Byline: Erika Gonzalez News Staff Writer
Centura Health is back in the black after losing $61 million over its past two fiscal years.
The state's largest hospital system announced Thursday it turned a profit of $56 million for the fiscal year ended June 30, a significant improvement over the $33.1 million loss Centura posted the year before.
To bolster the bottom line, Centura shed non-core businesses, negotiated more favorable contracts with local health plans and downsized some corporate functions.
``This past year represents what we believe is the successful execution of our strategies,'' said Centura Chief Executive Joe Swedish.
Those strategies included:
* The sale of 120 physician practices, a line of business that recorded a $20 million loss last year.
* Staff reductions in administrative and management positions that saved Centura $8 million.
* The cancellation of several ``capitation'' or risk-based contracts that required Centura to share with health plans more of the financial burden associated with providing patient care.
Swedish said the reduction in risk-based contracting helped boost net revenues from $859 million to $977 million last year.
``We now believe that we're on a level where we're getting paid for the quality of services we're providing,'' Swedish said.
HealthONE and University Hospital also increased profits by pushing health plans into higher-paying contracts. HealthONE, which operates six metro-area hospitals, increased its net income from $31 million to $39 million in 1999. University posted a profit of $825,000 for the fiscal year ended June 30.
But experts say it may be difficult for hospitals to sustain that profitability in the years to come.
``They've managed to get more money from the HMOs, but the HMOs are limited in their ability to turn to their ratepayers and get more money from them,'' said health care consultant Allan Baumgarten, publisher of the Colorado Managed Care Review.
The hospitals also will face a significant challenge because of lower Medicare reimbursement rates. Centura expects to lose $70 million in reimbursement over the next three years.
``There are wild cards in our ability to perform at high levels going forward,'' Swedish concedes.
Rising labor and equipment costs also may take a chunk out of the bottom line. Centura said it plans to keep its wages competitive and will spend $64 million over the next year to renovate hospitals, improve services and update equipment.
The not-for-profit also is considering building a new hospital in the burgeoning south metro area but has scrapped expansion plans in Aurora and Golden. Centura also will continue its strategy of divesting ancillary businesses through its sale of Sloans Lake Managed Care, which should be finalized by year's end.
``The challenge is to assure that we maintain our business discipline and focus on our core business,'' Swedish said.
Centura manages 10 hospitals, four full-service medical centers, 10 senior living facilities and a home care and hospice division.
