Hospitals go where the money is

Inadequate State, Federal Payment Rates Forcing Hospital Closure, Officials Say

By David Gore
California Healthline, July 5, 2014

Doctors Medical Center in San Pablo, about 10 miles north of Oakland, is slated to shut its doors at the end of July, unless some kind of deal can be worked out to keep it operating.

There are many contributing factors to the financial death spiral at Doctors Medical Center, according to said Eric Zell, chair of the West Contra Costa Healthcare District board of directors, which oversees Doctors Medical Center. But there is one fundamental and underlying reason it cannot remain economically viable:

"It's the Medi-Cal and Medicare reimbursement rates," Zell said. "The rates are just too low."

Zell added, "The payer mix is 80% Medicare/Medi-Cal and about 10% uninsured. There's only about 10% private pay, and that's not enough to keep us going."

According to hospital officials, Doctors Medical Center is paid 60 cents for every dollar it spends to treat each Medi-Cal patient and just 90 cents on the dollar for every Medicare patient.

When you're looking at 100 patients a day and you lose money on 90 of them, the losses mount quickly, according to John Gioia, a longtime district supervisor on the Contra Costa Board of Supervisors.

Most medical facilities have a payer mix with a much higher percentage of people with commercial health insurance to mitigate the losses of their Medi-Cal, Medicare and uninsured patients, Gioia said.

And when you have such a large population of people living at poverty level, that also means the residents of western Contra Costa County don't have much money to try to underwrite the hospital.

Doctors Medical Center is one of the few remaining stand-alone small district hospitals left in the state, Gioia said. "There have been many places like this, hospitals like this in similar circumstances," he said. "Many have closed, dozens of them in California.”

"This hospital represents a larger problem and issue," Gioia said, referring to the access issue that would emerge in the west county if Doctors does shut down. "This represents a larger problem and issue," he said. "Is there a model that's more sustainable?"

"I think this is a failure of our health care system," (state Sen. Loni) Hancock said. "We need to have a single payer health system."

But at its root, Hancock said, it shouldn't be up to hospitals in the area to pick up the slack for low Medi-Cal and Medicare rates.

"Look, it's a great health care system for employed, insured people," Hancock said. "But this is not a health care system for people who are poor."

Doctors Medical Center is owned and operated by the West Contra Costa Healthcare District.

Doctors Medical Center Has an Emergency

If it doesn't get financial help in the next few months, it will close its doors permanently. More than 40,000 people use Doctors Medical Center for emergency room services every year. If you have a heart attack or stroke, or you are in an accident, the ER at DMC is often the first stop for an ambulance. Without it, an ambulance trip could take up to an additional hour. That time could mean the difference between life and death.



By Don McCanne, MD

It does not take much intellect to understand that hospitals should be located where they are needed and that they should be financed by a system that would ensure that adequate funds would be available to pay for appropriate health care services for the community. Based on our current methods of hospital planning and financing, it may be intellect that is in short supply.

Today a hospital that is located in a community with high levels of poverty is dependent on income from Medicare and Medicaid. In California these programs, especially Medicaid (Medi-Cal), pay rates below costs of providing that care. Insolvency is inevitable. This is directly related to our dysfunctional, fragmented system of financing health care through a multitude of private insurers, public programs, and no programs at all.

With the private sector making decisions on hospital planning, areas with assurance of revenues will be selected - usually areas with a high percentage of privately insured patients plus Medicare patients with higher regionally adjusted payment rates. The private planners do not select areas with high poverty rates and high numbers of uninsured and Medicaid beneficiaries. Private planning decisions are based on money, not on local need.

Under a well designed single payer system, capital spending is budgeted separately. Hospitals are built in areas of need. The hospital operations are financed through global budgets, just as with our fire and police departments. Public financing obviates the need to consider wealth when establishing the location of health facilities.

If Doctors Medical Center is closed down, the billionaire who is passing through town and is critically injured in an accident may die if his ambulance has to drive past a padlocked emergency department and continue for another hour to a different facility. No amount of money will buy your way to the front of that queue.

We need to adopt a system that will provide both appropriate planning and appropriate financing. Our current fragmented system can’t do that.

California State Senator Loni Hancock is right. “This is a failure of our health care system. We need to have a single payer health system.”