Jul. 8--The healthcare industry is supposed to be resistant to recession, because ill people can't put off going to the hospital. But this kind of economic downturn still stings in a big way.

Consider Texas Health Resources, the top hospital provider in the region. From 2004 to 2008, the Arlington nonprofit system earned almost $1 billion in "excess revenue" -- what regular companies would call net profit.

Then the recession hit last year, and THR, with 13 local hospitals, lost nearly $428 million.

That jaw-dropping turnaround is the first loss since the system was formed in 1997 by the merger of Harris Methodist in Tarrant County and Presbyterian Healthcare in Dallas.

Most of the red ink stems from declining investments, with more than half being paper losses only. THR didn't sell most of the assets, and if the stock market bounces back, their value will recover.

Some "things are not directly in our control, and we have to manage around them," said Barclay Berdan, a senior executive vice president who oversees about half the THR hospitals, including those in Tarrant County.

To Berdan, the financial number that matters most is operating income, and that's still solidly in the black. It topped $96 million in 2008, but that's a 43 percent drop from the year before, and it's less than half the operating profit in 2004 and 2005.

In response, the health system cut capital spending last year by nearly $35 million, or 15 percent. It put other capital projects on hold, waiting for the economy to strengthen. It tried to squeeze more efficiency from the supply chain and laid off fewer than 100 employees across the chain, hoping to trim expenses without compromising patient care.

For most companies, the recession creates a revenue problem. General Motors, Pier 1 Imports, McClatchy Co. and many others have seen sales fall by 20 percent and more. Their natural response was to cut costs deeply, including major layoffs and reductions in pay and benefits.

That's not an option for THR, because patient demand keeps growing, with revenue rising 10 percent last year. Regardless of the economy, people get sick, and the difference today is that more can't pay the bills.

THR's write-offs for bad debts increased $31 million last year after rising almost $30 million the year before.

"We see more people coming to us who don't have insurance and don't have the ability to pay for their care," said Berdan, who also chairs the Texas Hospital Association trade group.