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December 7, 2017

Fauquier Hospital earns record $22.7 million profit

Photo/Lawrence Emerson
Since LifePoint purchased 80-percent interest, Fauquier Hospital has produced double-digit profit margins, rising each year since 2014.
Fauquier Hospital in 2016
• Beds: 97

• Patient days: 18,820

• Admissions: 5,112

• Full-time employees: 656

• Revenue per admission: $11,334

• Total revenue: $146.3 million

• Profit: $22.7 million

• Margin: 15.5 percent

Source: Virginia Health Information 2017 Industry Report
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Despite increased competition and constant change in the healthcare industry, Fauquier Hospital’s financial performance has continued to improve dramatically the last few years.

The 97-bed Warrenton hospital produced a record profit of $22.7 million in 2016, according to the latest annual report from Virginia Health Information in Richmond.

That represents a 15.5-percent “operating margin” — after interest, taxes and amortization — on net patient revenue of $146.3 million.

Among Virginia’s 106 hospitals, Fauquier’s percentage of profit ranked 14th last year.

That does not include affiliated businesses, such as Fauquier Health’s nursing home and Suffield Meadows, an assisted-living center.

Fauquier Hospital’s profitability has risen consistently since LifePoint Health, a publicly-traded corporation headquartered in Tennessee, purchased an 80-percent interest four years ago.

The hospital produced a 2.87-percent operating margin in 2013, its last year as a not-for-profit entity. In the five years before that, Fauquier Hospital’s profit averaged 3.67 percent annually.

In the last three years, 2014-16, the profits have totaled 11.7, 13.6 and 15.5 percent, respectively. The hospital produced those earnings during Rodger Baker’s last three years as CEO. Mr. Baker retired March 31 after four decades with Fauquier Health.

“The hospital remains strong and was even before the partnership with LifePoint,” said CEO Chad Melton, who succeeded Mr. Baker. “LifePoint has been able to come in and build on that.”

Because of its scale, LifePoint could “streamline” business operations of the hospital, including a reduction in administrative positions, Mr. Melton said.

Jeff Hollis, CEO of Blue Ridge Orthopaedic & Spine Center, Fauquier’s largest medical practice, said the hospital “is doing a better job” in the way it conducts business.

“I’d like to think the current administration is more methodical in their approach to providing services,” said Mr. Hollis, who manages a Warrenton-based practice that has 10 surgeons and 105 employees. Those surgeons operate at Fauquier Hospital, the hospital in Haymarket and Blue Ridge’s own surgical suite in Warrenton.

Fauquier Hospital’s rapid rise in profits will level off this year, said Mr. Melton, who predicted a “flat” operating margin for 2017.

But, after three years of slight declines in market share, Fauquier Hospital experienced a slight uptick in 2016, according to Mr. Melton.

Novant Health Systems, a not-for-profit corporation based in North Carolina, presented particular challenges to the Warrenton hospital’s market share. Novant opened a 25-bed hospital at Haymarket in March 2014 and, with the U.Va. Health System, acquired the Culpeper hospital last year.

Novant opened medical clinics in Warrenton and Marshall, but both have closed in the last year.

Fauquier Hospital continues to add profitable services that help offset the cost of those that lose money or produce slim margins. Assuming state approval, the hospital plans to begin offering cardiac catheterization next year.

And, the hospital continues to provide a significant amount of charity care, which totaled $11.9 million in 2016.

Improving recruitment and retention of nurses also has strengthened the balance sheet, according to Mr. Melton.

Like hospitals nationwide, Fauquier suffered a nursing shortage in recent years, which led it to temporarily close a patient wing in 2016. The hospital this year began offering signing bonuses of up to $5,000.

As a result, it has filled vacancies, eliminating dependence upon contract nurses at $60 an hour versus staffers at about $35 an hour, Mr. Melton noted.

Fauquier Hospital accounted for a significant portion of LifePoint’s profit last year. Headquartered in Brentwood, Tenn., the 72-hospital chain reported net earnings of $131.8 million in 2016. LifePoint had total revenues of $6.3 billion.

The PATH Foundation’s decision to “redeem” — or sell — its 20-percent stake in Fauquier Health will have little effect on the hospital’s financial performance, the CEO said. LifePoint will pay PATH $33 million for the remaining ownership interest.

Although it operates in a competitive region, which has 16 other “acute care” hospitals within 40 miles, Fauquier also benefits from a market that has a high percentage of insured patients and relatively small shares of those on Medicare and Medicaid.

Still, Mr. Melton and Mr. Hollis stressed that Fauquier Health must compete because patients here have choices.

“If they leave for a specialty,” that increases chances patients will develop allegiances to competitors, Mr. Melton explained. So, the hospital will continue to focus on expanding services in Warrenton, he said.

“It’s about partnerships” with physicians and other providers, Mr. Melton added. “We think we’re moving in the right direction.”

Virginia Health Information’s annual industry report provides detailed financial information for every hospital and nursing home in the state.

The organization produces the data to help large employers and insurance companies negotiate contracts with healthcare providers.

Region’s hospital profits

Ranked by their 2016 operating margins, all these selected hospitals, except Fauquier and Reston, are not-for-profit: 

24.9 percent — Novant/U.Va. Haymarket Medical Center, $6.8 million

19.7 percent — Inova Fair Oaks, $60.8 million

15.6 percent — Reston Hospital Center, $49.8 million

15.5 percent — Fauquier Hospital, $22.7 million

13.9 percent — Inova Loudoun, $56.1 million

10.7 percent — Inova Fairfax, $154.3 million

8.1 percent — Winchester Medical Center, $58.4 million

5.1 percent — U.Va. Culpeper, $4.8 million

4.9 percent — U.Va. Medical Center (Charlottesville), $90.3 million

3.6 percent — Mary Washington (Fredericksburg), $18.3 million

-12.8 percent — Novant Prince William (Manassas), $20.3 million loss

-13.8 percent — Warren Memorial (Front Royal), $7.9 million loss

Nursing homes

VHI also provided this information on Warrenton nursing homes’ financial performance in 2016:

• Fauquier Health Rehabilitation & Nursing Center produced a $1.18 million profit on patient revenue of $10.5 million.

• Brookside Rehabilitation and Nursing of Warrenton produced a $669,732 profit on revenue of $8.69 million.
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steelernation · December 9, 2017 at 7:46 am
While i do not have an issue with a hospital being "for profit" i can attest that Fauquier Hospital is not an employee -friendly workplace since Lifepoint took over the operation. The line in the article referring to "streamlining" business operations is code for staff reduction. And there have been few "administrative " positions that have been eliminated compared to general staff reductions. If you go to other area hospitals you will see quite a few former Fauquier Health employees, particularly nurses.That is another reason why temp nurses had to be used for staffing (at increased cost) and why bonuses and other incentives had to be used to hire new staff. The administration failed to mention this fact. Talk to the current staff all through the health system - especially the few that have been there a while. They are not happy.
Jim Griffin · December 8, 2017 at 1:48 pm
MissB: Yes, much profits go to wages, workers have profit motives, too. Especially so in health care, a service industry led by relatively well-rewarded professionals.

As regards corporate boards, I suspect you mean corporate shareholders (Lifepoint is a public company). As a result, those who benefit include retirees receiving pension benefits from retirement and pension plans invested into Lifepoint, whose numbers include workers from New Jersey and Norway, among others.
MissB · December 8, 2017 at 1:24 pm
Yes, we absolutely should reward health care and hospital workers. Is that where the profits go? Those profits are going to a corporate board. Corporations are not the hospital workers.
Jim Griffin · December 8, 2017 at 11:41 am
MissB: Quite the contrary, shouldn't we reward health care and hospital workers with the profit they need to live at least as well as those whose lives they birth and extend? How will they live and prosper without competitive reward? Who would do their work -- let alone undertake their education -- without recompense?
MissB · December 8, 2017 at 9:44 am
Hospitals and health care should NOT be for profit. When decisions are made based on profit, people with money get treated and people without get shorted.
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