The health-care sector here faces major hurdles and uncertainty in the coming year, due partly to eroding patient volumes, pressure on government funding sources, and the continuing consolidation of hospitals and physician groups.

"I think it will be a tougher year next year, and we are currently looking at our cost structure, making sure we are able to serve the mission we are here to serve," says Dr. Andy Agwunobi, CEO of Providence Health Care, the Inland Northwest's largest health-care system. The nonprofit Catholic-sponsored network includes Spokane's Sacred Heart Medical Center and Holy Family Hospital and two Stevens County hospitals, plus laboratories, physician clinics, and a number of other facilities.

Agwunobi says a recently published story that said the hospital has earned more than $30 million so far this year didn't account for sums paid to employed physicians or losses suffered by affiliated ministries. Factoring in those figures makes for "a much more challenging picture. It shows that we gave more money to the community than we took in," he says.

"Patient volumes have been down significantly," due partly to people hit hard by the recession putting off elective procedures and "nonemergent" care, he says, and patient volume is projected to rise less than 2 percent at the four hospitals in 2011.

Also, the payer mix for provided services is changing in a way that drives up the amount of free care the hospitals must bear, Agwunobi says. Commercial payers have slipped to 29.4 percent of the payer mix this year from 30.2 percent in 2009, with each percentage point equating to around $800,000 to $900,000 a month in revenues, he says.

Meanwhile, the amount of revenues derived from patients who take on bills themselves has grown to 4.4 percent this year from 3.6 percent last year, Agwunobi says. "That's very challenging because a lot of 'self-pay' goes to charity care or bad debt," he says.

A big budget shortfall has forced Sacred Heart and Holy Family to lay off more than 100 employees this year, and Agwunobi says it's too early to say whether more job cuts will be needed in 2011. On the brighter side, he says he's excited about some of the closer relationships Providence is developing with physician groups and other providers.

Steve Duvoisin, CEO of Spokane-based Inland Imaging LLC, the Inland Northwest's largest radiology practice, says, "I think a lot of people in health care saw a slowdown" this year, and jobs probably "will come back slowly."

He predicts next year will bring further consolidation of physician groups into either Providence Health Care or for-profit competitor Community Health Systems Inc., which owns Deaconess Medical Center and Valley Hospital & Medical Center.

Inland Imaging, which employs about 550 people, has experienced a roughly 8 percent decline in revenues this year compared with 2009, and most imaging centers around the country probably are off more like 10 percent to 15 percent, Duvoisin says. He says he expects Inland Imaging's revenues to be flat next year, and says, "We don't plan to hire or fire going into the future. We're just being very careful."

A bright spot on the local health-care scene has been Pathology Associates Medical Laboratories. The big Spokane-based lab, known as PAML, recently took one of the biggest steps to date in its quest to become a national laboratory by entering into a joint venture in the Denver area that will serve 13 hospitals. Its aggressive growth strategy calls for setting up two to four such partnerships a year throughout the country, each of which could involve a number of hospitals. It quietly has grown to roughly 1,600 employees, about 850 of whom work in Spokane, and now has annual revenues in excess of $200 million.

—Kim Crompton