A Message From Our CEO – John Chivers

I get lots of questions about hospital finances and operations when I am out and about in the community and I thought I would answer some of the more common questions here.

The most frequent questions I’m asked are about the property taxes we collect from our residents. I think the citizens of Reedsport are some of the most generous people I’ve ever had the privilege of working with.

How much in taxes does the hospital receive?

Our levy rate is $3.97 per $1,000 of assessed valuation. During our last fiscal year (July 1, 2022 to June 30, 2023) we received $2,372,491 which our hospital is immensely thankful for.

Are the taxes used to pay salaries and/or bonuses?

The taxes we receive are budgeted and support our general operating fund and, in that regard, they are used pay operating expenses such as salaries, benefits, supplies, insurance, utilities, rents etc. They are not directly used to pay salaries or bonuses. The hospital paid out $36,993,532 in operating expenses last year. Taxes accounted for 6.41% of the total.

Should taxes be used to pay bonuses?

First, the hospital does not routinely pay bonuses. The last time bonuses were paid was in November 2021. I do not know the last time the hospital paid bonuses prior to that. The bonuses accounted for less than one-third of one percent (.003) of total employee compensation that year. Bonuses were given because throughout the COVID pandemic, there were many sacrifices made by our employees and it seemed like the right thing to do. Most of our leaders received no raises for almost two years. To receive a bonus, employees had to meet certain service criteria and the maximum bonus given was $500 (for full-time employees). Part-timers got $250. Paying a bonus is just part of total compensation and is no different than an employer paying for health insurance, giving a raise or contributing to a retirement plan and yes, in my opinion, bonuses are a legitimate operating expense and as such, are indirectly supported by tax dollars.

Do employees get free healthcare at the hospital?

No, they don’t. There are some employee discounts, but more on that in a minute. Over 80% of our employees are represented by either the Teamsters Union or the United Food and Commercial Workers Union. Their wages, hours, working conditions and benefits (including employee discounts) are negotiated. Employees must pay up to 20% of the premium charged to the hospital for their healthcare insurance. This is withheld from each paycheck. Last year we withheld $522,637 from our employees for this purpose. Employee discounts are offered to cover copays, but only after the annual deductible is met and only for LUHD hospital (not clinic) services. Last year, we gave $38,469 in employee discounts. Put another way, the average employee paid $2,575 for their healthcare benefits last year and they got back $190 in employee discounts from the hospital.

Why does the hospital always seem to be operating at a loss?

Healthcare finance is extremely complex. If you listen to or watch the news regularly, you know most hospitals, by far, operate at a loss – especially rural hospitals. Over 160 rural hospitals have closed their doors nationwide over the past 10 years. Many more have cut back on the services they offer (the hospital in Ashland, OR eliminated intensive care services earlier this year; Peace Health closed their downtown Eugene hospital last month). Sixteen rural hospitals have converted to Emergency Room only Hospitals this year and provide no inpatient services whatsoever. There are many factors that lead to these losses, but here is the biggest:

How much does the hospital make off of Medicare and Medicaid?

Medicare and Medicaid set the rates that they pay and those rates are less then the cost of the care provided to Medicare and Medicaid patients. Seventy-eight percent of the patients we cared for last fiscal year had Medicare or Medicaid. We spent $27,644,000 to take care of those patients and we were paid $21,898,000. This resulted in a loss of $5,746,000.

So why not cut costs so the hospital makes money from Medicare and Medicaid?

The rates Medicare and Medicaid pay us are based on the cost of taking care of their patients. For every expense dollar we save, Medicare and Medicaid reduce their payment to us by seventy-eight cents. Furthermore, most clinical departments in the hospital have government mandated minimum staffing levels. No matter how low the volume, we can only cut back staff so much. We are required to have four nurses and a physician in the hospital 24/7/365 – even if there are no patents. Other departments have similar requirements. Approximately 84% of our costs are fixed.

How much did the hospital make/lose last year?

The hospital lost just under $2.1 million. We took a big hit in patient volume during COVID. Thankfully there were many COVID related grants to help off-set those losses between 2020 and 2022. There were no COVID grants to be had last year (2023), but the pre-COVID volumes have not yet returned. On a good note, things are looking much improved so far this year.

What does the community get back for the taxes it pays?

Here are some examples: Last year we provided uninsured community members $1,235,000 in free or reduced charges for care. We spent $244,000 to help pay for 911 dispatch services, a School Resource Officer, and the Family Resource Center. To keep ambulance services here locally 24/7/365 required a subsidy of $308,000. To help insure that the community had access to retail pharmacy seven days a week, required a subsidy of $520,000. To have primary care providers here locally required a subsidy of $1,097,000. There’s much more. In all, we got credit from the state for providing about $8.1 million in community benefit
spending. Outside of reduced charges for the uninsured, these are not contributions to the community that big-city hospitals provide. We do it because it also is the right thing to do.

If anyone has questions for me, you can email me at jchivers@luhonline.com. If you would like to meet in person or talk on the phone, contact Stephanie Miller at 541-271-6374 and she will schedule an appointment or a call. I welcome your questions, comments, criticisms or praise.

-John Chivers, CEO