St. Joseph Hospital Foundation

Establishment of SJH Foundation: Frequently Asked Questions
Q Why does St. Joseph Hospital need to start a Foundation?

St. Joseph Hospital seems to be well off.  It is always expanding, remodeling or building something.  It appears to be in good financial health, so why is it necessary to establish a foundation to raise funds for the hospital?

A

St. Joe’s has been and continues to be one of the most fiscally well-managed hospitals in the region and has been able to maintain a high standard of service to the community largely because of this sound fiscal management.   The “bottom line” has looked good but it must be remembered that, as a nonprofit hospital, any revenues in excess of operational expenses are put back into the hospital and the community - for things such as capital equipment, building, charity care and community outreach programs.

Unfortunately, economic pressures are placing unprecedented strain on St. Joseph Hospital – draining precious dollars needed to buy medical equipment, upgrade services, expand programs and maintain excellence in patient care.

In recent years a number of factors have begun to threaten the hospital’s ability to maintain the healthy margin it has enjoyed in the past.  That healthy margin is rapidly dwindling to the point where the hospital’s ability to meet community needs and expectations to replace equipment and bring new technological advances to Whatcom County will be severely curtailed without additional revenues.  The five primary factors impacting St. Joseph Hospital’s margin include costs associated with:  (1) Technology, (2) Reimbursement and Demographics, (3) Labor Shortages, (4) Regulations, and (5) Skyrocketing Insurance Costs.  Further erosion of the hospital’s “margin” can only have a negative impact on health care services in Whatcom County. 

1.  TECHNOLOGY – With rapid advancements in healthcare made possible by giant leaps in technology, the opportunity to provide better healthcare has never been greater. That’s the good news.  The bad news? Unfortunately the costs for acquiring and utilizing these new technological advances are huge and account for a significant portion of the increased costs in health care.   Committed to meeting regional and community health care needs and to bringing state-of-the-art care to our community, St. Joseph Hospital recognizes that philanthropy is the only remaining source of revenue that will help bring technological advances to our community.

2.      REIMBURSEMENT AND DEMOGRAPHICS - Consistent decreases in reimbursements, particularly Medicare, are resulting in financial crises for many hospitals. . . to the point that some hospitals have been forced to close their doors.  This threat is particularly true in our area, where reimbursements are among the lowest in the nation.  The following facts about the reimbursement environment clearly illustrate the need for St. Joseph Hospital to find additional sources of revenue in order to even maintain its current ability to serve the community:

  • 60% of St. Joseph Hospital’s revenues come from government reimbursements;
  • Reimbursement rates are established by the Federal Government;
  • Northwestern Washington State has among THE lowest reimbursement rates in the nation, the price paid for being efficient providers when national reimbursement rates were established in the 1980’s; and
  • Government rates drive the commercial reimbursement rates, further compounding declining reimbursements to the hospital for services rendered.

In addition, data from the 2000 United States Census reveal other significant stressors on hospital revenues, indicating St. Joseph Hospital’s need for a financial “safety net” that could be created via the fundraising efforts of a foundation.  The Census illustrates the following:

  • Whatcom County has the lowest median household income ($40,005) in all of Northwestern Washington;
  • Household income here is nearly 14.4% lower than the State’s average of $53,558.00;
  • Of the most populous counties in Western Washington, the percentage of people 65 and over (highest users of health care services) is higher in Whatcom County than anywhere except Skagit County;
  • 13.7% of Whatcom County’s population lives below the poverty level vs. the state average of 10.6%.

The above statistics also suggest that St. Joseph Hospital can expect an increasing demand for services from people who do not have means to pay.  This added pressure will affect healthcare for the entire community. 

3.      LABOR SHORTAGES – Healthcare industry labor shortages, particularly for physicians and nurses, have a major economic impact on hospitals, forcing wages to increase (supply and demand).

4.      REGULATIONS!  - The hospital is subject not only to federal and state regulations, but also to insurance company regulations.  The cost of ensuring regulations followed is mind-boggling.  St. Joseph Hospital estimates it will spend hundreds of thousands of dollars on ensuring compliance with HIPAA regulations alone.  The costs associated with these regulations are literally killing hospitals across the country.

5.      SKYROCKETING INSURANCE RATES - (liability insurance, employee insurance, etc).

There are, of course, other factors such as even slight variations from projections in the hospital’s census, the local economy, a natural or other disaster and for-profit medical “competitors” which could affect the hospital’s financial viability.  Even sound fiscal management cannot predict or control any of these factors.

ALL other hospitals in Washington State the size of St. Joseph Hospital have had a fundraising arm – either a development office or a foundation - for years.  While that attests to the excellent fiscal management of St. Joe’s, it also suggests that the hospital may be overdue for establishing a foundation to raise funds to ensure future financial viability.

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Q I heard that the hospital is doing a $70 million expansion project.  Why are you doing that expensive project in these uncertain economic times, and how are you paying for this?
A

In 2000, the hospital studied our community’s health care needs and developed a comprehensive plan designed to meet community and hospital needs for the next 25 years.  Some of the challenges St. Joseph Hospital recognized were as follows:

  • The “bottom line” has narrowed to the point that insufficient funds will soon be available to maintain the current standard of care, let alone to enhance it.
  • As the county’s ONLY hospital, it has become so busy it is bursting at the seams.  For both inpatient and outpatient care, the community has grown to use the upper limits of the hospital’s capacity to the point where the hospital often operates at or above capacity in both inpatient and outpatient services;
  • The St. Joseph Hospital Emergency Department (a high cost area of the hospital) is increasingly being used by the uninsured population for non emergency situations in place of going to a regular physician's office, because many physicians cannot afford to serve uninsured or underinsured people;
  • St. Joe’s has become a regional provider of care for selected services, such as specific cardiovascular interventions;
  • Growth in Whatcom County – one of the nation’s top 25 fastest-growing areas – has been between 3.5 and 4% per year, requiring rapidly increased health care capacity; currently the population here is more than 185.500 (2006) and is expected to approach or exceed 243,300 in the year 2020;
  • Physician retention in Whatcom County has become increasingly difficult primarily because of the dismal insurance reimbursement rate. Concerned about the possible decline of access to healthcare in the community because of this factor, the hospital has, true to its mission,  taken on the burden of recruiting external physicians and healthcare professionals at a substantial expense to the hospital;
  • The Hospital’s secondary service area, which includes Skagit, Island and San Juan Counties, is also growing at a rapid rate;
  • The most significant growth in our region is projected to occur in the 45-64 and 65+ age groups, the highest users of healthcare services; and
  • Aging facilities.

The hospital is paying for its current capital projects with grant money, a private tax-exempt bond, and cash reserves.

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Q If the hospital is currently showing a positive bottom line, I still can’t understand why it is necessary to raise funds.  At what point will the hospital begin to show a loss?  What are the alternatives to going to the community for contributions?
A

The hospital may begin to experience a deficit in the very near future due to current financial pressures as well as unpredictable things like census figures. 

Alternatives to beginning a fundraising program for the hospital include:

  • Cutting programs and services, especially those offered to those who are unable to pay; or
  • Lowering the hospital’s standards, such as instituting delays in service.

NONE OF THE ALTERNATIVES IS ACCEPTABLE TO ST. JOSEPH HOSPITAL OR TO THE SISTERS OF ST. JOSEPH OF PEACE, BECAUSE EACH ALTERNATIVE IS IN DIRECT CONFLICT WITH THE HOSPITAL’S MISSION.

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Q Won’t a hospital foundation be in competition with the St. Luke’s Foundation?  I thought the St. Luke’s Foundation was raising funds for the hospital?  And what about United Way?
A

A. No. Although St. Luke’s Foundation accepts philanthropic gifts and conducts an annual campaign, its primary focus is on providing funding for health-related projects and education for a broad range of Whatcom County recipients, including St. Joseph Hospital. The hospital has been the grateful recipient of many St. Luke’s Foundation grants, including major support for the Community Cancer Center, the St. Luke’s Education Center, and several other projects.  The St. Joseph Hospital Foundation staff will work closely with St. Luke’s Foundation staff to ensure that a mutually beneficial and positive relationship is in place.

B. Regarding United Way, the hospital, as one of Whatcom County’s largest employers, fully supports United Way and conducts an employee campaign each year.  St. Joseph Hospital does not receive United Way funding but will enthusiastically continue to support the efforts of United Way.

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Q How much of a bottom line does the hospital need to maintain its capacity to replace equipment and continue providing community services?  When will the bottom line be “in the red?”
A It takes a margin of minimal 6% of a hospital’s operating budget to maintain the hospital’s ability to continue its community services and meet its capital needs, such as the capacity to replace equipment. To grow programs and services requires an 8-10% margin.

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The St. Joseph Hospital Foundation has been established to help maintain and strengthen St. Joseph Hospital’s mission to provide – with caring, compassion and commitment – the best healthcare available to the people of our community.

SJH Foundation