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Around the State
The hospital business, complicated by the growth of managed healthcare organizations and changes in government reimbursements for Medicare and Medicaid services, is struggling. The length of average hospital stays is down and occupancy rates have dropped. Even the most profitable hospital systems in central Florida are making a return on investment that pales in comparison with a certificate of deposit. Central Florida's largest hospital system, Florida Hospital with six facilities, had preliminary earnings in 1998 of $45 million on revenues of approximately $1.5 billion -- just a 3% return.
Complicating the hospital business are the different payment strategies used by insurers, health maintenance organizations (HMOs) and the government. As the industry moves toward more outpatient surgery and insurers push for shorter stays, hospitals are scrambling to reinvent the way they do business.
While low occupancy rates do not necessarily mean financial ruin, neither do high rates guarantee a profit. Depending on the business mix, a hospital could make money or lose it on any given occupancy rate, according to Richard Morrison, Florida Hospital vice president, government relations and strategic planning. Usual rules of commerce don't always apply. "Healthcare isn't a commodity," Morrison says. "You can't go 'try on' a brain surgery like you can a pair of shoes. You can't 'try on' giving birth."
The Florida Hospital system operates central Florida's biggest and most-used hospital as well as two facilities with dismal occupancy rates. But more important than the size of a hospital system these days is efficiency, such as an organization's ability to optimize the number of beds it allocates to each department. For example, with more than 25,000 births in central Florida last year, neonatal intensive care units (NICUs) were swamped. Together, Florida Hospital-Orlando and Arnold Palmer Hospital, part of the Orlando Regional Healthcare System (ORHS), made nearly 11,000 deliveries. At Florida Hospital-Orlando, the NICU Level 2 unit operated at 14% over capacity and the Level 3 unit was 8.5% over capacity. At Arnold Palmer, Level 2 also was 14% over, but the larger Level 3 unit was 40% under capacity.
ORHS recently purchased Lucerne Medical Center from Columbia/HCA, a move that could address occasional capacity problems at Arnold Palmer and Orlando Regional Medical Center (ORMC), the largest hospital in the ORHS stable. But spokesman Joe Brown also says that "for the foreseeable future Lucerne will remain a full-service acute care hospital." Although ORHS may at some point incorporate Lucerne into the ORMC campus, Brown says any such move is "several years down the road." Meanwhile Lucerne will be a substantial drain on the bottom line for ORHS, a non-profit organization. Lucerne lost about $4.6 million on revenues of $234 million last year, while ORHS reported earnings of $10.4 million on revenues of $1.3 billion, less than a 1% return, according to preliminary information filed with the state Agency for Health Care
Administration.
Consolidating hospitals into ever-growing systems can yield some economies of scale, but, as Columbia/HCA has learned, larger is not always better and with such thin profit margins, individual facilities must carry their own weight. Florida Hospital's Apopka and Celebration facilities, for example, were underutilized last year. The situation is "difficult" in Apopka, where Orlando physicians hesitate to see patients because there are so few and it takes time to travel there, Morrison says. Florida Hospital has tried for years to address the low usage of its Apopka facility. The company now holds out hope the community is poised for growth with the construction of the first 10-mile leg of the Western Beltway. Celebration's hospital was open for less than half of 1998, so its true occupancy rate is about double the reported 12%. While that's still not enough to cover expenses and overhead, the hospital serves a growing community, so business should improve.
Meanwhile, independent Princeton Hospital continues to operate under Chapter 11 bankruptcy protection, suffering from a year in which it functioned at only 25% capacity. Located in one of Orlando's poorest communities, the hospital suffered from poor management and high costs. When Princeton filed for bankruptcy earlier this year, it listed debts of $59.6 million and assets of $25 million. In order to keep a handle on costs during reorganization, the hospital has limited its free services available to the poor, including tests, and it no longer dispenses pharmaceuticals.
In The News...
CAPE CANAVERAL -- Florida's chances of hosting the successor to the space shuttle, Lockheed Martin's VentureStar, appear promising after a meeting among representatives of the company and Florida officials. Lockheed Martin is in the midst of a two-year evaluation process that will net two U.S. launch sites for the $5-billion project. Florida's proposal designates the Kennedy Space Center as the primary launch site, with the shuttle runway as the landing strip.
LAKE MARY -- Telephone Company of Central Florida emerged from Chapter 11 bankruptcy protection after a judge approved a plan by West Palm Beach-based Phoenix International Industries to pay off the telephone company's $1.5 million in outstanding debt. The 3-year-old company once had $1.5 million in monthly revenue from 30,000 customers nationwide.
ORLANDO -- Cirent Semiconductor pledged $600,000 to the University of Central Florida and University of South Florida to help them lure top-notch research professors. A state matching funds program will provide another $400,000, allowing each school to establish an endowed chair -- UCF in computer science and USF in microelectronics. The two schools have pushed hard for economic development programs promoting the I-4 corridor, and Cirent has capitalized on the programs.
Wycliffe Bible Translators of Huntington Beach, Calif., bought an 815-acre tract of land and plans to relocate its headquarters here, adjacent to the new Campus Crusade for Christ headquarters. About 100 employees will transfer, and the new facility will add 200 local employees and volunteers.
Televangelist Benny Hinn expects to move his ministry to Dallas in September to be closer to "our people." Hinn's Orlando church, the World Outreach Center, will remain open. Hinn moved his TV production studio from Orlando to California last year.
Lockheed Martin Corp. said it will close its simulation training unit in Pomona, Calif., and move most of the 290 positions to the company's information systems headquarters in east Orlando. The closing facility designs and builds simulators used to train soldiers in laser-based weapons. Lockheed also won a contract to manage the information technology systems of Gateway 2000.
At a recent luncheon, hotelier Harris Rosen handed out bonuses totaling $1.6 million to 2,256 non-management employees. He has promised at least $1.5 million a year and hopes to double that pledge in five to 10 years. Employees received $200 for each year with the company.
TITUSVILLE -- The Orlando Utilities Commission (OUC) agreed to sell its power plant on the Indian River to Reliant Energy of Houston for $205 million. Although selling the outdated and inefficient plant will save OUC money, the utility's 140,000 customers won't get a rate reduction. Proceeds will go toward lowering debt or be set aside to purchase a more modern plant.
WINTER PARK -- Park Avenue merchants developed a program for rewarding hotel concierges who send tourists to the upscale shopping district. It's in response to a new mall planned for south Orange County.
Overheard
Pssst .... wanna buy a timeshare? Timeshare salespeople became so aggressive and bothersome to tourists along Volusia County's beaches that the County Council recently adopted rules to regulate them. For years, visitors and residents have complained about canvassers, sometimes shirtless, who woke them up when they were dozing, or hassled them after they'd already said no thanks. According to the new rules, solicitors must apply for permits, identify themselves as salespeople, and wear identifying T-shirts. Newly required background checks for the timeshare solicitors revealed additional reason to be concerned: Some had been convicted of major felonies, including attempted murder and kidnapping. But whether the new rules will stick remains to be seen. While the industry worked with local chambers and governments for 18 months to create the new rules, one group of solicitors plans to challenge the latest law in court. Local government here tried to ban beach solicitation outright in the 1980s, but courts found it violated the salespeople's free speech rights.
