special board meeting on Friday, July 11, where they held a closed session on the performance of CEO Bob Schapper. During open session, the board noted that it had been investigating the possible conflict of interest between Schapper, his wife Marsha Schapper, and Medical Practice Solutions for the past couple of months and that the investigation is  ongoing. The board also said it would respond publicly to Moonshine Ink’s most recent reports on the hospital in the publication’s next issue.

Over the last decade, Tahoe Forest Hospital has undergone a dramatic transformation. Bankrolled largely by taxpayer funding, the hospital embarked on large-scale building plans that converted a small community hospital into a healthcare center with regional ambitions and a desire for a national reputation.

Tahoe Forest Hospital is reaching the tail end of its decade-long expansion funded by $98.5 million in taxpayer funding generated by the Measure C voter-approved bond. But even after the infusion of taxpayer money, troubling signs point to a turbulent future for the hospital. In the 2013 fiscal year, Tahoe Forest Hospital recorded a $5.8 million loss in operating revenue. In the recently completed 2014 fiscal year, the district projected it lost approximately $1 million (audited financials have not been completed for 2014). So far this year the hospital is running deficits as it grapples with a difficult electronic medical records conversion project and slumping patient admission numbers. Inpatient days for Tahoe Forest Hospital’s intensive care unit will go from a high of 545 days in 2010 to a projected 275 days in the 2015 fiscal year, according to hospital projections. Similarly, medical surgical days that were 3,029 in 2010 are expected to drop to 2,775 in the 2015 fiscal year. Diagnostic imaging is projected to drop from 2,130 patient days in 2010 to 1,581 patient days in 2015.

The hospital district has projected another $2.6 million loss in the 2015 fiscal year. Some of those losses are due to the depreciation of buildings built with Measure C funding, an added cost that was anticipated, said Tahoe Forest Hospital Board member Roger Kahn, who emphasized that he was speaking only for himself and not for the hospital or the board in general. Kahn said a better measure of the hospital’s finances is the Earnings Before Interest Depreciation and Amortization figure. That figure shows earnings of $2 million budgeted for 2015.

Standard & Poors reviewed the hospital’s bond rating in January 2014 and downgraded the hospital from “positive” to “stable,” reflecting increased concern of the hospital’s financial stability.

The hospital has responded to its worsening financial position by raising prices. In February, the hospital raised prices by 5 percent, and the district will increase prices by another 5 percent in August, making for a 10 percent increase in prices in six months.

If you place the Tahoe Forest Hospital of 10 years ago side by side with the Tahoe Forest Hospital of today, you’d be hard pressed to see that they were the same institution. Over the last decade and a half, a small, community hospital has transformed into a health system with a brand new $32 million cancer center, a large network of outpatient health services, and a newly remodeled emergency room and Western Addition.

It has doubled its revenue, increased its prices, and nearly quadrupled the amount it spends in “professional fees” to more than $18 million — a category of expense that includes consultants, outpatient doctor contracts, and hospital vendors.

Tahoe Forest Hospital is facing new and unprecedented challenges. Healthcare reform is changing how the hospital is reimbursed for procedures and hospital stays. The hospital’s payor mix is putting pressure on its bottom line as the percentage of commercial insurance patients declines, and Medicare patients increase.

Increasing price competition from Northern Nevada medical institutions threatens to siphon off patients to lower-cost facilities only a half hour away. National healthcare is now moving toward a system that rewards health outcomes over fee-for-service procedures. And growing community concern is questioning the management and operating expenditures of the hospital.

The Business of Not-for-Profit Hospitals

Tahoe Forest Hospital reaps immense financial advantages from being a public, special district hospital, but functions in much the same way a private hospital would operate.

Truckee and North Tahoe taxpayers contribute approximately $5 million in property tax to the district every year, and taxpayers have also footed the $98.5 million Measure C bond that has financed the cancer center, emergency department overhaul, maternity ward upgrades, central power plant rebuild, and seismic retrofits.

But Tahoe Forest Hospital benefits in other ways because of its public, not-for-profit status. The hospital’s foundation marshals hundreds of thousands of dollars of community donations each year. The hospital is exempt from property taxes and corporate income taxes that a private hospital would have to pay.

But few of these financial advantages are noticeable to the patient. The billing and care at Tahoe Forest Hospital is similar to a private hospital experience. And while Tahoe Forest Hospital doles out charity care to patients unable to pay, so do private hospitals around the country.

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Reader comments so far...

bob | Truckee
Thank you for the excellent reporting. Since I have a HSA health plan which includes a very high deductible, I am compelled to shop for my health care. I have received excellent work in Reno for an MRI at 1/3 of the cost Tahoe Forest would have charged. A colonoscopy was also 1/3 the cost. That equates to thousands of dollars in savings. I think we have excellent providers in the Tahoe Forest system however the cost is way out of line. I am concerned that in the near future we will be asked to tax ourselves some more to cover annual shortfalls in operating income. Administrative salaries are completely out of line with comparable hospitals.

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February 14, 2019