Levine is undaunted. Were not making apologies about it, he says of the changes to the districts accounting for property tax revenue. He dubbed blending tax and reimbursement revenue dishonest. The combined revenue inflates operating margins and financial performance ratios with subsidies, he adds. It skews everything. It can mask inefficiency.
The National Association of Public Hospitals and Health Systems does not track how its tax-supported members disclose public financing in financial statements, says Brigette Settles Scott, a spokeswoman for the Washington-based trade group.
Wiping out tax funds from its revenue reversed North Browards operating profit in 2006 and weakened key ratios used to track expenses in 2006, Levine says. The system reported operating income (with taxes) of $42.9 million. Without the tax revenue, operating income evaporated into a $132.2 million operating loss, the revamped financials show.
One key performance measure, used to keep tabs on hospitals largest expenselaborlooked significantly worse after removing tax funds from revenue. The ratio, which represents salaries, wages and benefits as a percentage of net operating revenue, jumped to 67% from its previous 57% (with taxes included), Levine says. Supply costs gobbled up 19% of net operating revenue without taxes, compared with 16% when public subsidies are included in net operating revenue figures.
Minus the subsidies, the numbers look less favorable, but they better reflect North Browards ability to control costs, negotiate with vendors, providers and insurers and attract patients, Levine says. Tax revenue keeps us from behaving like an agile, market-driven organization that would aggressively pursue the best possible pricing because, well, we dont have to, he says.
Levine says he would like to see North Broward better compete with private providers. The districts flagship, 567-bed Broward General Medical Center, Fort Lauderdale, is six miles southeast of HCAs 264-bed Plantation (Fla.) General Hospital. HCAs 215-bed Northwest Medical Center, Margate, Fla., sits roughly five miles east of North Browards 200-bed Coral Springs (Fla.) Medical Center. The districts 180-bed Imperial Point Medical Center is roughly two miles from two competitors: Tenet Healthcare Corp.s 391-bed North Ridge Medical Center to the southwest and Catholic Health Easts 450-bed Holy Cross Hospital; all three of those rivals operate in Fort Lauderdale.
I prefer to manage as if we didnt have taxes, and then use the taxes to offset losses created by the fact we have such a high volume of uninsured, he says. The district recently announced a $33 million investment to expand emergency department capacity at Imperial Point and Coral Springs.
Moodys analysts noted in February the districts new operating strategy, which includes efforts to boost its neurosurgery, cancer and cardiology services in a service area which is quite competitive. In Broward County, the adjacent South Broward Hospital District, a public system based in Hollywood that operates as Memorial Healthcare System, has captured market share through expansion, the ratings agency noted. Meanwhile, HCA and Tenet also compete in Broward County. Overall, 18 acute-care hospitals operate in the county, which had an estimated population of 1.8 million, according to 2006 Census Bureau estimates.
In late June, the system touted $22.5 million in savings over six years after renegotiating physician contracts. North Broward also outsourced its pathology services after losing roughly $750,000 a year on its group of 12 employed pathologists, Levine says. The move saved the district an additional $500,000 per year, significantly shrinking the loss, he says.
Levine says the change may also help build trust in the system by boosting its transparency. The public should have a clear picture of the (hospitals) performance in the event it has no taxes, he says.
North Browards board Finance Committee chairman, Robert Bernstein, agrees. Bernstein, founder and president of outpatient surgery center developer Spectrum Healthcare Solutions, says without tax revenue, the districts financial statements better highlight North Browards operations. Were not entitled to spend any more money than we have to, says Bernstein, who was appointed to the district by then-Gov. Bush in 2005. Bernstein says he backs the change, which Levine made without board approval.