While the fate of California health care
reform continues to be debated, one
topic is not up for debate: Where goes California health care goes the rest of
the nation. California has the largest U.S.
population (36.5 million) and the most hospitals; it’s the incubator for clinical advances,
technological breakthroughs, innovative payment vehicles, regulatory requirements and
multi-cultural approaches to disease; and at
6.8 million has the highest number of uninsured, most from working families.
“When 47 percent of hospitals in Orange
County and 54 percent in Los Angeles
County operate in the red, and positive margins for the remaining average just 2.5 percent, we all share responsibility for understanding the business of health care, creating
reforms that cover the uninsured, protecting
long-term stability of hospitals and safeguarding access to care,” says Barry
Arbuckle, Ph.D., president and CEO of
MemorialCare Medical Centers, a five-hospital system in Los Angeles and Orange
Counties.
Smart Business spoke to Arbuckle about
the state of Southland health care and how
health care is unlike other businesses.
What is the status of California health care?
We are home to world-class physicians,
nurses and health professionals. Many
innovative, pioneering preventive, diagnostic, treatment and rehabilitative care were
started by our own medical pioneers. We
have the newest and best technologies and
treatments that detect disease earlier, provide an array of treatment modalities, and
offer best-practice medicine and superior
clinical outcomes.
What is the status of emergency care?
During the last decade, 70 hospitals and 65
emergency rooms in California closed. Only
16 trauma centers in Los Angeles and Orange
Counties from the original 30 remain.
Paramedics often scramble to identify a hospital for the critically ill and injured. Many
hospitals cannot afford high costs of emergency services, and we will see continued
diminution of services and more ERs close in
the coming years.
Why are California hospitals vulnerable?
In addition to low government reimbursement from Medi-Cal and Medicare — 40 percent or more of the average hospital’s business — significant labor shortages drive up
costs, forcing hospitals to pay premiums of
150 percent or more of average salaries to
secure temporary personnel.
Unfunded mandates like seismic safety
retrofit requirements cost California hospitals billions of dollars. Payments to hospitals
from Medi-Cal — California’s Medicaid
health insurance program for 6.5 million low-income and disabled people — are lowest
among the 50 states. With average payments
77 percent of what it costs hospitals to provide care, providers accepting Medi-Cal are
decreasing, taxing a fragile system. Hospitals
fare little better with Medicare with payments covering only about 82 percent of the
costs to provide care. In 2007, California’s
hospitals provided $8.8 billion of uncompen-sated care, including a $2.1 billion Medi-Cal
shortfall and a $3.3 billion Medicare shortfall.
Why is hospital pricing unique?
In a typical business model, an item is
priced on actual cost, plus a markup to produce a profit. Businesses expect to be paid
for each item. For hospitals, upwards of 50 percent of their volume is paid at rates dictated by the government — rates that often
do not even approach the actual cost of providing the service. Moreover, hospitals very
willingly provide services to patients who are
unable to pay. This issue is exacerbated in
that California ranks dead last for Medi-Cal
reimbursement nationally and up to one-third of state residents have inadequate or no
health insurance. Hospitals, though, still bear
labor, pharmaceutical, medical equipment
and supply costs that increase annually. For a
hospital to make a margin — necessary for
any business to maintain its facilities — they
must either attempt to achieve higher profitability from other payers (namely private
health plans) or risk falling behind on routine
maintenance and up-to-date technology.
What can we expect next?
We continue to seek comprehensive reforms covering more Californians and securing adequate reimbursement for patients on
government programs. Simultaneously, we
are pioneering best practice, evidence-based
medicine that identifies the best diagnostic,
treatment and preventive techniques and
achieves clinical outcomes surpassing
national benchmarks. Implementing Electronic Health Records helps clinicians make
decisions with as much information as possible at the point of care through secure patient
and medical data online in real time. And notfor-profit hospitals like ours are fortunate to
have philanthropic support of corporations,
granting organizations and individuals to
help fund facility expansion, programs, services, education and research.
What can employers do?
Partner with hospitals to learn more about
the health care business and how to lower
your health benefits expenditures, support
health initiatives, and offer programs and incentives that improve employee wellness, reduce absenteeism and increase productivity.
BARRY ARBUCKLE, Ph.D., is president and CEO of
MemorialCare Medical Centers (www.memorialcare.org) and
chair of California Hospital Association. He can be reached at
[email protected] or (562) 933-9708.
