Las Vegas Sun

March 28, 2024

Economy’s bust stings hospitals built for boom

Officials of Southern Hills, St. Rose in southwest valley try to stay upbeat despite low demand

Hospital

Ulf Buchholz

Stalled growth: Desert surrounds Southern Hills Hospital, the valley’s 15th largest hospital. Growth expected to create enough demand to support three southwest valley hospitals has yet to take place.

It made all the sense in the world a few years ago for entrepreneurs to focus on the southwest part of the Las Vegas Valley as the next boom area. Everything pointed to that — the construction of the Las Vegas Beltway, the emerging master plans, the building permits.

Among those who positioned themselves for the boom — along with the big box stores, slot bars and pizza parlors — were two private hospital chains. They built Southern Hills Hospital and the San Martin campus of St. Rose Dominican Hospitals.

But the boom crashed, the sea of rooftops never appeared, many of the homes that were built are in foreclosure and commercial buildings — including medical offices — are struggling to hunt down tenants.

And the hospitals are bleeding red ink.

St. Rose has reported a $4.6 million net loss; Southern Hills, owned by Hospital Corp. of America, a $6.7 million net loss. The hospitals expected losses, officials say, in part because of the cost of opening new facilities, including depreciation and interest. But the patient numbers are undeniably lower than expected.

By comparison, the 6-year-old Spring Valley Hospital, within five miles of the other two hospitals and surrounded by homes and businesses, reported a gain in net income of $407,000.

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.”

Southern Hills CEO Mike Johnson remains optimistic.

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

Johnson said Southern Hills is doing “very well” and has “turned the corner.”

Without elaborating, he said the hospital’s cash flow is “reasonable” and the hospital’s income will improve with time.

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

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

St. Rose spokesman Andy North said that while San Martin was being built, the hospital revised its growth projection in response to the slowing economy.

This didn’t affect the size of the hospital or the number of patient beds, North said. It did, however, slow down how quickly the hospital added beds to the original 111.

“San Martin continues to grow and so far has been a very wise investment for us,” he said.

Catholic Healthcare West, which owns the St. Rose hospitals, is able to move patients from its Siena Campus in Henderson, when it is full, to the San Martin hospital.

“Just because there’s not a tremendous amount of homes doesn’t mean there isn’t a (patient) base,” 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 where it can add 60 beds.

For years 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 instead, the southwest was hard hit by the economic downturn.

The area is the highest in foreclosures and vacant office and commercial space, Aguero 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 demand, in the future those same hospitals could be in the fortuitous position of having space available on demand, Aguero said.

A version of this story appeared in In Business Las Vegas, a sister publication of the Sun.

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