Roger Seaver

When the Los Angeles Times reported that MediCal patient Ozzie Chavez was denied an epidural during childbirth at Northridge Hospital Medical Center, a torrent of negative publicity surrounded the facility. News broadcasts reported the story across the country, and the physician accused of denying the anesthesia when Chavez could not produce $400 in cash to pay for it was publicly denounced.

Roger Seaver, hospital president and chief executive officer, has expressed concern for Chavez and, along with other hospital officials, apologized to her for the 1997 incident. But he also criticized MediCal regulations and denounced its meager physician payments. Seaver, a South Dakota native who received an MBA from Pepperdine University in 1981, was interviewed in Glendale, where he formerly was president of Glendale Memorial Hospital.

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Question: When the epidural controversy erupted [in July], you told a reporter that the anesthesiologist’s actions may have been understandable due to MediCal regulations. How?

Answer: There’s a long MediCal history of regulations overlaying regulations. The original system established lower payment processes than any other system, especially for outpatient care, physician care and emergency care. [MediCal] provides access with minimal reimbursement. Because MediCal’s funding is 50% federal and 50% state, many states did not expand benefits because they couldn’t afford it. But here in California, the political goal was to expand benefits, so MediCal has become a very rich benefit, though the payment system never matched the benefits. It’s really the first example of the government writing benefits without funding them. They kept fees very, very low. For decades, hospitals have been trying to get funding for outpatient services. The physician payment, at the core of MediCal, is seriously underfunded.

Q: How are physicians paid by MediCal?

A: In the case of pregnancy, we had what I would call a Third World crisis. Potential MediCal beneficiaries were not seeking prenatal care; they were arriving at the hospital for deliveries without any prenatal care. We really had Third World mortality at childbirth. So MediCal was extended to cover prenatal care, and payment for the obstetrician was increased to near-market rates--but not payment for the anesthesiologist, nor for the pediatrician, nor for the surgeon. As a result, patient access improved and we’ve avoided higher morbidity. However, it accentuated a differential in physician payment.

For example, an obstetrician is paid near-market rate in a lump sum payment for prenatal care and a lump sum for delivery, whether it’s a normal delivery, caesarean section or a complicated birth. But there’s one payment for the physician. A surgeon or an anesthesiologist who are called in on an emergency are paid at this 1970s rate. The payment is low.

Q: Do the pregnancy benefits attract [undocumented residents] to MediCal, as critics claim?

A: There’s been a lot of controversy about this. MediCal really opened up pregnancy requirements. Well, hospitals can’t control the [undocumented] population and, from a health standpoint, we advocate keeping those requirements in place. A mother coming in to the emergency room ready to deliver a baby without prenatal care is a pretty scary experience for everyone involved. But it may attract border crossing. It certainly is an example of carrying government benefits too far. Everyone gets everything for nothing--but it’s really not for nothing because someone pays for it. Up to 50% of MediCal patients are [undocumented], and some say it’s higher, though it does vary by local geography.

Q: What percentage of Northridge patients is [undocumented]?

A: At our Roscoe [Boulevard] facility, it’s roughly 40%, and at our Sherman Way facility in Van Nuys, it’s approaching 90%. But remember, we’re also attracting uninsured patients who may be working. Many of those patients also qualify for the MediCal pregnancy-only benefit.

Q: Another state law forces hospitals to treat all reasonable requests by patients for health care. Reasonable to whom? The government? The patient? Or the professional who delivers health care? Who defines a reasonable request?

A: The patient.

Q: Northridge Hospital is currently operating under MediCal’s threat to terminate its contract. What can happen if the MediCal contract is terminated? Will the hospital close?

A: In the case of our Van Nuys campus, it will threaten our viability. While that is an ultimate threat, we’re cooperating with regulators and we do not anticipate that.

Q: Couldn’t you find alternative payment methods for delivering health care in that scenario?

A: Not for the population we discussed. Let’s take Van Nuys. Hospitals are pretty much dependent on the local environment and our Van Nuys patients mostly need other sponsorship; they’re either elderly and on Medicare or they’re indigent with no coverage--or they’re on MediCal. In the ultimate doomsday scenario, if the state pulled our MediCal contract, you would see a major burden on two or three hospitals in the [San Fernando] Valley. The normal hospital to pick up our Sherman Way patients would have been North Hollywood--but they just closed. With them being out of business, patients would have to go to other facilities.

Q: What is the hospital’s current MediCal status?

A: Our follow-up has been accepted by the state, the federal investigation has been completed, we’ve just received our written findings and we’ll follow up. MediCal has asked the hospital to make sure that all patients who were charged privately will be refunded. We’re in the process of identifying those patients and . . . [issuing refunds].

Q: You remember fee-for-service medicine, when the medical profession was less regulated. Wouldn’t a free market for the medical profession lead to quality medicine?

A: The best American system would probably require the patient opening up a personal billfold on most occasions and leaving in place basic coverage needed to avoid catastrophic illness. American health care is the best and we’ve made great advances in spite of regulations. Clearly, a free market--where people make individual choices with economic consequences--is more rational. What we’ve had with major government funding has created an irrational market.

Q: How does Northridge Hospital plan to serve the emerging private medicine market, fueled by physicians’ and patients’ growing rejection of managed care plans as patients purchase health care directly by using medical savings accounts, or MSAs?

A: I don’t think that part of the market will be large for some time. However, I do think that in southern California especially but also in large urban areas, there will be a huge free-market movement. . . . There are more free-market choices in Southern California now than ever. Independent physicians are here and there’s a market for the independent physician. A lot of uninsured patients prefer to pay cash, and while we at hospitals wonder how they will pay in cash, there’s a real market. Therefore there is a need for catastrophic insurance that covers the periodic, albeit very infrequent, need for hospitalization. For the normal, healthy individual, until they’re past age 65, the frequency of a hospital visit is once in 15 years. From an economic standpoint, a medical savings account is a terrific idea. If you look at any community in this state, the growth is highly entrepreneurial and those individuals need more choices. They need an MSA. They need other methods for financing their health care. As a matter of fact, when we look at market opportunities, the largest segment of the market is the uninsured--and we believe the uninsured patient has money.

Q: Do you give cash discounts to private patients and MSA patients?

A: Yes. We negotiate discounts for private, cash patients.

Q: Let me ask you about hospital costs. Does an aspirin really cost $50?

A: Over the course of time, the actual cost of the aspirin becomes irrelevant for one reason; it is the methodology used by the government to determine their share, and it must be calculated with their cost formula of how much they provided to their patients versus non-government patients, so we have to charge everyone the same. Unfortunately, we get a charge that inflates the cost because there are only a few people who actually pay their charges [directly]. The bottom line is that a highly profitable hospital in southern California today will make 3% profit on that aspirin, and that’s highly profitable.

Q: So where does the rest of the money go?

A: At a nonprofit hospital, it goes back into care. But the private patient basically subsidizes some other cost that the hospital is unable to charge for--and there are many costs for which we aren’t paid. . . . Government regulation creates inefficiency, and there is a cost to regulation. And there’s a uniqueness to hospitals. If Detroit had independent engineers designing cars, how efficient would the assembly line be? Most hospitals have independent physicians who direct care. I’m not saying it’s bad but it’s not always efficient. Trying to control economics means controlling the care.

Q: Isn’t managed care based on rationing?

A: Yes. Every system has rationing, but the question is who decides what health care is rationed. You’ll get more rational decisions from the patient making the decision.

Q: The Ozzie Chavez controversy raises the question: Is health care a right? Are a physician and a hospital morally obliged to treat patients without making money?

A: You must separate the circumstances. When a patient is truly in an emergency need, for someone to even think of money is highly unusual, irrespective of the [Chavez] allegations. A patient in true need of health care service is provided service by those in the field without regard to money. It starts getting blurry when you leave the emergency room.

Is health care a right? I have to ask, “What is health care?” We want to expand health care to be everything to everybody, and we know in truth that we can’t do that. In my opinion, the one doing the most disservice is the person who says health care is a right and health care is everything that you want--because they are not dealing with reality and they are misleading people. Do I want health care to be a right? In a defined range, I probably want there to be access. Physicians should have their independent decisions for the most part. I don’t think it’s honest to say doctors should work for nothing, and we’re doing a great disservice to physicians when we take away their right to make money. They spend a considerable amount of their lives preparing to be a physician. If you take away the economic incentive at the end--though I don’t believe people go into medicine solely for the money--that’s not right.

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Scott Holleran is editorial director of the nonprofit patient advocacy organization Americans for Free Choice in Medicine. Roger Seaver has no affiliation with that group. Holleran’s e-mail address is: sholleran@earthlink.net.