Sometimes red ink on a hospital’s books doesn’t tell the whole story.
A new hospital in a growing area such as Owasso may post losses in early years before turning a profit. But the opening of a competing hospital can prolong those losses.
Bailey Medical Center opened in Owasso in late 2006 and recorded a $16.5 million loss by the end of 2007. Since then, the losses have dropped to $4.1 million by the end of 2012.
The for-profit hospital is part of the Hillcrest system, which also operates two hospitals in Tulsa and hospitals in Cushing, Henryetta and Claremore.
Kevin Gross, CEO of Hillcrest HealthCare System, said new hospitals expect financial losses the first year or two due to startup costs. Bailey Medical Center’s losses were lower in 2012 over the previous year and declined again in 2013, he said.
Gross said he could not release specific figures because they are not yet official.
“The growth continues in Owasso and in the neighboring communities to the north so I would say over the next two or three years we project that it would at least break even,” he said.
The hospital forecasts a $1.7 million loss for 2013.
The 73-bed hospital offers traditional services including general surgery, obstetrics and an emergency room. The hospital’s website prominently displays the expected wait time for patients to be assessed in the ER – often less than 30 minutes.
The facility also has a bariatric surgery program, which offers several types of surgery to help obese patients lose weight. Gross said that program has balanced the hospital’s losses from uncompensated care because it’s an elective surgery that patients pay for in full.
Bailey’s bottom line would likely be better had it been the only hospital in town, Gross said.
Shortly after news reports surfaced about the planned hospital in 2004, St. John Health System formally announced plans for a new non-profit Owasso hospital with 50 beds.
At the time, then-City Manager Rodney Ray told the Tulsa World: “As the city manager, I wouldn’t discourage anyone. But it is only logical to believe that two facilities will not be successful. We’ll just have to see what happens.”
St. John’s Owasso hospital opened in November 2006, the same month as Bailey.
Gross said Owasso’s growth and the lack of a nearby hospital created an ideal market for one hospital, but not two. But he said Bailey can sustain the losses because it is part of a larger system with buying power.
“Had there been only one hospital in Owasso, that hospital would probably have a positive balance. There’s enough need for one of the two hospitals.”
St. John Owasso lost money the first two years it was open, 2007 and 2008, but profits have climbed steadily since then, records show. The hospital reported a 19 percent overall profit margin in 2012.