If there’s one word to describe the nation’s healthcare industry it’s
uncertainty. The new tax bill repealed the Affordable Care Act’s individual mandate provisions that required most Americans to purchase health
insurance or face penalty, which could hurt hospital revenue with
fewer people buying health plans. The bill also took away
nonprofit hospitals’ ability to use advanced refunding to
replace outstanding bonds with bonds at lower interest rates.
The Business Journal’s Sherry Hsieh asked a handful of Orange
County hospital executives to address how they plan to continue providing value-based care while bracing for further revenue squeeze.
Here are edited excerpts of their responses:
Barry Arbuckle
Chief Executive
MemorialCare Health System
Fountain Valley
MemorialCare’s very strong credit rating over many years has meant that the cost of capital is extraordinarily low. Therefore, our ability to raise funds and secure financing remains strong and virtually unchanged.
To advance value-based care, MemorialCare have formed strategic partnerships, increased outpatient offerings and broadened population health management to tackle chronic diseases and reduce hospital admissions.
We continue engaging in dialogue with partners who share our commitment to providing consumers, employers and health plans with more healthcare centers, innovative programs and progressive partnerships to bring care near where people live and work. Our preferred partnership with Boeing Co. in 2016 offered over 25,000 Southern California employees and dependents a customized health plan option at a lower cost.
MemorialCare’s joint venture with RadNet for 34 outpatient medical imaging centers created Southern California’s largest imaging network. Our dialysis joint venture with Fresenius gives patients access to 15 Southern California dialysis clinics, and joint ventures with SCA, Monarch and community physicians includes nine ambulatory surgery centers.
On top of expanding outpatient offerings, MemorialCare also collaborated with academic hospitals, including UCI Health to increase access to primary care health centers. The strategic alliance between Miller Children’s & Women’s Hospital Long Beach and UCLA Mattel Children’s Hospital brings together academic, clinical and research expertise and resources to enhance and expand children’s health services throughout the Southland. The strength of these and future partnerships will continue to add value to all we serve.
Robert Braithwaite
Chief Executive
Hoag Memorial Hospital Presbyterian
Newport Beach
Our priority is and always will be to provide the highest-quality healthcare services to the communities we serve.
Hoag was founded on a commitment to delivering outstanding and innovative care, and regardless of the new tax bill we will continue to be an example of excellence in community-focused, high-quality patient care.
Everything we do at Hoag, no matter how small or how large, is done with the community’s best interest in mind.
As we develop and offer new programs and services, the one question that guides it all is, ‘How will this benefit the communities, and the families, we serve?’
Our multifaceted plan involves both physical growth and an emphasis on innovation to better meet the needs of our patients, connecting them with their physicians as quickly and conveniently as possible. This includes opening new facilities, such as health centers and urgent cares, as well as digital services, including telehealth. The convergence of these ideas provides Hoag the opportunity to deliver care in a very efficient way. Patients want access, and they want it in a variety of ways.
Hoag is known for a focus on technology, having been nationally recognized for a commitment to pioneering innovative medical and surgical advancements and investing in highly skilled clinical teams and facilities to expand the comprehensive services we offer. Examples of technology that Hoag pioneered in Orange County include da Vinci surgical robots, breast tomosynthesis (3D Mammography), Surgical Theater virtual reality technology used in neurosurgery, and the ExcelsiusGPS Robotic Navigation platform for spine surgery.
Mark Costa
Executive Director, Orange County service area
Kaiser Permanente
Anaheim, Irvine
Kaiser Permanente is committed to providing affordable healthcare to those living in communities we serve. First, we are focused on finding ways to keep our members healthy. People who are healthier make healthcare less expensive. The second thing we are focused on is making sure individuals get the right care at the right location.
The fastest-growing demographic are those over 65. We have a large senior population in South County. Common diseases include congestive heart disease, diabetes and dementia. We help families identify those diseases. They can get care at Kaiser Permanente, as well as community resources like Alzheimer’s Orange County, which provides free care and support services for those affected by Alzheimer’s disease and dementia. We want to help seniors stay healthy so they don’t end up in health crises that need emergency-room care. We help them get care at home to manage chronic conditions, instead of skilled nursing facilities and hospitals.
Digital health is highly active now as to how we think about care delivery today. Our 12 million members interact with our digital portal kp.org to schedule appointments, refill prescriptions, pay bills and access lab results.
Consumer interaction increased 18% last year in terms of volume of contacts our members made through our digital portals. This is becoming the way consumers want to interact with healthcare. Of 300 million visits in 2017, over 65% were made through a mobile device.
Telehealth, phone or Skype-like video visits also grew at a high rate of 20%. Members have more flexibility scheduling visits at break or lunch, making life more productive. That’s also more efficient for employers who can have their workforce at work and not having to take time off. Telehealth will grow up to 50% in the coming years.
We want people to have choices, to give our members tools to help them better manage their health. We want to provide, and will always provide access, whether that’s through our hospitals, outpatient centers or digital.
Kimberly Cripe
Chief Executive, President
Children’s Hospital of Orange County
Orange, Mission Viejo
CHOC Children’s long-term bonds are in place and aren’t impacted by the tax bill. As we look into the future, we expect that the tax bill will result in a narrowing of the spread in interest rates between tax-exempt and taxable bonds. Nonprofits like CHOC are expected to see slightly higher interest rates in the future as a result of these changes.
CHOC and other tax-exempt organizations provide tremendous value to our communities in exchange for not paying federal and California income taxes. Last year CHOC provided $2.72 of community benefit for each tax dollar saved. Under the new tax law, CHOC provides $3.70 of community benefit for each tax dollar saved. CHOC is exceptionally fortunate to have donors who are inspired to support our mission—to nurture, advance and protect the health and well-being of children—regardless of the tax benefit they receive from donations. While it’s too early to tell, we’re hopeful that higher donations from businesses with more to give due to a lower tax rate will offset any negative impact CHOC will experience from the reduced value of deductions.
CHOC is known for the way we care for our patients needing chronic, acute care. That will continue.
CHOC’s constantly looking to the future and seeking ways to improve healthcare for children and adolescents. It will open the first inpatient psychiatric beds in California this year to provide care for patients 3 to 18 years old.
Jennifer Mitzner
Chief Executive
Hoag Orthopedic Institute
Irvine
HOI, like most hospitals and providers, benefits when more people have access to healthcare, including through exchange plans. Moreover, exchanges often contain choices in coverage and high deductibles resulting in consumers who are making important decisions about their health based on what they’re getting for their healthcare dollar. HOI, since its founding, has embraced the value-based concept of healthcare and is well-positioned to benefit from consumers who do their homework on costs and outcomes. It’s largely unaffected by the tax bill.
HOI was founded with a mission to focus on value. Uncertainty is almost a constant in healthcare; therefore, our founders believed that no matter what changes come from Washington, D.C., or from other stakeholders in the healthcare enterprise, value wins. We are hyper-focused on patient experience and service and have hardwired the care model to achieve our notable outcomes. The HOI model is designed for such a value-imperative marketplace. We win our business one customer at a time by delivering outstanding outcomes and service, and the consistent positive referrals from our patients help drive our future growth. HOI is an innovative healthcare business model that delivers better outcomes, lower costs and exceptional customer experience. As we look to the future, we’re optimistic about replicating our outcomes and model with other like-minded organizations, partners who are committed to providing high-value orthopedic care to their communities. In fact, we’re already plotting our expansion to more of Orange County through consumer-centric ambulatory surgery sites to improve access to our care model.
As an independent, innovative organization that’s well-positioned for this increasingly consumer-driven marketplace, HOI is actively exploring opportunities to expand our model and expertise within Providence St. Joseph Health, particularly in the system’s growing footprint in greater Southern California.
Erik Wexler
Executive Vice President
Providence St. Joseph Health
Chief Executive
Southern California region
As a mission-driven healthcare system, our priorities center around those we serve. An earlier version of the bill would have eliminated medical expense deductions for people with high healthcare costs. Fortunately, the final bill not only preserves but improves the deduction for two years. This is very good news for Californians, especially those over the age of 65, who depend on this deduction.
We’re also monitoring the future impact of the repeal of the Affordable Care Act’s individual mandate in 2019. As a result, the size of the uninsured population is expected to rise, possibly up to 4 million people in the first year alone.
This is concerning because people without affordable coverage tend to forgo or delay care, leading to poorer health. Looking at funding, if the bill’s tax cuts don’t lead to expected levels of economic activity, or if there’s a new economic downturn, future deficits may result in budget-driven cuts to social safety net programs, such as Medicaid and Medicare.
The tax bill didn’t include another early proposal to eliminate tax-exemption for private-activity bonds available to not-for-profit hospitals. The exemption provides access to low-cost capital that can be used to update facilities and enhance and expand care and services. Not-for-profit systems often care for a disproportionate share of lower-income patients, and with anticipated growth in the need for subsidized or free care, these bonds help to cushion rising costs and allow hospitals to continue investing in their communities.
It’s very important to our family of organizations to preserve existing levels of health insurance coverage. We’re strongly advocating for passage of legislation in Congress to strengthen the individual health insurance marketplace across the U.S. We also will continue to be leading advocates on behalf of the more than 13 million Californians who depend on Medicaid, including about 5 million adults who qualified after the ACA expanded eligibility.
