4 Hospitals Reconsidering Medi-Cal Ties

Officials at four San Fernando Valley hospitals say the exodus of two other Valley-area hospitals from the Medi-Cal system may portend their own eventual departure from the state’s health care program for the poor.

Although the officials said Medi-Cal contracts will not be discontinued immediately, they described terminating their contracts as an option they will consider within a year because they face the same financial problems as Northridge Hospital Medical Center and Henry Mayo Newhall Memorial Hospital in Valencia.

Northridge and Henry Mayo administrators, citing million-dollar losses each year, said Tuesday that they are leaving Medi-Cal because the program’s reimbursements cover only part of their treatment costs.

Similar concerns were expressed a few days later by administrators at Van Nuys Community Hospital, AMI-Medical Center of North Hollywood, Simi Valley Adventist Hospital and Pacific Hospital of the Valley in Sun Valley, formerly known as Serra Memorial Health Center.

“We lose money on every Medi-Cal patient,” said Darwin Remboldt, president of Simi Valley Adventist Hospital.

Departures Cause Concern

“It barely covers our costs . . . in the future we may drop it,” said Jim Rush, vice president and chief financial officer at Van Nuys Community Hospital.

The departure of Northridge Hospital and Henry Mayo from Medi-Cal will create aftershocks, but it is too soon to say how patient loads at other hospitals may change, the administrators said.

The hospitals plan to watch the situation carefully. Simi Valley Adventist Hospital, for example, will track its Medi-Cal patients by checking ZIP codes to see whether they come from Northridge or Valencia, Remboldt said.

Administrators at two other Valley hospitals--Granada Hills Community Hospital and AMI-Tarzana Regional Medical Center--said they have not decided whether to continue or drop their Medi-Cal contracts.

Officials at six other Valley hospitals pledged to continue with Medi-Cal as long as they can: Burbank Community Hospital, Holy Cross Hospital in Woodland Hills, St. Joseph Medical Center in Burbank, Valley Presbyterian Hospital in Van Nuys, Valley Hospital Medical Center in Van Nuys and Olive View Medical Center in Sylmar.

Regardless of their plans for Medi-Cal, the 12 remaining Valley hospitals with Medi-Cal contracts agree there is cause for concern and that the program falls short of paying for the health needs of the poor.

Helping the Poor

They also add, however, that hospitals don’t expect to make money off Medi-Cal because of its structure. Unlike Medicare, a federal program targeting needs of the elderly, Medi-Cal is a state-administered effort aimed at helping the poor, regardless of age. Hospitals with Medi-Cal contracts agree to accept set daily fees for patient services. The fees are negotiable and vary.

Generally, Medi-Cal payments equal only 30% to 40% of a patient’s expenses, said David Langness of the Hospital Council of Southern California. Hospitals realize Medi-Cal won’t cover their costs when they sign a contract, he said, but participate as a public service nevertheless.

“We’re committed to taking care of the poor,” said Christine Karlsen, director of community relations at Holy Cross Hospital.

Rhoda Weiss, a spokeswoman at St. Joseph Medical Center, agreed: “We’re owned by the Sisters of Providence, and that’s our mission.”

Joe Brotnow, vice president of finance at AMI-Medical Center of North Hollywood, likened the situation to department stores that assume their overall income will cover losses from shoplifting. As the department stores do, the hospital passes some of the costs to other customers by raising the hospital rates.

Two Factors

How do hospitals survive this arrangement?

It depends on two factors: the reimbursement rate the hospital has negotiated with the state and the percentage of Medi-Cal patients treated at the hospital, administrators said.

At Simi Valley Adventist Hospital, for example, an average 5.5% of the monthly patient load receives Medi-Cal--a relatively low percentage. But, because the hospital receives less than 40% of its costs from Medi-Cal reimbursements, the hospital may have to sever its ties with Medi-Cal if the caseload increases.

Conversely, Medi-Cal is the largest source of revenue for county-owned hospitals such as Olive View, where 55% of the monthly patients are Medi-Cal recipients and reimbursements from the state run higher.

Generally, a large county hospital system would have more negotiating power to levy against the state than one private hospital, said Douglas Bagley, administrator at Olive View.

The termination of Medi-Cal contracts at Northridge Hospital and Henry Mayo could cause an increase in the number of Medi-Cal patients treated at the other 12 Valley-area hospitals.

Even without the contracts, Northridge Hospital and Henry Mayo will continue to provide emergency care under Medi-Cal, as do all hospitals. Northridge also will accept Medi-Cal outpatients.

Henry Mayo had an average monthly Medi-Cal population of 3%, and Northridge Hospital had 9%. At 345-bed Northridge Hospital, this meant expenses exceeded state reimbursements by $2.8 million this year alone, said Jeff Flocken, administrator. This figure did not include $4 million in charity care provided each year, and the hospital had no choice but to discontinue its contract, he said.

Numbers Grow

Whether the defections of Northridge Hospital and Henry Mayo signal the start of a trend is a matter of opinion.

Langness of the Hospital Council said the two Valley hospitals are part of a growing number severing their ties to Medi-Cal. He said the trend won’t reverse until the state provides better rates. The issue, he said, is whether the state is willing to care for the poor.

But John Rodriguez, deputy director of the state Department of Health Services for Medi-Cal in Sacramento, said he sees no trend and that the number of hospitals with Medi-Cal contracts has held around 265 to 275 statewide since 1984. As some hospitals leave the system, others join, he said.

Statewide, five hospitals have terminated Medi-Cal contracts this year: Northridge Hospital and Henry Mayo this month, Chico Community Hospital in September, Lancaster Community Hospital in July and San Diego’s Mission Bay Hospital in March. Shasta General Hospital is expected to terminate its contract Nov. 1.

Rodriguez said hospitals often drop their contracts as a tool to negotiate higher reimbursement rates and renew the agreements later. Langness acknowledged that hospitals sometimes use that tactic but said he expects more hospitals that leave the system to stay out.

One hospital administrator said: “It’s not that we don’t want to serve these patients. If we can’t cover costs, we can’t operate.”

MEDI-CAL SCOREBOARD

Some of the Valley area’s 14 hospitals are reconsidering their contracts with Medi-Cal, a $5.3-billion state program that provides health care to the poor.

Total % Medi-Cal Decision Hospital Beds Patients on Medi-Cal AMI-Medical Center of N. Hollywood 182 7% May Quit AMI-Tarzana Regional Medical Center 212 7% No Decision Burbank Community Hospital 103 5% Committed Granada Hills Community Hospital 201 5.5% No Decision Henry Mayo Newhall Memorial Hospital 133 3% Quit Holy Cross Hospital 259 n/a Committed Northridge Hospital Medical Center 345 9% Quit Olive View Medical Center 154 55% Committed Pacific Hospital of the Valley 265 20% May Quit St. Joseph Medical Center 498* 5% Committed Simi Valley Adventist Hospital 215 5.5% Committed Valley Hospital Medical Center 213 n/a Committed Valley Presbyterian Hospital 363 7.5% Committed Van Nuys Community Hospital 63 4% Committed

Of 450 acute-care hospitals in the state, 274 now have Medi-Cal contracts.

Statewide, three other hospitals have terminated Medi-Cal contracts this year: Mission Bay (San Diego) Hospital, Chico Community Hospital and Lancaster Community Hospital. A fourth, Shasta General Hospital, will drop out Nov. 1.

About 3 million people are eligible for Medi-Cal in the state.

* 50% of the patients in St. Joseph’s 149-bed skilled nursing facility are covered by Medi-Cal. The 149 beds are separate from the 498-bed acute care unit.