Hospital Revenue Dips 1%, Net Income Drops 17%

Orange County hospitals saw mixed financial outcomes in 2020.

While net patient revenue was relatively stable, down 1% to $8.7 billion among 24 hospitals on the Business Journal’s annual list, net income tells a different story. The 24 hospitals combined saw a 17% drop in net income, likely due to a mix of unexpected costs associated with COVID-19 care and supplies and canceled elective procedures. The American Hospital Association estimates, between March and June, a four-month financial impact of $202.6 billion in losses for hospitals and health systems in the U.S. “These losses put hospitals’ survival at serious risk,” the hospital association stated in the report. Below, a look at how OC’s largest hospitals weathered the storm and plan to grow in the future.

Outpatient Focus

In-person visits fell across multiple categories; patient days slid 4.7% while outpatient visits fell 5.3% in 2020.

Hospital execs attributed these declines to pauses in elective procedures and patient hesitancy to visit hospitals, and organizations continue to encourage patients to seek care as needed.

Holds on elective surgeries “brought down access for many patients in the community,” said Erik Wexler, chief executive of Providence Southern California.

“We continue to encourage strenuously the community does not delay care. Hospitals are safe. Seeking care should be a top priority.”

Providence’s St. Joseph Hospital in Orange moved up three spots to No. 4, with almost $730 million in net patient revenue. Providence’s St. Jude Medical Center in Fullerton and Mission Hospital in Mission Viejo were No. 6 and No. 7, respectively.

Hoag Orthopedic Institute, a specialty hospital with four ambulatory care surgery centers and a network of orthopedic surgeons and providers, outpaced most area hospitals with a nearly 121% jump to 2,230 outpatient visits in 2020.

“Our years of advancing the care model to increasingly outpatient proved relevant and transformational in the face of COVID-19,” Jennifer Mitzner, chief executive of Hoag Orthopedic Institute, said in the 2020 HOI Annual Outcomes Report.

“We shifted our focus to meet the immediate needs of the community and further optimize safety measures to protect patients, staff and physicians, allowing many patients to recover at home instead of the hospital,” she said.

“Our ambulatory surgery centers also proved well-prepared and we anticipate this growth trajectory to continue.”

Digital Boost

There’s one thing the numbers don’t show: rampant demand for telemedicine in 2020.

Kaiser Permanente, which ranked No. 3 with an estimated $1.1 billion between its two hospitals in Anaheim and Irvine, attributed outpatient declines to both “a steep increase in virtual appointments” and “COVID-related operational changes” such as repurposing medical office buildings, officials told the Business Journal.

MemorialCare Health System, which saw a 3% decline in outpatient visits between its two hospitals in Fountain Valley and Laguna Hills, supplemented patient care with virtual primary care and specialty services such as remote monitoring for expectant moms.

“Technology is increasingly allowing us to reach patients anywhere and anytime,” MemorialCare Chief Executive Barry Arbuckle told the Business Journal in October.

“There are options for text messaging, artificial intelligence-enabled chats and other ways to provide consumers access to health information and treatment virtually without having to go to a doctors’ office or health facility.”

Children’s Hospital of Orange County also increased its telemedicine offerings, most recently by partnering with Laguna Hills-based nonprofit Western Youth Services to develop an online mental health toolbox.

Irvine Spotlight

Owners of the largest hospitals in Orange County have plans to keep growing—with a particular eye on Irvine.

UCI Medical Center in Orange—No. 1 with $1.3 billion in net patient revenue—plans to build a $1 billion medical center with an acute care hospital and an ambulatory care center at the corner of Jamboree Road and Birch Street, not far from the University of California, Irvine.

“World-class care is going to happen now at one proximate site,” Steve Goldstein, vice chancellor of health affairs at UCI, told the Business Journal last month.

The project will open in three phases in 2022, 2023 and 2025.

The Irvine complex is expected to account for $309 million in increased revenues in 2026 and $552 million in 2030, according to UC Office of the President planning documents.

Hoag Memorial Hospital Presbyterian, which maintained the No. 2 spot for the second consecutive year with $1.1 billion in net patient revenue, has filed early-stage plans for a major expansion of its 154-bed hospital in Irvine. A timeline for the project hasn’t been disclosed.

Also in Irvine: City of Hope, based in Duarte, continues to push forward on its $1 billion cancer complex in the city’s Great Park Neighborhoods.

A comprehensive cancer center is expected to open in 2022, followed by a specialty hospital in 2025.