Hospitals in Orange County and elsewhere across the country weathered the downturn fairly well, according to a think tank report.
Hospitals did see a drop in profitable elective procedures, higher care for those without insurance and a shift to more patients covered by government health programs, according to the Center for Studying Health System Change in Washington, D.C.
Hospitals offset those changes by cutting staff, adjusting salaries and benefits and improving productivity, the report said.
The center recently looked at hospitals and health plans in OC and 11 other areas around the U.S.
Size and reputation played a role in how hospitals negotiated contracts with insurance companies, according to a client note on the report by Jason Gurda, a healthcare services analyst with Leerink Swann LLC, a Boston investment bank.
“For hospital systems with significant market leverage or must-have status with consumers, commercial payment rates continued to increase faster than unit costs, offsetting losses on Medicaid patients,” Gurda said.
The report found smaller, independent hospitals were squeezed in their negotiations with health plans.
Hospitals also are expanding into nearby markets in an effort to pursue well-insured patients, according to the report.
Those efforts can take the form of setting up freestanding outpatient or emergency departments in affluent suburbs or nearby urban and rural growth areas.
In health insurance, the report said traditional plans such as health maintenance organizations are asking members to shoulder more costs via things such as deductible plans.
HMOs, which came into prominence in Southern California in the 1970s and 1980s, traditionally did not have deductibles.
An estimated 80% of Oakland-based Kaiser Permanente’s Orange County local employer accounts reportedly offered an HMO with a deductible, according to the center.
Concerns about healthcare reform and what it meant for “safety net” providers that draw uninsured or underinsured patients came up in both reports.
“Safety net providers in communities with large Latino populations, including Orange County, northern New Jersey and Miami, were particularly concerned about future resources for the safety net,” the center’s report said.
Hospitals that stand to be serving people who would continue to be uninsured after full implementation of healthcare reform in 2014 were fearful that a decline in disproportionate share payments to cover the care may exceed revenue that newly insured patients would bring in, according to analyst Gurda.
In other insurance matters, nearly all health plan respondents “voiced strong concern about the potential for adverse selection,” or attracting sicker-than-average members, in the health insurance exchanges that are scheduled to start operating in 2014, according to Gurda.
Penalties for not having insurance under an individual mandate “were widely perceived as too weak, leading many plan respondents and market observers to expect that a substantial portion of healthy people will remain on the sidelines and out of the exchanges.”
When the fine for not having health insurance is fully in place in 2016, people will have to pay $695 a year or 2.5% of their income, whichever is higher.
The center, a nonprofit funded by the Robert Wood Johnson Foundation, makes site visits to its study communities and talks to healthcare leaders in those markets about the industry and how it’s changed.
Grubb & Ellis Buys
Santa Ana’s Grubb & Ellis Co.’s healthcare real estate investment arm bought 15 buildings in five states. The total price was about $74 million.
As part of the buying, Grubb & Ellis acquired the Dixie-Lobo Medical Office building portfolio, which is made up of 10 properties in Arkansas, Louisiana, New Mexico and Texas. It bought the portfolio from eight individual sellers tied to White Plains, N.Y.-based Seavest Inc.
That deal was valued at $30 million.
Dixie-Lobo totals more than 156,000 square feet. It’s made up of medical office buildings on local hospital campuses.
Grubb & Ellis also spent $44 million to buy five medical office buildings in Arkansas and New Jersey from an undisclosed seller. Those buildings total 179,000 square feet and are leased to hospitals.
Bits and Pieces
InSight Health Services Holdings Corp., a Lake Forest-based medical imaging company, said it renewed a long-term mobile magnetic resonance imaging deal with Elizabethtown Community Hospital in New York … Leonard Sender, medical director of clinical operations at the University of California, Irvine’s Chao Family Comprehensive Cancer Center, and colleagues have started the Journal of Adolescent and Young Adult Oncology. Sender, who also is affiliated with Children’s Hospital of Orange County in Orange, is editor in chief … Quality Systems Inc., an Irvine medical software maker, appeared last week at a Goldman Sachs & Co. healthcare conference in Rancho Palos Verdes.
