The forecast for Spokanes health-care sector looks sunny next year, with hospitals expecting steady growth and developing plans for major expansion projects. A few threatening clouds loom on the horizon, though, because of a tight labor market and shrinking reimbursements.


Spokanes three major hospitals, which report healthy growth in both patient volumes and revenue so far this year, say they expect similar gains in 2008. Sacred Heart Medical Center & Childrens Hospital and Holy Family Hospital, both operated by Renton, Wash.-based Providence Health & Services, currently are working on a 10-year master plan for future projects. Empire Health Services, which operates Deaconess Medical Center and Valley Hospital & Medical Center, has said its acquisition by Community Health Systems Inc. will mean an influx of $100 million for capital projects and other improvements over the next five years.


The population is growing, and the whole economy is growing, and thats good for the health-care industry, says Keith Richardson, assistant vice president for finance at Empire Health. Its a very capital-intensive industry, so finding the money to invest in employees and in equipment, with reimbursement rates that dont keep up with inflation, is a huge challenge.


Through October, patient volumes at Empire Health were up about 2 percent from the year-earlier period, and Richardson expects about a 3 percent increase in patient volumes and revenues next year. Revenues are up 9 percent so far this year, largely because of increases in outpatient volumes and because Empire added a doctors group near the end of last year, he says.


As of Nov. 21, Empire Health had 1,864 full-time employees, up from 1,640 last year. The hospital operator added 174 employees to its payrolls this year for functions that it previously had outsourced to another company, which explains part of the jump in employment. Richardson says Empire plans to keep its employment levels fairly steady next year.


Sacred Hearts inpatient volumes are running about 2 percent ahead of budget this year and its outpatient volumes are between 5 percent and 8 percent ahead of budget, says President Mike Wilson. Through October, the hospitals net service revenue was about 5 percent ahead of budget, Wilson says. Sacred Heart employs roughly 3,300 people full-timenearly 4 percent more than anticipated when it started the year. Wilson expects patient volumes, net revenue, and employment levels to increase between 2 percent and 3 percent next year.


He says he believes Sacred Hearts projections for 2008 are conservative, in light of heightened demand for care anticipated from the aging baby boomer population. Demand is expected to increase particularly for outpatient diagnostic services and inpatient acute-care services, he says.


Tom Corley, president of Holy Family Hospital, says the North Side hospital has 931 full-time employees, up slightly from 928 last year, and he expects employment levels to rise roughly 4 percent next year. Patient volumes likely will be about 6 percent higher this year than in 2006, and revenue will be up about 10 percent, he says. Corley anticipates 3 percent to 4 percent increases in both patient volume and revenue next year.


The number of surgeries performed at the hospital and admissions to its ER, maternity, and intensive-care unit and acute-care units have been strong this year, which bodes well for 2008, he says.


Those are major bellwethers for any hospital, and all of them are up this year over last year, Corley says. I see no sign of it abating at all.


Holy Family and a development partner recently wrapped up construction on a new medical-office building, and the hospital finished an expansion of its surgical services wing. Next year, it plans to spend several million dollars on renovations to its patient-care units, Corley says.


Despite their optimism about the industrys growth next year, hospital executives say theyre wrestling with a few key issues related to reimbursements and a tight labor market.


The federal government recently made some of the biggest changes to Medicare since 1983, by expanding the number of diagnosis-related groups (DRGs) by 40 percent, Richardson says. The DRG system uses codes to classify hospital services and thereby determine how much Medicare pays a hospital for treating Medicare patients, he says. As a result of its change to the coding system, Medicare decided to raise reimbursement rates this year by less than 1 percent, rather than matching the medical inflation rate as it has done in the past, he says. Last year, that inflation rate was more than 3 percent.


A similarly pressing concern is the rising number of uninsured patients, as well as patients whose private health plans include high copays and deductibles and thus increase the potential for bad debt, Wilson says.


The tight labor market, though, is causing the biggest headaches for the health-care industry.


Regionwide, thats probably the biggest issue, particularly in rural communities, Wilson says. We have certain advantages because of our size and the concentration of programs in Spokane, but the demand for employees is still greater than the amount available.


Wilson adds that demand is highest for professional technical positions, including therapists, surgical technicians, and intensive-care nurses. Other professions that Corley and Richardson say are in high demand include nurses, radiology specialists, pharmacists, and medical technologists.


The health-care industry also is facing a shortage in physicians, particularly primary-care doctors. Recruiting physicians to Spokane has been difficult mainly because of the states moderately low reimbursement rates, Wilson says.


If were going to continue to meet the health-care needs of our population, were going to have to have an adequate number of physicians, Corley says.


Employment Security estimates that the health-care and social assistance sector in Eastern Washington will grow at an average annual rate of 1.9 percent between 2009 and 2014faster than any other industry. Regional labor economist Jeff Zahir says he expects a similar growth rate in the health-care sector in Spokane during that period. For 2008, though, Zahir says he anticipates a slightly lower rate of growth around 1.5 percentbecause of the slowdown expected in the overall economy.


The major tent poles of the Spokane economy have fluctuated over the last decade, but health-care seems immune to that, Zahir says. Its just the momentum that sub-economy in the region has built up.


Greater Spokane Incorporated says its trying to help the health-care sector meet its personnel needs by addressing work- force issues through its health industry development group.


To get young people interested in health-care careers at an early age, the development group has put together a brochure and booklet about various health-care professions and has distributed those materials to schools here as part of its career awareness campaign, says Amy Johnson, Greater Spokane Incorporateds vice president of work force and education. The health industry development group also conducts workshops for teachers so they can visit hospitals and health-care programs at colleges and universities here and get a better idea of the opportunities available to their students, she says.


Were trying to tie in the theoretical curriculum the students are getting to the practical applications of it, Johnson says. Were giving them a goal to work toward.


The group also is trying to alleviate what Johnson calls a bottleneck in higher education. Demand is strong from students interested in health-care careers, and schools offer a variety of health-care related programs, but there arent enough professors to staff those programs adequately, she says.


The group is helping schools find ways to fund their science programs and recruit more professors. Its biggest push for the past four years was the expansion of the University of Washingtons medical school here, she says.


Starting in fall 2008, 20 first-year medical students and eight first-year dental students will take classes at the Riverpoint Higher Education Park.


Meanwhile, the WSU-Spokane College of Nursing has started a doctorate in nursing program, which will help meet demand for professors at the nursing school as well as provide education for nurses who already are working, but want to get an advanced degree, she says.


This week, the development group started a new round of discussions about issues facing the health-care industry, Johnson says.


Some of the items under discussion include getting more funding for public health services; recruiting faculty and staff who focus on health-care research to schools here; establishing more clinical sites for students enrolled in health-care-related academic programs; and addressing the gap in the health-care information-technology work force by developing more specialized training programs for those professions.


Contact Emily Proffitt at (509) 344-1265 or via e-mail at emilyp@spokanejournal.com.