Hospital capacity outpaces slower growth in valley

By Nicole Lucht

Friday, Aug. 21, 2009 | 3 a.m.

Southern Hills Hospital and St. Rose Dominican Hospitals — San Martin Campus were built during the residential and commercial development boom. At the time it was expected that both hospitals would be surrounded by homes and businesses, attracting physicians to medical buildings and servicing a high demand for medical care.

But the surrounding sea of rooftops hasn’t happened. Medical buildings are desperate for tenants. Homes are in foreclosure and commercial buildings can’t attract businesses.

St. Rose reported a $4.6 million net loss; Southern Hills, a $6.7 million net loss.

Only Spring Valley Hospital, within a five-mile radius of the other two hospitals and surrounded by homes and businesses, reported a gain in net income of $407,000.

Yet Southern Hills CEO Mike Johnson is optimistic.

“Yes, the economy has been a little rough,” he said. “It is true it is a difficult economy, and growth didn’t materialize. It’s also true that we were able to adapt to it.”

Southern Hills is the Las Vegas Valley’s 15th largest hospital and is part of Hospital Corp. of America’s far west region.

Although the net income loss was “technically correct,” he stressed that it was misleading because the hospital was still incurring startup costs, such as depreciation and interest expenses.

“Southern Hills is actually doing very well,” Johnson said, adding it has “turned the corner.”

Without giving away Southern Hills’ current financial standing, he said net income will stabilize and improve over time. The hospital’s cash flow is “reasonable,” he said.

Southern Hills has chosen not to open some nursing stations, but has not cut back or closed services.

“There is no risk of closure,” Johnson said.

Spring Valley CEO Leonard Freehof said in an e-mail that there are “apparently” not enough people in the southwest valley to support three hospitals.

“It is evident that not all of the hospitals in the southwest have been financially successful,” he said. “I am sure that once the national and local economy improve, and we see growth again, that could change. However, Spring Valley Hospital is prepared to continue to grow and add services to continue to meet the needs of our community for many years to come.”

St. Rose spokesman Andy North said the hospital group is able to move incoming patients from Siena to San Martin in the underdeveloped southwest valley when the Henderson campus is at capacity.

“Just because there’s not a tremendous amount of homes doesn’t mean there isn’t a (patient) base,” he said.

The net loss was expected and because San Martin opened just a few years ago, it was something that was built into the financial plan, North said

The hospital opened with 111 beds and often uses 36 more beds. If demand grows as St. Rose expects it will, the hospital has a fourth floor it can expand into, adding another 60 beds.

Ranked by the number of beds, Spring Valley is the ninth largest hospital in Las Vegas and is part of the Valley Health System, according to In Business Las Vegas’ 2009 Book of Business Lists.

St. Rose’s San Martin is the 13th largest, and its corporate owner is Catholic Healthcare West.

Four of Valley Health’s five properties made a profit in the first quarter, netting about $10.5 million total. Centennial Hills, Valley Health’s newest hospital, lost $3.7 million.

Hospital Corp.’s MountainView Hospital made $152,000 in the first quarter, but its two other properties, Southern Hills and Sunrise Hospital ($1.6 million) both had losses.

St. Rose’s Siena Campus made $6.3 million, offsetting the losses at de Lima ($1.2 million) and San Martin ($4.6 million).

For a long time, health care providers were underrepresented in Las Vegas, said Jeremy Aguero, a principal analyst at Applied Analysis, an economic consulting firm.

Companies entered the market and made substantial investments, with the idea that booming Las Vegas, particularly the southwest valley, would continue to grow, he said.

But growth slowed and the southwest valley, which boasts developments such as Mountain’s Edge, Rhodes Ranch and part of South Summerlin, is home to the stalled ManhattanWest, Spanish Towers and Mercer condominium projects.

“The southwest is among the hardest hit,” Aguero said.

The area is the highest in foreclosures and vacant office and commercial space, he said, and residents have less to spend on health care.

But he said health care is one of the few economic sectors with job growth, and as more retirees move to the area and Baby Boomers age, the demand for the hospitals’ services will increase.

If the entire area were to be built out, there would be enough demand for all three hospitals, he said. In the long run, the hospitals may be well-positioned to serve a population that rebounds.

“Getting to the long run is a difficult hurdle,” he said. Although nursing stations, even entire floors, are shuttered while the hospitals respond to a limited demands, in the future those same hospitals could be in the fortuitous position of having space available on demand, Aguero said.