By Betsy Q. Cliff / The Bulletin / May 22. 2009

The organization lost $615,000 last year, according to audited financial statements obtained from the state.

CHC operates three hospitals: St. Charles Bend, St. Charles Redmond and Pioneer Memorial Hospital in Prineville.

The loss, the difference between revenues and expenses, represents just a little more than one-tenth of 1 percent of CHC’s total revenue. Still, it indicates that CHC needs to do better to ensure its long-term financial health.

“This is a health care system that has a reasonably good track record over the years, but they are facing some challenges,” said Bill Kramer, an independent health care consultant in Portland who reviewed the financial statements at The Bulletin’s request.

“They are not generating sufficient margin in 2007 and 2008,” he said.

In 2005, the organization posted operating income of $9 million, followed by $17 million in 2006 and about $1.1 million in 2007.

CHC declined to comment on its 2008 results because they had not yet been presented to the hospital’s board of directors, according to spokeswoman Janette Sherman.

The 2008 loss in operating income - the money left after operating expenses have been subtracted from revenue, which is often used as a gauge of the financial health of a hospital - occurred despite a 16 percent growth in revenue, largely from patient services. In 2008, the hospital group’s revenues totaled about $427 million.

However, expenses grew at a faster clip, about 16.5 percent over 2007. Expenses in all categories rose in 2008, including staff salaries, employee benefits and fees for contracts.

CHC also saw steep losses on its investments in 2008. After making $22 million in 2007, the hospital lost about $31 million in 2008.

“Investment losses were dramatic,” said Kramer, though not uncommon. He noted that nearly everyone with money in the stock market experienced significant losses in 2008.

In addition, the hospital saw its bad debt, or uncollected bills, rise 28 percent in 2008 to more than $24 million.

Charity care, free or lower-cost care provided to low-income individuals without health insurance, also rose in 2008 to $25.5 million from $20 million in 2007.

Charity care and bad debt have been climbing in recent years at hospitals around Oregon, according to the Oregon Association of Hospitals and Health Systems, a hospital advocacy organization. In 2008, according to the organization, the amount of care Oregon hospitals provided but were not paid for was nearly $1 billion, an increase of 12 percent over 2007.

Based on its financial statements, most of the trouble for CHC appeared to occur in the last half of 2008. Through June, CHC had operating income of $9.5 million, according to financial statements released to bondholders. It continued to operate in the black through September, according to those statements, but operating income had declined to about $3 million.

CHC’s financial pain isn’t unique. In 2007, 35 percent of Oregon hospitals operated in the red, according to the Oregon office of Health Policy and Research.

Though the office doesn’t have 2008 data, other surveys suggest conditions have worsened.

A survey of more than 1,000 hospitals nationwide released last month by the American Hospital Association, a lobbying organization, found more than half had a worse operating margin in the first few months of 2009 than in 2008.

In that survey, 90 percent of the hospitals had made cutbacks to address the economic conditions, including nearly 50 percent that had laid off staff.

CHC also has made cuts. It cut 74 jobs in February and reduced hours for 45 staff members. It also reduced salaries by 5 percent and trimmed other operating expenses.

In January, Cascade Healthcare CEO Jim Diegel said cuts were necessary given the economic conditions and results from 2008.

“2008 was an ugly year,” he said at the time. “I’m probably being optimistic with that statement.”

Betsy Q. Cliff can be reached at 541-383-0375 or at bcliff@bendbulletin.com