Hospital Struggling to Mend Financial Wounds

Scott Rhine has a task few hospital administrators would find enviable. And last week he was given at least another year to carry it out.

He heads an inner-city hospital where 95% of the patients either have no insurance or receive government coverage that is inadequate to cover costs, where 70% of the admitted patients come through the emergency room, and where many doctors have traditionally declined to send patients because of the location and the facility’s checkered history.

San Diego Physicians and Surgeons Hospital lost more than $1 million in 1986 and its owner, National Medical Enterprises--a large for-profit national hospital chain--has considered closing the 78-bed Southeast San Diego facility.

However, some tough money-raising efforts headed up by Rhine and Southeast community leaders in the last few months persuaded NME last week to renew the hospital’s lease on life for at least another year. And if Rhine can translate some of his short-term successes into longer-range trends, the area’s only hospital--and one the community of more than 200,000 has taken pride in as NME has put money into capital improvements--could survive indefinitely.

Rhine admits major problems still exist, the largest of which is the continued difficulty of getting federal and state health officials to provide sufficient funding to cover the expense of having patients with government insurance.

“We’re not saying we don’t have problems, we’d be foolish to say that,” Rhine said in an extensive interview this week. “But both the community and NME want to continue.

“We know this (hospital) is never going to be very successful financially but our goal is to break even. That is the focus of our efforts.”

To that end, Rhine has already worked out some recent improvements with patient reimbursements.

The hospital has a longstanding agreement with UC San Diego Medical Center to treat medically indigent adults--people without private medical insurance and those who fail to qualify for state Medi-Cal or federal Medicare coverage. UCSD contracts with the county to provide indigent medical care in the central region for approximately $20 million a year and then apportions the responsibility among several hospitals through subcontracts, including one with Physicians and Surgeons.

“We are handling 6.8% (of the countywide total) of the indigent impatient volume, 5.9% of the (indigent) emergency room volume, and 4.7% of the (indigent) outpatient volume but only receiving 4% of the funds,” Rhine said.

After extensive negotiations with UCSD, the hospital has received a substantial increase in indigent funding, he said, adding, “It brings us much closer to the break-even point for such services.”

“UCSD has tried to be supportive of us and recognizes the role that we play. If we were to close, most of the patients would go (to UCSD) instead and it would cost UCSD even more because UCSD’s (per-patient) costs are higher.”

While 17% of its patients qualify as medically indigent, 32% qualify for the Medi-Cal insurance program, and Rhine said the hospital has been losing $1 million a year on the difference between Medi-Cal payments and actual hospital cost of treatment. Physicians and Surgeons received a small boost in its Medi-Cal reimbursement rate in September, Rhine said, but not nearly enough to eliminate losses. Each hospital negotiates its own rates with the state.

The Medi-Cal problem is one that many other hospitals face as well, Rhine admitted, but few hospitals statewide have as high a percentage of patients on Medi-Cal as does Physicians and Surgeons. A political task force of state, county and federal representatives for central San Diego plans to argue the case before state health officials this spring, at a time when the state is hinting broadly that Medi-Cal costs already are too high.

“I realize you can’t change all of this around short-term,” Rhine said. “But again, we’re trying to make people aware that if there were no P & S, the state costs would be even higher because UCSD and other hospitals have higher costs.”

The daily cost figures of hospitals such as UCSD factor in the costs of running all their specialized facilities such as cancer and kidney treatment and advanced trauma care, which push up the per-patient figure and which few community hospitals have.

For the emergency room, Rhine has hired two case managers whose only job is to make sure that every patient who comes through the doors is checked to see if he or she can qualify for some type of government coverage. In this way, the hospital can reduce the percentage--7% last year--of patients treated who have no coverage of any kind. The screening is already paying dividends since it was set up in July, Rhine said.

Rhine is also working with UCSD officials on the possibility of switching from UCSD to Physicians and Surgeons the treatment of county jail prisoners. Because of his facility’s lower costs, Rhine could treat those prisoners--usually two to three people a day--under the same contract and turn a profit. He said the presence of jail prisoners at the hospital could be handled in a way that would not harm his effort to alter the facility’s image as more than a place where poor people or criminals go.

To that end, Rhine hopes to announce within two to three months a program involving private doctors in San Diego that will steer more of their patients with private insurance into Physicians and Surgeons.

“If a doctor is confident in our level of services, then they are confident they can convince their patients to try us,” Rhine said. “And we think that our attention to patients will make those patients want to come back here again.”

Rhine is using the NME name in this effort because doctors associate it with quality care, he said. In addition, the facility’s skilled nursing-care section, which predates the hospital by many years, is being enlarged because of its longtime reputation within the community.

The small number of elective patients is a problem that can be solved only long-range, Rhine conceded. The fact that 70% of all patients are admitted after emergency room treatment heavily weights the patient population toward the chronically ill elderly, the downtown homeless, and crime-related gang and drug injuries that occur in the area.

“A lot of doctors here can get frustrated because of the types of patients we have, with the lack of funding, with the fact that some patients do not follow protocols after a surgery, for example, and later show up with broken casts or secondary infections,” Rhine said. “And added to the (doctor’s own) problems with reimbursement, it is a problem.”

That type of frustration contributed to the hospital’s one significant medical problem until recently, Rhine said. The hospital had an ongoing problem with meeting the requirements of state law concerning the number of general surgeons on standby to respond to the needs of emergency room doctors.

Since June, however, Rhine said that general surgeons have been available at all times under a new contract with a physicians group. The hospital still has problems with having enough orthopedic surgeons on call at all times for broken legs and similar injuries, Rhine said. But those injuries are not considered life-threatening and patients with orthopedic problems can be transferred to UCSD after stabilization, he said.

“Our intent is to have orthopedic surgeons on full-time coverage and we are doing everything we can to arrange that, even to subsidizing the doctors,” Rhine said.

A recent inspection of the hospital by state health officials and a group from the Joint Commission on Accreditation of Hospitals found several deficiencies, including one incident where a surgeon was not immediately available despite being on call. The hospital will reply in writing to the findings, Rhine said.

Ernest Trujillo, head of the state health licensing division in San Diego, said none of the deficiencies would be considered critical.

“The problems appear to be typical of those that would occur in a facility of their size,” Trujillo said. “Nothing from the report indicates that (the deficiencies) are life-threatening or should shut the hospital down.”

Rhine said that he would expect all the changes--those implemented already and those hoped for--to make a difference within two years. But he said that NME will look at the trend after a year’s time before continuing with its commitment further.

Should NME decide to close the hospital, the City of San Diego--which guaranteed the bonds necessary to build it in the mid-1970s--would be faced with letting the hospital remain closed, finding a new operator, or running it as a city facility.