Hospitals are trying to figure out how to take care of their patients and their bottom lines.
As an increasing number of uninsured or underinsured people hit emergency rooms, local hospital operators are looking to Washington and their own neighborhoods for ways to handle the changing nature of healthcare.
Some are lobbying Congress as healthcare reform still is morphing its way through special committees.
“We must be involved in helping to
sculpt healthcare reform,” said Terry Belmont, the recently named chief executive of UCI Medical Center, an Orange teaching hospital of the University of California, Irvine.
But when the Democrats lost a supermajority in the Senate in January—when Sen. Edward Kennedy’s former seat was taken by Republican Scott Brown—it cast a pall on the hopes of easily passing any kind of reform.
“One of the things that’s on executives’ minds right now is what changes healthcare reform will bring,” said Mitch Morris, head of Deloitte Consulting LLP’s Western regional hospital consulting business in Costa Mesa. “We know one of the most important aspects of the Obama (administration’s) agenda has really been derailed by the election in Massachusetts.”
Uninsured
Because of the election, Morris said he doesn’t expect a major shift in uninsured people becoming insured—one of the hallmarks of Obama’s reform proposals.
The massive layoffs across the country left many people without health insurance, which is placing pressure on several local hospitals, he said.
Morris estimates that 350,000 to 500,000 of OC’s more than 3 million residents don’t have any form of health insurance—and another half a million people don’t have enough coverage.
A group of OC healthcare stakeholders has applied for a federal grant to create a way to address care for uninsured residents, Morris said.
That group includes the county’s Health Care Agency, CalOptima, which provides healthcare programs for children, the poor and the disabled, the Health Funders Partnership, which is a coalition of healthcare groups, hospitals and large medical groups.
Hospital operators also are coming together to work with the county government and Orange-based CalOptima.
In the meantime, Morris said he expects hospitals to make more efforts to contain their costs to offset lost money from patients and insurance companies.
“We just expect payments to continue to decrease,” he said. “Reimbursement payments under Medicare and Medicaid (will go first), then the private plans usually follow suit.”
Since Orange County doesn’t have a public hospital—it’s only one of three counties in California without one—the burden of uninsured and underinsured patients falls on private and nonprofit hospitals and medical groups.
Overall, hospitals have to be involved with reform efforts “to be sure that we’re able, and other hospitals are able, to serve these individuals in some way,” UCI’s Belmont said.
“The basic nature of the hospitals that remain here has not changed significantly, (but) it has changed some,” he said.
Part of that change is an increased focus on trying to remain financially solvent while still properly caring for patients.
“I worry about how the underserved and the indigents are going to be taken care of if financial pressures on hospitals continue,” Belmont said.
Hospital Consolidation
Some operators are selling hospitals that have been squeezed too much.
St. Joseph Health System, an Orange-based Catholic hospital operator, spent $36.5 million last year to buy the former South Coast Medical Center—now renamed Mission Hospital Laguna Beach—from Adventist Health.
The Roseville-based operator wanted to sell it because it was geographically isolated from its other hospitals, making it hard to get managed care contracts with insurance companies.
In an effort to make it more profitable and efficient, Mission Laguna dropped some resources, such as cardiac rehabilitation, because they are available at Mission’s main campus in Mission Viejo.
“When Mission bought South Coast, South Coast was already part of a large system but was under-invested,” Morris said. “(Adventist) was really not putting in the resources that you really need to keep something up to speed.”
For a smaller hospital like South Coast, “it makes a lot more sense” for it to be paired with Mission because certain basic services can be offered with the understanding that the larger campus will offer the more specialized, complex care, Morris said.
Other hospitals are beefing up to take on more patients.
Newport Beach-based Hoag Memorial Hospital Presbyterian is continuing work on its $84 million transformation of the former Irvine Regional Hospital and Medical Center into Hoag Hospital Irvine (see story, page 25).
Hoag Irvine, which will have specialty concentrations on orthopedics and cardiovascular care, is set to open its doors to patients as early as this summer.
Another hospital that’s working under new ownership is the AHMC Anaheim Regional Medical Center, formerly An-aheim Memorial Medical Center.
Alhambra-based hospital operator AHMC Healthcare Inc. bought the hospital last summer for $60 million from Memor-ialCare Health System of Fountain Valley.
AHMC pledged another $45 million worth of improvements.
AHMC Anaheim officials did not respond to interview requests.
Deloitte consultant Morris said he would not be surprised to see more hospital consolidation on the horizon to save financial resources.
“The thought is that there’s safety in numbers and economies of scale that you get from being part of a large system, so we think we would expect that to drive consolidation,” he said. “We’re starting to see some of that.”
Independent hospitals will be rare in the coming years, Morris said.
