Carilion Clinic on Monday released financial statements showing continued improvement for both its operating margin and bond ratings that could soon prompt it to make public its plans to expand Carilion Roanoke Memorial Hospital.
The financial news comes 10 years to the day after Carilion announced it would transform health care in the Roanoke Valley.
“We are proud of what we set out as goals and what we are about, and that we are at the pinnacle of success,” Chief Financial Officer Don Halliwill said .
Halliwill said Carilion continues to expand services but still turns away 100 to 200 patients a month from Roanoke Memorial because it does not have the room to treat them.
About 12,800 doctors, nurses and support staff worked for the nonprofit Carilion Clinic and were paid more than $1 billion in salaries and benefits during the financial year that ended Sept. 30, 2016.
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On June 19, 2006, Carilion announced it would remake itself into a physician-led clinic, similar to the Mayo or Cleveland clinics, and emphasize coordinated patient care along with the training of new doctors and medical research. Carilion Health System was then a collection of hospitals, employing 576 physicians, including residents and fellows. Its leaderships said then that about half of its doctors were expected to retire within 10 years. Today, Carilion employs 957 physicians, offers 76 specialty services and has attracted doctors and researchers looking to build their careers.
During the last decade, Carilion has partnered with Virginia Tech to create a research institute and medical school; expanded specialty care, most notably in orthopedics and neuroscience; increased residency and fellowship slots; and transformed a brownfield near Roanoke Memorial into an expanding medical and teaching complex.
“If we hadn’t done anything, I feel very strongly the medical community would be significantly different today,” Halliwill said.
Carilion’s initial plans created dissension among some local doctors as the health system started to buy out practices and build its network of specialists. The national recession hit as the transformation was underway, followed by changes to insurance reimbursements through Medicare and the Affordable Care Act.
Carilion lost $131 million from 2008 through 2011 before returning to profitability the following year. Since then its operating margin has continued to improve.
Halliwill said the physician leadership was the key ingredient in Carilion’s performance.
The audited financial statement released Monday showed Carilion earned $69 million on $1.65 billion in revenue during fiscal year 2016, giving it a 4.2 percent operating margin. In addition, Moody’s affirmed an A1 rating and upgraded Carilion’s outlook from stable to positive. Standard & Poor’s moved Carilion’s rating upward from A+ to AA-.
As a nonprofit, Carilion reinvests earnings into providing health care services to the region. Halliwill said Carilion’s financial health would allow it to move forward with improving and replacing aging buildings, upgrading technology, providing merit increases and expanding services for patients.
Roanoke Memorial is the only hospital in western Virginia designated to treat all types of trauma, and it accepts from other hospitals patients who require complex care. Two years ago, Carilion said it was considering building a second 15-story tower on Roanoke Memorial, with 10 stories of hospital space on top of a five-story garage. Details have yet to be released.
Halliwill said a plan will soon be ready to present to the board.
“There is no doubt that we need additional space,” Halliwill said. “The demographic and social economic factors would indicate that regardless of new drugs or the macro legislative environment changing, our population is going to need just as much health care for the foreseeable future.”
He said even if efforts are successful to improve the overall health of the region’s residents the additional space would be needed as the economy also is expected to grow and with it the population.
Halliwill said he also expects the need will continue for charitable care. Carilion provided $67 million worth of services to people who could not afford them during 2016. This was up about $15 million over 2015.
The reasons for the increase are as complex as the shifting health insurance market, he said. Even with subsidies, people are finding premiums too expensive and are forgoing or dropping coverage, and employers are switching to plans with high deductibles that people with lower incomes cannot afford to cover, he said.