November 19, 2018

Q3 2018 HOSPITAL UTILIZATION AND FINANCIAL ANALYSIS

November 19, 2018

4000 Kruse Way Place • Suite 100 • Lake Oswego, OR 97035 • Tel: (503) 479-6034 • www.apprisehealthinsights.com APPRISE HEALTH INSIGHTS IS A SUBSIDIARY OF THE OREGON ASSOCIATION OF HOSPITALS AND HEALTH SYSTEMS

ABOUT THIS REPORT

This report aims to provide a quarterly analysis of the utilization and financial data submitted by Oregon’s hospitals to the DATABANK program.

DATABANK is a state-mandated monthly hospital data program administered by Apprise Health Insights in collaboration with the Office for Oregon Health Policy and Research (OHPR). Please note that all DATABANK data are self-reported by the hospital and represent a twelve-month calendar year. Accuracy is the responsibility of the reporting hospitals.

Because this report’s objective is to provide a complex dive into the data, the graphs and methods may change between reports. This forces only the most compelling stories to be exhibited. The determination of which graphs and stories to focus on is evaluated by hospital finance and data experts at Apprise.

Note: Kaiser Sunnyside and Kaiser Westside hospitals are excluded from this analysis due to the lack of financial data available in DATABANK.

LAYOUT INFORMATION

Aggregate vs Median This report uses two statistics to report statewide hospital data: median and aggregate. Aggregate numbers sum up the entire amount for all hospitals into one number, where median only takes the number from the middle of the pack. Aggregate is useful when looking at the industry as a whole, such as the percent of Medicaid charges or the total number of patients visiting Emergency Departments in the state. Median is useful when outliers can be highly-influential on a statistic, such as a large hospital having a significant negative margin dragging down the statistic for the whole state. Apprise tries to conform to the Oregon Health Authority’s Office of Health Analytics on the subject as much as possible: https://www.oregon.gov/oha/analytics/Pages/Hospital-Reporting.aspx

Trend vs Seasonal-Adjusted Each metric in this report contains two graphs: a trend analysis and a seasonal-adjusted graph. The trend analysis is a simple line graph that shows how the metric has changed over time linearly. However, because many of these metrics tend to be affected largely by seasonal influences, the seasonal-adjusted graph shows a comparison of each quarter to the same quarter in the previous two years.

QUICK STATS

1. Operating Margins decreased from Q2, but remain highly seasonal

2. Commercial & Other Payer Mix is showing a slight downward trend

3. Medicaid Payer Mix continues to decrease

4. Medicare Payer Mix continues to increase

5. Charity Care continues to increase

Notes for the Q3 2018 Report -The numbers and figures in this report are based on a DATABANK download from November 15, 2018.

-Lower Umpqua Hospital has been excluded from this report due to unavailable data.

-Kaiser Sunnyside and Westside Medical Centers have been excluded from this report due to only having three quarters of financial data available. They will be added to the Q4 2018 report.

-Shriners Hospital for Children is automatically excluded from this report because of their unique status. They often have margins of ≤ 100% and wildly fluctuating payer mixes that make them difficult to compare with traditional hospitals.

TABLE OF CONTENTS

Operating Margin...... Page 4

Net Patient Revenue...... Page 4

Payer Mix...... Page 5

Charity Care...... Page 7

Bad Debt...... Page 7

Inpatient Discharges...... Page 8

Total Outpatient Visits...... Page 8

Ambulatory Surgery Visits...... Page 9

Emergency Department Visits...... Page 9

Appendix A: Regions...... Page 10

Appendix B: Hospital Types...... Page 11

Appendix C: Definitions...... Page 12

OPERATING MARGIN Measure of profitability from the reporting entity’s operations

Median Operating Margin continues to follow its recent pattern of seasonal swings, with highs in Q2 and lows in Q4 of each year. (Figures 1 & 2).

Operating Margin Percent Operating Margin Percent (Median) (Median, Seasonal Adjustment) 5.4% Q1 Q2 Q3 Q4

5% 5.4% 4.6% 5% 4.1% 4.6% 4% 3.8% 4.1% 3.8% 4% 3.8% 3.8% 3.4% 3.4% 3% 2.6% 3% 2.7% 2.8% 2.8% 2.7% 2.6%

2% 2% 1.5% 1.5% 1% 1%

0.0% 0% 0% -0.1% 0.0% -0.1% 2016 Q1 2016 Q3 2017 Q1 2017 Q3 2018 Q1 2018 Q3 2016 2017 2018 2016 2017 2018 2016 2017 2018 2015 2016 2017 Figure 1 Figure 2

NET PATIENT REVENUE The revenue the reporting entity generates from patient care

Aggregate Net Patient Revenue (NPR) saw a decrease this quarter in overall trend. However, the past eight quarters have seen increases in seasonally-adjusted NPR, with an average increase each quarter of approximately 4.1% (Figures 3 & 4).

Net Patient Revenue Net Patient Revenue (Aggregate) (Aggregate, Seasonal Adjustment)

$3.02B Q1 Q2 Q3 Q4 $3.00B $2.99B $3.02B $3.00B $3.00B $3.0B $3.0B $2.92B $2.89B $2.82B $2.80B $2.84B $3.00B $2.76B $2.76B $2.75B $2.99B

$2.5B $2.92B

$2.9B $2.0B $2.89B

$2.84B $1.5B

$2.80B $2.8B $2.82B $1.0B

$2.76B $2.76B $0.5B $2.75B

$2.7B $0.0B 2016 Q1 2016 Q3 2017 Q1 2017 Q3 2018 Q1 2018 Q3 2016 2017 2018 2016 2017 2018 2016 2017 2018 2015 2016 2017 Figure 3 Figure 4

MEDICAID PAYER MIX The amount of total charges that were attributable to Medicaid

Aggregate Medicaid Payer Mix continues to decrease (Figures 5 & 6). The past eight quarters have all seen decreases in seasonally-adjusted Medicaid payments.

Medicaid Payer Mix Medicaid Payer Mix (Aggregate) (Aggregate, Seasonal Adjustment) 24% Q1 Q2 Q3 Q4 25% 23.4% 22.9% 22.4% 22.3% 22.3% 22.6% 22.1% 22.4% 23.4% 21.5% 21.4% 21.8% 21.8%

20%

23% 22.9% 22.6% 15% 22.4% 22.3% 22.3% 22.4% 22.1% 10% 22%

21.8% 21.8% 5% 21.5% 21.4%

21% 0% 2016 Q1 2016 Q3 2017 Q1 2017 Q3 2018 Q1 2018 Q3 2016 2017 2018 2016 2017 2018 2016 2017 2018 2015 2016 2017 Figure 5 Figure 6

MEDICARE PAYER MIX The amount of total charges that were attributable to Medicare

Aggregate Medicare Payer Mix saw a decrease this quarter in overall trend. However, the past eight quarters have seen increases in seasonally-adjusted Medicare payments (Figures 7 & 8).

Medicare Payer Mix Medicare Payer Mix (Aggregate) (Aggregate, Seasonal Adjustment) 46% Q1 Q2 Q3 Q4

44.8% 44.9% 45.0% 44.4% 44.2% 43.1% 43.1% 43.8% 42.9% 43.8% 42.8% 43.3% 45.0% 44.9% 40% 45% 44.8%

44.4% 30% 44% 44.2%

43.8% 43.8% 20% 43.1% 43.1% 43.3% 43%

42.8% 42.9% 10%

42% 0% 2016 Q1 2016 Q3 2017 Q1 2017 Q3 2018 Q1 2018 Q3 2016 2017 2018 2016 2017 2018 2016 2017 2018 2015 2016 2017 Figure 7 Figure 8

COMMERCIAL & OTHER PAYER MIX The amount of total charges that were attributable to a commercial insurer or other payer

Aggregate Commercial & Other Payer Mix is showing a slight downward trend. Five of the past seven quarters have seen decreases in seasonally-adjusted Aggregate Commercial & Other Payer Mix (Figures 9 & 10).

Commercial & Other Payer Mix Commercial & Other Payer Mix (Aggregate) (Aggregate, Seasonal Adjustment) Q1 Q2 Q3 Q4 33.1% 35% 33.0% 33.0% 33.1% 33% 31.9% 32.1% 32.2% 32.5% 32.1% 32.0% 32.1% 31.0% 31.0% 31.7% 30%

32.5% 32.2% 32.1% 25% 32.0% s 32% 32.1% l u e 32.1% a

V 31.9% 31.7% 20% b l e a s U 15%

31% 31.0% 31.0% 10%

30% 0% 2016 Q1 2016 Q3 2017 Q1 2017 Q3 2018 Q1 2018 Q3 2016 2017 2018 2016 2017 2018 2016 2017 2018 2015 2016 2017 Figure 9 Figure 10

SELF PAY PAYER MIX The amount of total charges that were attributable to patients paying primarily out-of-pocket

Although Aggregate Self Pay Payer Mix saw a slight increase from previous quarters, it remains fairly stable at approximately 1-2% (Figures 11 & 12)

Self Pay Payer Mix Self Pay Payer Mix (Aggregate) (Aggregate, Seasonal Adjustment) Q1 Q2 Q3 Q4

2.1% 2.1% 2.1% 2% 2.0% 2.0% 2.1% 1.9% 1.9% 1.8% 1.8% 1.8% 1.7% 2.0% 1.6% 1.7% 2% 2.0%

1.8% 1.9% 1.9% 1.8% 1.8% 1%

1.7%

1.6% 1.7%

0% 2016 Q1 2016 Q3 2017 Q1 2017 Q3 2018 Q1 2018 Q3 2016 2017 2018 2016 2017 2018 2016 2017 2018 2015 2016 2017 Figure 11 Figure 12

CHARITY CARE PERCENTAGE The amount of free care provided to patients who are determined by the hospital to be unable to pay their bill

Median Charity Care as a percentage of Total Charges has been steadily increasing (Figures 13 & 14). The past seven quarters have seen increases in seasonally-adjusted Charity Care.

Charity Care Percentage Charity Care Percentage (Median) (Median, Seasonal Adjustment) Q1 Q2 Q3 Q4 1.8% 1.8% 2% 1.8% 1.8% 1.8% 1.8% 1.7% 1.6% 1.6% 1.7% 1.5% 1.4% 1.4% 1.4% 1.5%

1.4% 1.1% 1.1% 1.4% 1.0% 1.4% 1%

1.1% 1.1%

1% 1.0%

0% 2016 Q1 2016 Q3 2017 Q1 2017 Q3 2018 Q1 2018 Q3 2016 2017 2018 2016 2017 2018 2016 2017 2018 2015 2016 2017 Figure 13 Figure 14

BAD DEBT PERCENTAGE Unpaid obligation for care from patients who have not requested or do not qualify for financial assistance and have been unwilling to pay their bill

Median Bad Debt remains fairly stable at approximately 1% (Figures 15 & 16).

Bad Debt Percent Bad Debt Percent (Median) (Median, Seasonal Adjustment) Q1 Q2 Q3 Q4 1.06% 1.07% 1.06% 1.07% 0.99% 0.99% 1% 1.0% 0.95% 0.91% 0.90% 0.95% 0.88% 0.87% 0.85% 0.87% 0.90% 0.91% 0.71% 0.68% 0.85% 0.88% 0.87% 0.87%

0.71% 0.68%

0% 2016 Q1 2016 Q3 2017 Q1 2017 Q3 2018 Q1 2018 Q3 2016 2017 2018 2016 2017 2018 2016 2017 2018 2015 2016 2017 Figure 15 Figure 16

TOTAL DISCHARGES The total number of inpatient discharges during the reporting period

Aggregate Inpatient Discharges remain highly seasonal, with highs in Q1 and lows in Q3. The past five quarters have seen slight decreases in seasonally-adjusted Aggregate Inpatient Discharges (Figures 17 & 18).

Total Discharges Total Discharges (Aggregate) (Aggregate, Seasonal Adjustment) 82K Q1 Q2 Q3 Q4 81.4K 80.9K 81.4K 81.1K 80.1K 80.1K 80.0K 79.5K 80.8K 80.6K 81.1K 80K 78.9K 78.5K 78.2K 80.9K 81K 80.8K 80.6K 70K

80.1K 80.1K 80.0K 60K 80K

50K 79.5K 40K 79K 78.9K 30K 78.5K

78K 78.2K 20K

10K

77K 0K 2016 Q1 2016 Q3 2017 Q1 2017 Q3 2018 Q1 2018 Q3 2016 2017 2018 2016 2017 2018 2016 2017 2018 2015 2016 2017 Figure 17 Figure 18

TOTAL OUTPATIENT VISITS The total number of outpatient visits during the reporting period

Aggregate Total Outpatient Visits decreased this quarter in both overall trend and seasonally-adjusted (Figures 19 & 20). It is unusual that the past two quarters have both seen decreases in seasonally-adjusted Total Outpa- tient Visits. However, the decrease from Q2 2018 was expected as most Q3’s have shown decreases from Q2.

Total Outpatient Visits Total Outpatient Visits (Aggregate) (Aggregate, Seasonal Adjustment) 3.1M Q1 Q2 Q3 Q4 3.03M 3.03M 2.99M 2.99M 3.0M 2.91M 2.87M 2.95M 2.99M 2.82M 2.86M 2.85M 3.0M 2.99M 2.77M 2.74M 2.77M

2.5M 2.95M 2.9M 2.91M 2.0M 2.85M 2.87M 2.82M 2.86M 1.5M 2.8M

2.77M 2.77M 1.0M 2.74M 2.7M

0.5M

2.6M 0.0M 2016 Q1 2016 Q3 2017 Q1 2017 Q3 2018 Q1 2018 Q3 2016 2017 2018 2016 2017 2018 2016 2017 2018 2015 2016 2017 Figure 19 Figure 20

AMBULATORY SURGERY VISITS The total number of ambulatory surgery visits during the reporting period

Aggregate Ambulatory Surgery Visits are highly seasonal, with counts typically much higher in Q2 and Q4 (Figures 21 & 22). The overall trend seems to be stable at 45-50K.

Ambulatory Surgery Visits Ambulatory Surgery Visits (Aggregate) (Aggregate, Seasonal Adjustment) 52K Q1 Q2 Q3 Q4 51.2K 50.2K 50.7K 50.2K 51.2K 51K 50.7K 50K 48.9K 49.6K 48.7K 47.7K 47.1K 47.9K 48.3K 50.2K 50.2K 45.8K

50K 49.6K 40K

s 49K l u e a

V 48.3K 48.9K 48.7K 30K b l e a s

U 48K 47.9K 47.7K 20K 47K 47.1K

10K 46K 45.8K

45K 0K 2016 Q1 2016 Q3 2017 Q1 2017 Q3 2018 Q1 2018 Q3 2016 2017 2018 2016 2017 2018 2016 2017 2018 2015 2016 2017 Figure 21 Figure 22

EMERGENCY DEPARTMENT VISITS The total number of patients seen in the emergency department who are not later admitted as inpatients

Aggregate Emergency Department Visits decreased this quarter, both in overall trend and seasonally-adjusted (Figures 23 & 24). The overall trend seems to be stable at 320-345K.

Emergency Room Visits Emergency Room Visits (Aggregate) (Aggregate, Seasonal Adjustment)

350K Q1 Q2 Q3 Q4 344.3K 350K 337.9K 341.0K 335.8K 335.0K 344.3K 331.6K 334.7K 333.4K 331.7K 328.4K 327.6K 345K 319.8K 341.0K 300K 340K 337.9K 335.8K 335.0K 250K 335K 333.4K 334.7K 200K 330K 331.6K 331.7K

328.4K 327.6K 325K 150K

320K 100K 319.8K

315K 50K

310K 0K 2016 Q1 2016 Q3 2017 Q1 2017 Q3 2018 Q1 2018 Q3 2016 2017 2018 2016 2017 2018 2016 2017 2018 2015 2016 2017 Figure 23 Figure 24

APPENDIX A: REGIONS

Central Oregon: Mid-Columbia Medical Center, Providence Hood River Memorial Hospital, St. Charles Bend, St. Charles Madras, St. Charles Prineville, St. Charles Redmond

Eastern Oregon: Blue Mountain Hospital, CHI St. Anthony Hospital, Good Shepherd Health Care System, Grande Ronde Hospital, Harney District Hospital, Lake District Hospital, Pioneer Memorial Hospital-Heppner, St. Alphonsus Medical Center-Baker City, St. Alphonsus Medical Center-Ontario, Wallowa Memorial Hospital

Northwest Oregon: Columbia Memorial Hospital, Providence Newberg Medical Center, Providence Seaside Hospital, Samaritan North Lincoln Hospital, Samaritan Pacific Communities Hospital, Tillamook Regional Medical Center, Willamette Valley Medical Center

Portland Metro Area: Adventist Health Portland, Legacy Emanuel Medical Center, Legacy Good Samaritan Medical Center, Legacy Meridian Park Medical Center, Legacy Mount Hood Medical Center, Kaiser Sunnyside Medical Center, Kaiser Westside Medical Center, OHSU, Providence Milwaukie Medical Center, Providence Portland Medical Center, Providence St. Vincent Medical Center, Providence Willamette Falls Medical Center, Shriners Hospital-Portland, Tuality Healthcare

Southern Coast: Bay Area Hospital, Coquille Valley Hospital, Curry General Hospital, Lower Umpqua Hospi- tal, Southern Coos Hospital & Health Center

Southern Oregon: Asante Ashland Community Hospital, Asante Rogue Regional Medical Center, Asante Three Rivers Medical Center, Mercy Medical Center, Providence Medford Medical Center, Sky Lakes Medical Center

Valley: Good Samaritan Regional Medical Center, Legacy Silverton Medical Center, McKenzie-Willamette Medical Center, PeaceHealth Cottage Grove Community Hospital, PeaceHealth Peace Harbor Hospital, PeaceHealth Sacred Heart Medical Center at RiverBend, PeaceHealth Sacred Heart Medical Center University District, Salem Health West Valley, Salem Hospital, Samaritan Albany General Hospital, Samaritan Lebanon Community Hospital, Santiam Memorial Hospital

APPENDIX B: HOSPITAL TYPES

Urban Rural

DRG Hospitals Type A Hospitals Type B Hospitals

• Adventist Health Portland • Blue Mountain Hospital* • Asante Ashland Community Hospital • Asante Rogue Regional Medical Center • CHI St. Anthony Hospital* • Columbia Memorial Hospital* • Asante Three Rivers Medical Center • Curry General Hospital* • Coquille Valley Hospital* • Bay Area Hospital • Good Shepherd Health Care System* • Legacy Silverton Medical Center • Good Samaritan Regional Medical • Grande Ronde Hospital* • Lower Umpqua Hospital* Center • Harney District Hospital* • Mid-Columbia Medical Center • Kaiser Sunnyside Medical Center • Lake District Hospital* • PeaceHealth Cottage Grove Community • Kaiser Westside Medical Center • Pioneer Memorial Hospital-Heppner* Hospital* • Legacy Emanuel Medical Center • St. Alphonsus Medical Center-Baker • PeaceHealth Peace Harbor Medical • Legacy Good Samaritan Medical Center City* Center* • Legacy Meridian Park Medical Center • St. Alphonsus Medical Center-Ontario • Providence Hood River Memorial • Legacy Mount Hood Medical Center • Tillamook Regional Medical Center* Hospital* • McKenzie-Willamette Medical Center • Wallowa Memorial Hospital* • Providence Newberg Medical Center • Mercy Medical Center • Providence Seaside Hospital* • OHSU Hospital • Salem Health West Valley* • PeaceHealth Sacred Heart Medical Cen- • Samaritan Lebanon Community Hos- ter at RiverBend pital* • PeaceHealth Sacred Heart Medical Cen- • Samaritan North Lincoln Hospital* ter University District • Samaritan Pacific Communities Hospi- • Providence Medford Medical Center tal* • Providence Milwaukie Hospital • Santiam Memorial Hospital • Providence Portland Medical Center • Southern Coos Hospital & Health • Providence St. Vincent Medical Center Center* • Providence Willamette Falls Medical • St. Charles Prineville* Center • St. Charles Madras* • Salem Hospital • St. Charles Redmond • Samaritan Albany General Hospital • Willamette Valley Medical Center • Shriners Hospital-Portland • Sky Lakes Medical Center • St. Charles Bend • Tuality Healthcare

Type A Hospitals are small and remote and have 50 or fewer beds. Type A hospitals are located more than 30 miles from another acute care, inpatient facility.

Type B Hospitals are small and rural and have 50 or fewer beds. Type B Hospitals are located 30 miles or less from another acute care facility

*Designates a CAH facility (more information in Appendix C: Definitions)

APPENDIX C: DEFINITIONS

Bad Debt: Bad debt is the unpaid obligation for care, based on a hospital’s full established rates, for patients who are unwilling to pay their bill. Unlike charity care, bad debt arises in situations where the patient has either not requested financial assistance or does not qualify for financial assistance. In these cases the hospital will generate a bill for services provided. For uninsured patients, the amount of bad debt can pertain to all or any portion of the bill that is not paid. For patients with insurance, certain amounts that are the patient’s responsibility—such as deductibles and coinsurance—are expensed as bad debt if not paid.

Charity Care: The dollar amount of free care, based on a hospital’s full established rates, provided to patients who are determined by the hospital to be unable to pay their bill. The determination of a patient’s ability to pay is based on the hospital’s charity care policy. Hospitals will typically determine a patient’s inability to pay by examining a variety of factors such as individual and family income, assets, employment status, or availability of alternative sources of funds. Determination of charity care status is made prior to admission if the patient has requested and applied for financial assistance. Charity care status may be granted at a later date depending on the circumstances of the admission, such as an emergency admission, no request for financial assistance prior to admission, or lack of information about the patient’s financial status at the time of admission. Financial assistance provided by the hospital may pertain to all or a portion of the patient’s bill.

Critical Access Hospitals (CAHs): A designation given to certain rural hospitals by the Centers for Medicare and Medicaid Services. Created by Congress in the 1997 Balanced Budget Act, the CAH designation is designed to reduce the financial vulnerability of rural hospitals and improve access to healthcare in those areas. A CAH must have no more than 25 inpatient beds, maintain an annual average length of stay of less than 96 hours, offer 24/7 emergency care, and be located at least 35 miles away from another hospital.

Emergency Department Visits: The total number of patients seen in the emergency department who are not later admitted as inpatients.

Net Nonoperating Gains: Amount of income or loss after expenses which result from the hospital’s peripheral or incidental trans- actions and from other events stemming from the environment that may be largely beyond the control of the reporting entity and its management. An example would be sale of investments in marketable securities.

Net Patient Revenue: The revenue the reporting entity generates from patient care.

Operating Margin Percent: Measure of profitability from the reporting entity’s operations.

Other Operating Revenue: Revenue derived from the reporting entity’s operations other than direct patient care. Examples are revenue generated from operation of the cafeteria and gift shop.

Outpatient Surgeries: A planned operation for which the patient is not expected to be admitted to the hospital.

Outpatient Visits: Total number of outpatient visits reported during the reporting period. This includes emergency room visits, ambulatory surgery visits, observation visits, home health visits, and all other visits.

Payer Mix: The amount of total charges that were attributable to one of four payer categories: Medicaid, Medicare, commercial, and self pay.

Reporting Entity: A hospital and any additional consolidated entities that are included in the Income Statement at the front of the audited financial statement. The only exceptions are foundations that the hospital does not want included in its financial reporting.

APPENDIX C: DEFINITIONS (CONT.)

Tax Subsidies: Tax revenues from cities, counties or special hospital districts, which assess levies to subsidize the reporting entity.

Total Charges: Amount billed for services at full established rates.

Total Contractuals: The amount of total charges that have been negotiated away by payers. This is the difference between what the hospital bills for and what it expects to receive as revenue.

Total Discharges: The termination of the granting of lodging in the hospital and the formal release of the patient (includes patients admitted and discharged the same day). When a mother and her newborn are discharged at the same time, they count as one discharge. When the baby stays beyond the mother’s discharge (boarder baby), it counts as one discharge for the mother and one discharge for the boarder baby.

Total Margin Percent: Measure of profitability from all sources of the reporting entity’s income.

Total Operating Expenses: All expenses incurred from the reporting entity. Examples are salaries and benefits, purchased services, professional fees, supplies, interest expense, depreciation, and amortization and rent and utilities.

Total Operating Revenue: All revenue derived from the reporting entity’s operations directly related to patient care. Includes net patient revenue and other operating revenue.

Uncompensated Care: The total amount of health care services, based on full established rates, provided to patients who are either unable or unwilling to pay. Uncompensated care includes both charity care and bad debt.