Samaritan Offers Some Creativity: Can a Healthcare Provider Overcome Industry Uncertainty with Diversification?

Samaritan Health has seen some rough times in the last few years. As Corvallis’ largest health services provider, the financial stability of Samaritan is of paramount importance to the citizens of Corvallis and the Willamette Valley.

Due to a variety of factors, revenues have been down sharply in recent years—something that would normally lead a corporation to staff and service cutbacks. And the cutbacks have indeed struck Samaritan, with some last year that led to changes in staffing that were reported on here over the last few weeks. That said, the service has mostly remained unaffected, with new options being brought to the table despite the major losses in revenue—including $10 million in losses just last year.

goodsamI recently sat down with CEO Larry Mullins to speak about the ways Samaritan is finding to pick up the slack in revenues, without curtailing services.

When asked what the factors in the revenue shortfalls were, Mullins referred to several including some obvious ones, like the economic downturn, which not only caused more people to not be able to pay their bills or have insurance, but also caused many to put off medical procedures they might otherwise seek.  He also mentioned some positive reasons for the slowing of hospital usage.

“A lot of the techniques and procedures we’ve been practicing for years now, I think are really starting to work,” said Mullins, “and that’s a good thing.”

Among the examples of this, he cited: “Less heart disease, better management of diabetic care, less invasive procedures, because we address it through lifestyle changes and so forth.” All this leads to less trips to the doctor.

He also talked about the effects of the changes to health insurance from the implementation of the Affordable Care Act, aka Obamacare.

“I see a lot of what I like to call ‘pre-reform anticipation,’ where it’s like groups and businesses and other people are waiting to see, ‘Well, what happens next? Is the insurance exchange gonna get started or is it not gonna get started? Am I gonna be covered for this, or is my deductible going to go up?’ So the uncertainty.

Country-Vitamins_5.9 (1)“We started trying to develop other revenue sources to offset that, so trying to take assets we might have, buildings, properties, other things that we weren’t using, things that were just in our balance sheets, our inventories and getting them to do a couple of things. One, hopefully do something that’s kind of mission-related. And at the same time, that would push us into a business model, if you will, that could help to generate some earnings that could help to fund healthcare services, that would not be dependent upon our traditional revenue.”

The traditional forms of revenue he’s referring to are made up of payments from the state or federal government (taxes), in the form of Medicare and Medicaid, and payments from private insurance.

One of the mission-satisfying alternative revenue streams is Samfit. The health center on 9th Street opened a year ago, and serves members of the community with a gym that’s open 24 hours a day 365 days a year with classes and other resources to help people improve their fitness. It also has no membership fees—just month-to-month fees for using the gym—so unlike most fitness centers, they’re not trying to rope you into a long contract. Samfit seems to not be the only health club venture Samaritan is undertaking, as they recently purchased the Albany Athletic Club and will run it without a name change.

Then there’s the new Sports Medicine Facility, announced in March and set to break ground in January of 2014, which will be a partnership with OSU and located on OSU’s campus serving as the home of Beaver sports teams’ health needs.

When asked if it would serve as primarily a teaching facility or a caregiving facility, Mullins replied, “Actually, it’s both. Several things are going to be happening at the sports medicine center.  Certainly it will have the capacity to care for athletes, faculty, and other parties who need sports medicine, but there’s going to be research going on there, interface with various colleges like public health and nutritional, asking how we enhance athletic performance and do things related to sports medicine…”

The revenue will be Samaritan’s, though, and is predicted to be a huge boost to the bottom line of the hospital, allowing it to continue serving the community. This  includes writing off as much as 40% of patients’ bills, according to Mullins.

In addition to the already mentioned health ventures, Samaritan is using another untapped resource from its balance sheet, the old Corvallis General Hospital location. They’ve turned it into student housing.

The Union, which is opening this month, is an apartment complex that serves multiple purposes.

“We take an old building, remove it—because it was an eyesore to the community—and put something there that can produce a positive position from an earnings perspective,” said Mullins. “The earnings from that, as with the earnings from Samfit, as well as the earnings from our other ventures or projects, come back into the organization and in large part help cover the cost of things that we don’t get paid for.”

Samaritan has a lot of challenges in its future, but it’s a huge benefit to Corvallis for it to continue to have healthy finances in the face of so much uncertainty. Mullins seems confident it will be able to achieve this, in large part due to the quality staff he’s found in Corvallis.

“That’s probably the most critical element in any of this, is having good people who are mission-driven to say, ‘OK, this is important, we want to get this done and we want to get it done properly.”

By Ygal Kaufman