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Amy Umble is health reporter for The Free Lance-Star

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Mary Washington’s operating income dropped 50 percent in 2011

The company's 2011 performance was its worst in at least six years.

Mary Washington Healthcare saw its operating income drop by more than 50 percent in 2011, its worst fiscal performance in at least six years.

The company earned $5.2 million from its health care operations last year, compared to $10.8 million in 2010, according to its latest audit.

The audit, released last week, also shows that the income that Mary Washington earned from patient-care was almost completely offset by losses from its partnerships and stock market investments.

As a result, its bottom  line—the combination of  operating and nonoperating  income—was $1 million in  2011, down 95 percent from $21 million in 2010.

“It was a difficult year,” said Sean Barden, executive vice president and chief financial officer.

The company earned more  than half a billion dollars in net patient-care revenue last year. However, this was a  drop of about 4 percent, compared to 2010.

The company reacted by cutting spending on everything from salaries and benefits to contract personnel and supplies. Even so, costs declined only 3 percent, and operating income fell.

Despite the declines, hospital officials defended the company’s financial performance.

They pointed out that  Mary Washington has expanded clinical services, such as the new cancer  center in Fredericksburg, dealt with lower reimbursements from Medicare and  Medicaid, and invested in new technology, such as an  electronic record-keeping  system, and still remained profitable.

“There’s a lot of pressure  on the industry,” Barden said. “If you go down the  street and talk to the guys  running the other hospital, they’ll tell you the same  thing.”

The biggest factor in Mary Washington’s downturn last year was the loss of Medicare’s sole community hospital status, Barden said. The Centers for Medicare  and Medicaid Services offers sole-provider status to hospitals that are the only hospitals in large geographic areas. The designation translates into higher Medicare  and Tricare reimbursements for providers.

Mary Washington lost that status in January 2011, after  the arrival of the Spotsylvania Regional Medical Center. The change meant a $20  million loss of revenue, Barden said.

“We’re providing the same  service to patients but at a reduced rate. It was a pay cut and a rather significant one,”  he added.

Mary Washington is the  parent company of more than  two dozen health care businesses. Its flagship operation,  Mary Washington Hospital,  led the declines last year. Operating income for the hospital dropped to $5.3  million in 2011, from $19.5  million in 2010.

Stafford Hospital, Mary  Washington’s 100-bed sibling, continued to lose money, though its losses are  getting smaller. Stafford lost  $4.3 million in 2011, compared to $12.2 million in  2010.

Officials have said that  these losses, more than $39 million since Stafford Hospital opened in 2009, were expected of a new operation.  They also point out that Stafford has had a positive  cash flow for the last 18  months.

“There’s a steady improvement in what’s happening, and we expect to be  profitable in 2012,” Barden said.

MWHC operating income

(In millions)







(For more on Mary Washington’s financial performance during 2011, see the story tomorrow in the paper.)