Dr. Andrew Agwunobi Strikes Again III

This news story was published in a local Spokane newspaper the other day.

State officials have rejected Providence Sacred Heart Medical Center’s plans to add 152 patient beds.

The decision by the Washington state Department of Health puts an end to a $175 million construction project that was expected to span several years and employ as many as 700 people.

“We’re surprised, disappointed and, quite frankly, saddened at this decision,” said Dr. Andrew Agwunobi, chief executive of Providence Health Care, “because we know the Department of Health is very objective. We also know, of course, that we need the beds.”

Now, to put things into perspective, South Fulton Hospital in Atlanta has just over 300 beds total. As such, this addition would have been rather extensive if it had been approved. If you've been following my reporting on Providence Medical Center, you maybe scratching your head.

Let me catch everyone up. On March 27th, Dr. Agwunobi sent an email to the entire staff at Providence Hospital system in Eastern Washington, the area he is currently the Chief Executive Officer of. In the email, Dr. Agwunobi pronounced that because of difficult financial times some staff cuts would be coming. He cited a tough 2008 in the stock market and the hospital underperforming their budget projections as two reasons for the cuts.

Then, a couple weeks back, I followed up by analyzing the financials of this hospital system. Last year, their operating income was $288 million. The year previous they made just over $300 million. In fact, $300 million is about where they end up on any given year. Their so called financial problems stem mainly from having a bad year in the market in 2008. Despite significant losses in 2008, the hospital system continues to sit on just under $2 billion as of December 31, 2008. Furthermore, while the hospital system may not be meeting their budget projections, that doesn't necessarily mean the hospital is in dire financial straits. This is all very significant given that Providence enjoys non profit tax status and thus pays no income taxes on any of their profits. As such, if a financially health non profit hospital cut staff, that would put their non profit status in jeopardy.

Now, you maybe asking how a hospital that is supposed to be struggling so much that it needs to cut staff is able to move forward with a major expansion that would cost just south of $200 million. Furthermore, if the system is cutting staff, how were they going to find doctors and nurses to take care of the patients in this new addition? More than that, now that they are unable to move forward with the massive costs of this expansion, will the hospital still cut staff? After all, if they had enough in the budget for a nearly $200 million expansion, I can only assume they now still have enough money to pay all the staff they currently have. According to hospital officials, the short term cuts are "separate from the the capital spending projects." They planned to pay for the expansion by selling long term bonds. This would seem reasonable except that they are currently sitting on nearly $2 billion in investments. It sounds to me as though the system have enough for both short term and long term projects, including keeping their current staff.

Here's is the full dossier on Dr. Andrew Agwunobi. Here is my first and second piece in this series.