The latest predictions show the nonprofit hospital will cap off the 2018-19 fiscal year with $142 million in profits — what its balance sheets refer to "net income" — which is 26% more than was budgeted for the year. It's good news all around, with higher-than-expected revenue, lower-than-expected costs and the hospital's $933 million investment portfolio turning a tidy $39 million profit as of the end of April — despite a volatile market that tanked in December.
The $142 million figure is probably an undercount, too: Since 2014, hospital officials have wrapped up the budgeting process in June only to find out after the fiscal year officially ends that El Camino did even better than anticipated — anywhere from $3.7 million to $25.6 million higher than their projections.
When asked about the windfall, hospital board member John Zoglin told the Voice that financial performance is tremendously difficult to predict, and that he credits the hospital's high-quality care and strong relationship with physicians for the years of strong earnings. He said he remains cautious about the unsustainable level of local economic growth, however, and that the eventual downturn in the economy will someday put a squeeze on the hospital's budget.
Budget documents show that El Camino pumped much of its extra money back into improvements to El Camino Hospital's Mountain View campus, with $153 million spent on construction projects through April. Most of that money went toward a new seven-story medical office building in the center of the campus and a two-story behavioral health services building, both expected to open later this year. Despite the constant presence of hard hats and buzz saws, the hospital is falling behind, and was originally planning to spend twice as much this year.
El Camino is expected to increase the price of its services by 5% for the third year in a row, which hospital officials say is a measured approach that keeps up with inflation. Insurance companies with contracts with the hospital negotiate for a lower amount, and individual patients are not anticipated to pay more out-of-pocket for services. An increase in fees is estimated to boost hospital earnings by $19.9 million..
El Camino Hospital is also putting a big emphasis on its cancer services, and expects to have an extra 4,700 outpatient oncology visits in the 2019-20 year. A new infusion center will serve patients at the Los Gatos camps, while Mountain View's cancer center will ramp up staffing hours and physician recruitment.
Dan Woods, CEO of El Camino Health, told the Voice in an email that the cancer center has become a destination for patients who come in for a second opinion and decide to stay for outpatient services. The extra staffing is a response to the rise in demand, and the additional center in Los Gatos will provide a "convenient" location for patients currently traveling north to Mountain View.
The number of hospital visits for surgery is also forecast to grow, increasing by $7.9 million in revenue for fiscal year 2019-20 forecast. Woods said more surgeons are joining the hospital's Los Gatos campus, and that the hospital has made big investments in robotic surgery equipment designed for precise knee and hip replacement operations.
On the expense side, El Camino is expected to spend $51.1 million more on hospital services, fueled largely by employee salaries and wages ($24 million) and escalating costs for supplies ($9.1 million). The wage growth is assuming wages and benefits will increase by 3%.
Dispute with nurses union
The hospital's strong financial picture has been a recent target in stalled negotiations between El Camino and its nurses' union, with many of its members arguing that the hospital is making money hand-over-fist while short-changing its employees.
Union leaders with the Professional Resource for Nurses (PRN) announced they reached an impasse with hospital leaders earlier this month over the terms of a new three-year agreement, rejecting an offer of 3% annual salary increases and cuts to compensation for night-shift nurses and per diem nurses.
Shortly after a budget discussion on June 12, PRN President Catherine Walke told hospital board members that nurses have made serious sacrifices to help bring down labor costs and maintain the hospital's healthy finances. The union's contract includes a section on so-called Hospital Convenience, allowing El Camino to cancel work days that are deemed unnecessary for the current number of patients. By effectively furloughing nurses on slow days saved an estimated $6.7 million in 2018, Walke said.
"Nurses every day contributed to hospital savings by being canceled in four-hour increments," she said. "We are assisting in addressing productivity by not working, by not earning our expected salary."
Nurses picketing outside the hospital last month also point to the hospital's enormous reserves of $979 million as a clear sign that El Camino's leadership is unnecessarily short-changing its employees. The reserve fund is more than enough to keep the hospital operating for a full year.
Zoglin defended the reserves, and said that cash equal to one year of operation is "unremarkable" for a hospital of El Camino's size — particularly in a highly competitive health care market with massive competitors like Kaiser and Sutter. Having that money also steels the hospital for a dip in the economy and could provide a comfortable buffer for future, unforeseen budget troubles that would otherwise sink the hospital.
"We have seen hospitals across the state and country go under, be purchased or eliminate services at an increased rate over the past several years," he said. "These changes have resulted in a reduction of some or all of access, affordability and quality for these hospitals' communities. The availability of financial reserves often plays a role in these scenarios."
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