Some health insurance executives claim, and some news media have recently reported, that large provider systems like Sutter Health make health care more expensive by demanding higher-than-average reimbursement from insurers. To clarify Sutter Health’s position and shed more light on Sutter’s priorities, we’re posting this recent Q&A with Sutter Health’s leadership.
What is Sutter Health’s perspective on claims that hospitals’ demands for higher reimbursement from insurers drive up the cost of health care?
Sutter Health believes its reimbursements from insurers are fair, and reflect the high-quality and readily available health care that our doctors and hospitals provide to patients. Insurers contract with us for services of their own free will. There’s plenty of competition in Northern California — from Kaiser, Catholic Healthcare West, Adventist Health, John Muir and the UC hospitals, and from many independent hospitals and physicians. Sutter Health has held annual overall average price increases for commercial health plans to single digits in the past several years. Of course we have no control over whether health plans reflect our single-digit rate increases in what they charge consumers. Recently some health plans announced premium increases in excess of 20 percent, more than double the increase in reimbursement to our providers.
The reimbursement we receive from health insurance companies help fund Sutter Health’s commitments to ensuring our communities have adequate access to physicians, as well as fund our commitments to quality, safety, convenience and free care for the poor. While we continue to focus on meeting our community commitments over the long term, the for-profit health insurance companies focus on short-term profitability goals for their stockholders. For them, that means spending less for patient care, which represents the largest part of their budgets. The U.S. Congress found that the large for-profit insurers paid on average only 74 cents per dollar of premium from individual policies to doctors, hospitals and other providers, keeping the other 26 cents for their costs of administration and profits.
Certain health insurance plans maintain web-based pricing tools for members. Some of these tools post prices that the plans pay doctors and hospitals. Why hasn’t Sutter Health participated in these tools?
We want to provide consumers with fair and reliable information that is easily understood. Although several insurance companies have begun providing what they believe to be comparable data on prices between providers, Attorneys General of multiple states have disagreed with the approaches taken. Until they work the bugs out, we prefer not to add our data to the postings. We strongly believe a patient is best served by talking with a professional who can walk them through their personal health care needs, treatment options/choices and the estimated treatment costs of those options. Staff members at our hospitals and clinics regularly work with patients to answer questions about their estimated costs, and we plan to make estimates of our costs for common procedures available on our web site as soon as we can reliably do so.
Why are health care costs increasing at such a high rate?
The government pays less than the cost of care, so any inflation in health care costs must be borne by those who actually pay a market price. Since government-sponsored patients consume about 50 percent of the care in a typical health system, the cost-shifted to everyone else is double what it would otherwise be. For example, if inflation is 4 percent, a health system’s prices have to go up 8 percent to cover the increased costs of caring for government-sponsored patients when the government keeps its payments to doctors and hospitals arbitrarily low. Improvements in technology, drugs, and seismically-safe facilities all tend to drive the cost up faster than in other industries.
Health care providers, especially those like Sutter Health that invest in their communities (rather than giving that money to shareholders), have significant financial commitments. For example, we are replacing paper records with electronic systems and replacing hospitals at a time when per-bed construction costs have more than doubled, from $1 million about a decade ago to more than $2.5 million today. The other big cost driver is the success modern medicine has had in saving lives. Health problems that were once untreatable can now be treated, so we’re seeing more and more people living with chronic conditions. We’re absolutely committed to saving and extending patients’ lives, and we all need to be mindful that the costs of chronic care continue to be part of the nation’s overall health care bill.
How will health insurance reform impact your costs and affordability goals?
Our affordability imperative becomes even more important given cuts in reimbursement under health care reform. For Sutter-affiliated physicians and hospitals, Medicare cuts will likely total an estimated $124 million each year for the next 10 years – adding up to more than $1 billion in reduced Medicare reimbursement.
The United American Nurses Union/California Nurses Association has questioned Sutter Health’s commitment to “communities of working class people” and diverse populations. What’s Sutter’s response?
Counties including Del Norte (the north state’s poorest county), Lake, Merced, Sutter, Yolo and Yuba have some of the highest poverty levels in Northern California – and Sutter Health facilities serve each of them. In many small and rural communities such as Los Banos, Tracy, Novato, Jackson, Davis, Crescent City and Lakeport, Sutter Health is the sole provider of emergency medical services. Also, Sutter Health hospitals together serve more MediCal patients in our Northern California service area than any other health care provider. Sutter Health is building or has a continuing presence in diverse urban areas as well, such as downtown Oakland, San Francisco’s Mission District, midtown Sacramento and Stockton. Ironically and unfortunately, the nurses union formally opposed Sutter Health’s plans to construct new, seismically safe hospital facilities in urban Oakland, downtown San Francisco,Santa Rosa and right here in Castro Valley.
by George Bischalaney, President & CEO, Eden Medical Center
Nearly a year after the California Nurses Association filed a challenge to prevent Sutter Health from rebuilding Eden Medical Center, the petition has been denied. The judgment by Alameda County Superior Court was entered on July 7, 2010, and the Order Denying the Petition is now on the court’s website case # RG09462329. You can also view a PDF version of the judge’s order.
For all of us at Eden Medical Center, and more importantly, residents of Alameda County, this is very good news. We have always believed that this misguided attempt to stop a State-mandated rebuilding project was not based upon merit. Gratefully, the court agreed with our position.
On July 1, 2009, we broke ground to begin the project, just weeks after receiving approval of our Environmental Impact Report from the Alameda County Board of Supervisors. Despite the union’s challenge filed last year, work continued without hesitation. As a result, we remain on the very tight schedule to meet the opening date of January 2013. Any delay caused by this action would have put the timely opening, if not the project, in jeopardy.
When completed, the 230,000-square-foot hospital and 80,000-square-foot medical office building will provide assurance to the people of Alameda County that it will not only withstand a significant earthquake, but remain operational to aide victims affected by it.
The entire steel framework has been completed, and work continues to at a rapid pace. Weather permitting through the end of this year, the project team hopes to have the exterior and roofs completed, weather tight before the spring rains, and begin working in earnest on the interior finishes.
Cassandra Clark, Project Communications Director
While California earthquake safety legislation is the driving force behind new hospital construction such as ours, earthquake safety doesn’t begin or end with new construction. For many years, Eden Medical Center has participated in the California Strong Motion Instrumentation Program (CSMIP) by placing seismic motion sensors in the building to gather vital information when an earthquake strikes.
Recently, the Sutter Medical Center Castro Valley project team reached agreement with the California Department of Conservation to place sensors in the new hospital once it is completed. The agreement is good news for seismic research, and it ensures that Castro Valley joins other Sutter hospitals with seismic sensors, including Sutter Coast Hospital, Alta Bates Summit Medical Center and Novato Community Hospital. New construction at Mills Peninsula and California Pacific Medical Center will also have seismic instrumentation to provide essential data on San Andreas fault activity and to record the performance of the unique seismic structural systems employed at these facilities.
The instruments are part of a statewide network of strong motion instruments that ensures any strong ground motion, from a moderate to larger size earthquake, in California will be recorded.
Monitoring the Data
The CSMIP installations are advanced earthquake monitoring devices called accelerographs, which are placed at various representative geologic foundation materials to measure the ground shaking. When activated by earthquake shaking, the devices produce a record from which important characteristics of ground motion (acceleration, velocity, displacement, duration) can be calculated.
Accelerographs that are installed in buildings such as hospitals, bridges, dams, utilities and industrial facilities are selected by engineers and scientists representing industry, government, and universities. The program has installed more than 900 stations, including 650 ground-response stations, 170 buildings, 20 dams and 60 bridges. Many of these installations can be found locally along the Hayward fault (see map for more information).
The Office of Statewide Health and Planning and Development (OSHPD) arranged for CSMIP to begin instrumenting hospital buildings in 1989, and the program has instrumented 29 hospitals and health facilities throughout California.
Significant strong motion records have been helpful in shaping California’s seismic safety standards. Data gathered from the 1994 Northridge earthquake, for example, led to changes in California’s Uniform Building Code and gave engineers a greater understanding about the integrity of building structures after an earthquake.
The CSMIP is a program within the California Geological Survey of the California Department of Conservation and is advised by the Strong Motion Instrumentation Advisory Committee, a committee of the California Seismic Safety Commission. Current program funding is provided by an assessment on construction costs for building permits issued by cities and counties in California, with additional funding from the California Department of Transportation, the Office of Statewide Health Planning and Development, the California Department of Water Resources, and other agencies.
To learn more about the data collection and dissemination process, visit the CSMIP Website. To view existing data gathered from recent California earthquakes, visit the Center for Engineering Strong Motion Data.
All photos courtesy of the California Department of Conservation.
Photo of the collapsed Cypress Overpass, courtesy of U.S. Geological Society.
by Cassandra Clark, Project Communications Director
This week we are commemorating the 20th anniversary of the Loma Prieta earthquake. The media will cover the remembrances, the progress we have made since then, the victims, the heroes.
Those of us who were around then have memories of this momentous event. My memories are perhaps much more vivid than most. That single event changed my life, changed my career, and ignited in me a passion for health care and the important work we do.
I had worked at Eden Hospital only 2 months when the earthquake hit. My boss was on vacation, camping in the desert far away from news of the quake, and I was a newbie just learning the ropes. I left work that day just before 5 to get home to meet some friends to watch the World Series. I was driving my VW convertible down Castro Valley Blvd. when the ground started shaking and the road before me started moving like a snake. I thought my tires were falling off and that the street lights above would fall on me! I drove the few minutes to get home, only to find the power out and the phones dead. So I headed back to the hospital to check in, as per our protocol
I didn’t leave the hospital for two days.
We had 42 patients from earthquake-related injuries that night in Emergency and Trauma. The worst were from the Cypress structure collapse in Oakland, brought to our Trauma Center. Not knowing the details, I went first to the Emergency Room, where I sat and listened to one young man talk about leaving his car on the collapsed upper portion of the freeway, climbing down the side of the concrete rubble, and then calling his mom to pick him up. He had an injury to his mouth and was shaken, but he told us the details of what happened. I still remember his face, his name, the shocking details of his story. The TV in the corner of the waiting room was showing news coverage from Oakland and San Francisco, and I got word out to the hospital staff so they would know what was happening.
We set up the Command Center sometime later. Soon, the reporters started showing up and the media calls poured in from all over the country, all over the world. Gloria, my co-worker, and I gathered information from every department, and talked to patients and families. As the spokesperson for the hospital, I conducted interviews for the next two days and, as it turned out, for many months that followed. I was so tired at 4 a.m. when Harry Smith from CBS New York called that I could hardly get the words out. It wasn’t my best interview, but I was new at this! We tried our hardest to keep all the information straight: how many patients, where they were from, what their injuries were. We had calls from families trying to find loved ones. We had calls from local residents wanting to know how to help. Reporters from other parts of the country were under the impression that the entire SF Bay Area was reduced to rubble, and they wondered how we could even take care of patients.
Over the next several days, I got to know so many of the patients and their stories. Some did interviews, some just wanted to talk privately. Some couldn’t talk, their injuries were so severe the nurses didn’t think they would survive. Two patients from one van on the Cypress freeway were the most severely injured, but they survived, and I remember them and their stories as if it were yesterday. I met their families and got to know them over the next six months or so. And I saw the incredible care that Eden Medical Center’s staff provided. The doctors, the nurses, the respiratory therapists, physical therapists, social workers: all of them played such an important role in their medical and emotional care.
It was because of this experience that I knew that I was in the right place, that the mission and purpose of our organization was alive and carried out in the most complex, and the simplest, ways. We all made a difference, and we were all here for one reason: to take care of the people who need us in the most critical times. It didn’t matter what our role was, we all had a responsibility to take care of them and their families. I didn’t check vitals or change dressings, but i could spend time with each of them, help them process what had happened, help them tell their stories if they wanted. I could help their families and our staff with simple things to make their lives there easier.
A year later, we held a press conference with a couple of the patients who survived, along with their doctors and nurses. It was an emotionally charged event, before and after the conference, for one patient in particular. The memories were so vivid and frightening, but she wanted, or perhaps needed, to talk about it, to see the trauma surgeon and staff, to process what had happened. Years later I saw her and her colleague on a PBS special, talking about their lives since the earthquake. My heart ached, and still does, for the pain they endured. Their lives were never the same. I don’t know where they are now, but I still think of them, pray for them, and wonder if they were able to persevere.
Five years after the earthquake, I met a woman who came into the hospital to give birth to twin boys. She, too, was severely injured in the earthquake and came to our trauma center that night. She had such severe abdominal injuries that she was told later by her doctor that she would not be able to have children. But life had other plans for her. On this day, October 17, 1994 — the 5th anniversary of the quake — she gave birth to her “miracle” boys. The trauma surgeon who saved her life 5 years earlier assisted in the delivery. They are 15 now, and I wonder if they know how incredible their story is.
These stories, and many others, are on my mind as we approach the 20th anniversary of the quake. It amazes me how much our lives are intertwined by such an event. And how each person I met has their own memories, and their own scars.
I am also grateful for the experience, for all that I learned as a result, and for finding my passion in my career. Today, as I work with the Project Team to build a new hospital, I am reminded why this project is so important. I am proud of the tradition of care at Eden, and proud to be working toward construction of a new hospital so that the tradition can continue for many years to come.
Photos courtesy of DPR Construction
Construction continues this week as workers focus on a temporary pedestrian bridge from the parking garage to the hospital entrance. This is a critical part of the walkway changes that make way for new access roads and fire lane to the site and to the parking garage. Work is also continuing on the relocation of the helipad, moving approximately 150 feet north.
The most noticeable work is with the large drill, crane and cement truck on site to drill and pour the piers. The work is steady, with 10 to 12 piers poured each day until all 570 are complete. We’ll post soon about the purpose of these piers and what to expect over the next month as the work advances.
Economic Survey Shows 64% of Hospitals
Cannot Secure Funds for Seismic Compliance Mandate
The nation’s ongoing credit crisis and deteriorating revenues, caused in large part by governmental underfunding, is jeopardizing the ability of California’s hospitals to comply with state-mandated deadlines for seismic retrofitting, according to an updated economic impact report released today by the California Hospital Association (CHA).
The report, which is based on a survey of hospital chief financial officers (CFOs) conducted in April 2009, shows that 64 percent of hospitals report that they will not be able to access the capital necessary to comply with the state’s 2013/2015 seismic deadlines. More than a quarter of hospitals statewide (28 percent) have seen their interest expenses increase during the first quarter of 2009, while many other hospitals have been frozen out of the credit market entirely. As a result, hospitals throughout California are faced with limited access to capital and increased costs of borrowing. These dual challenges come at a time when hospitals are facing an unfunded mandate for seismic improvements estimated to cost up to $110 billion without financing charges.
“This report makes clear that revisiting the current timelines for the seismic mandate is essential,” said CHA President and CEO C. Duane Dauner. “The faltering economy is forcing all segments of our society to make difficult decisions. For many community hospitals, these decisions come down to whether or not they will be able to ensure that patients have access to care 24 hours a day, seven days a week.”
Under current state law, the state could force hospital buildings that are not in compliance with the seismic standards by January 1, 2013 (or January 1, 2015, if an extension has been granted) to close their doors to patient care. An estimated 900 acute-care hospital buildings, out of a total of 2,700 structures, face closure if they cannot meet the 2013/2015 deadlines.
In order for hospitals to access affordable capital for projects such as those related to the seismic mandate, creditors and rating agencies evaluate a hospital’s balance sheet and its demonstrated financial stability. Creditors also look for sustained operating results, specifically operating income of greater than 3 percent. In aggregate, California hospitals reported operating margins of less than 1 percent for each of the last three years, with margins in 2007 and 2008 in the red, according to the CHA report.
Among the factors impacting operating margins is a significant increase in the number of uninsured patients seeking care in hospital emergency rooms. According to the CHA report, more than 57 percent of hospitals have seen a rise in the number of uninsured patients during the first quarter of 2009, most likely as a result of rising unemployment and the loss of job-based health coverage. This is a 22 percent increase since CHA released its first economic impact report in January. Additionally, more than half of California’s hospitals are reporting a decrease in inpatient admissions and elective procedures.
In 2008, the costs of uncompensated care provided by California hospitals totaled $11.3 billion. Of that amount, Medicare payment shortfalls accounted for nearly $3.7 billion, while Medi-Cal underpaid hospitals to the tune of $4.1 billion. An additional $2.1 billion in 2008 losses are attributable to bad debt and charity care.
“California hospitals are not unique to the negative impacts of the economic recession,” Dauner noted. “The unfunded seismic mandate, however, places an extraordinary burden on our community hospitals at a time when they can least afford it.”
Access the full copy of the special report, called California Hospitals and the Economy — Ongoing Credit Crisis Jeopardizes Seismic Compliance Mandate.
By George Bischalaney, President & CEO, Eden Medical Center
Health care reform is on the agenda, again. The stakes are high, but our President is determined to make some significant changes. As the discussion moves from general to specifics, special interests are staking out their positions. None of the stakeholders—hospitals included—wants to feel the impact or be at a disadvantage.
Amidst the demand for cost reduction and health care coverage for all, there is and must be continued investment in care. Physicians demand it. They expect to be able to practice with state-of-the-art equipment and facilities to produce outcomes that meet national, state and local quality standards. Patients demand it. They want to know that their local hospital has the right number of well-trained staff as well as the latest diagnostic and treatment equipment, and contemporary facilities.
With this backdrop of conflicting needs, Eden Medical Center is about to begin a three-year project that will result in the replacement of the Castro Valley hospital. The project cost is estimated to be $320 million. The current 55-year-old building is anything but contemporary. With few private rooms, small operating rooms and inadequate support space for clinical services, a new hospital is very much needed.
Eden Medical Center has served the community well, but it was not designed for patient comfort and needs, more for staff needs and functionality. While our project may seem ill timed given the uncertainty of hospital reimbursement, we are required to meet California legislated standards for seismic safety in hospitals. And it truly is needed.
We’ll celebrate our long sought goal with a ground-breaking ceremony on July 1st. Then we’ll spend the next three years continuing the investment in the new buildings and equipment, while observing and hoping that decision makers do not enact legislation that essentially penalizes us for the commitment we are making. When we celebrate the grand opening and our new beginning early in 2013, it should be with the same hope and dreams as those who celebrated the first ceremony in 1954.
By Cassandra Clark, Project Communications Director
After much debate and public input, the Alameda County Board of Supervisors voted unanimously to certify the EIR (Environmental Impact Report) and approve the zoning and land use entitlements for the new hospital to replace 54-year-old Eden Medical Center.
Passage of the EIR and land use entitlement approvals is a major milestone for the Sutter Medical Center Castro Valley project—and the communities that will be served by this new, state-of-the-art hospital and adjoining medical office building.
About 20 speakers addressed the Board of Supervisors about the new hospital as well as concerns about future plans for San Leandro Hospital. Eden President & CEO George Bischalaney expressed to the Board members the overwhelming support for the new hospital, even among those who encouraged rejection of the EIR to “save San Leandro Hospital.” Bischalaney and others urged Board members not to delay approvals in order to meet “a very tight project timeline” and advised the Board not to tie the new hospital project to the uncertainty around San Leandro Hospital’s future.
In the end, the Board of Supervisors maintained that its obligation was to make a decision on the land use entitlement proposal before them. However, Board members promised to continue to work with Sutter and the District to come up with an optimal plan for San Leandro Hospital, and to meet the health care needs of the communities.
We are grateful to the many people of Eden Medical Center, San Leandro Hospital and our communities for participating in this process. We had tremendous support at both Board of Supervisors meetings, through the petitions, and all the phone calls and letters of encouragement.
What Happens Now?
The Board’s approval clears the way for SMCCV to use the designated property to build the new hospital, which will be on the northwest side of the Eden Medical Center campus, adjacent to the existing hospital.
In the coming weeks, we will file the appropriate permits to begin work on the land, including the demolition of the vacant apartment building and other site improvements, and the foundation work for the actual construction of the new hospital. Oversight and approval for the further construction is handled by the
California Office of Statewide Health Planning & Development.
The immediate work around the campus will get the land ready for construction and help minimize delays so we can proceed with building the new hospital as soon as possible in order to meet the deadline for State-mandated earthquake safety requirements.
We look forward to moving ahead with the project. As always, your questions and comments are welcome on this blog and on our social networks!
We could really use your support! The Alameda County Board of Supervisors will meet this Tuesday, June 9th, at 1:00 p.m. to make the final decision whether or not to build the new hospital to replace Eden Medical Center and pass the FEIR (Final Environmental Impact Report). We all know the value of having a hospital in our own backyards.
The meeting starts at 1:00, but Sutter Medical Center Castro Valley is on the agenda at 2:00 p.m. The meeting will be held at the Administration Building, Board Chambers, 1221 Oak Street, 5th Floor, Room 512, in Oakland. If you would like to read the Board’s agenda in advance, please click and download the PDF file here (see page 2).
We are also still taking signatures on the online petition, if you want to add your name and comments there. Additionally, your comments are always welcome here on this blog.
By Cassandra Clark, Project Communications Director
To follow up on the May 12, 2009 Alameda County Board of Supervisors meeting, the decision to certify the final Environmental Impact Report (EIR) has been delayed to June 9th to address concerns raised about San Leandro Hospital, which is leased and operated as part of Eden Medical Center, but owned by the Eden Township Healthcare District (the District). For more information, please see our previous blog post.
In the days prior to the May 12th meeting, after many rounds of public commentary, and after the EIR and related land use entitlements were approved by the Castro Valley MAC (Municipal Advisory Council) and the Alameda County Planning Commission, several community members and labor representatives raised last minute concerns about parts of the EIR. Those opposed to the EIR certification claim that there was not an adequate assessment of the impact of any possible closure or change of services at San Leandro Hospital, despite the fact that the EIR consultant and County planning staff have stated that the EIR is complete and the issues around San Leandro Hospital, while not related to the project, have no impact on the project. Supervisor Nate Miley made a motion for the Board to meet again to make the decision on June 9, 2009, which would provide attorneys for Alameda County an opportunity to examine these claims in more detail.
Supervisors Miley and Haggerty voiced their concerns about speakers making false or misleading allegations as a political tactic, in order to delay the EIR approval process, thereby “holding the Sutter Medical Center Castro Valley project for ransom,” which he and the other Supervisors warned could endanger the future of both Eden and San Leandro Hospitals. While there has been no decision by Sutter Health or the District on the future of San Leandro Hospital, the issue remains a topic of community discussion.
Eden Medical Center President & CEO George Bischalaney and other Sutter and Eden project team members emphasized the urgency of not going beyond June 9th to approve the EIR, as the delay of even a month could significantly hold up construction and may cause Sutter Health to withdraw its support from both hospitals. Sutter Health has already promised the $320 million to pay for the completion of the new Sutter Medical Center Castro Valley.
At the conclusion of the May 12th meeting, the four Supervisors present, with Supervisor Keith Carson absent, voiced their support for the new hospital project and the need to rebuild Eden Medical Center. They also are concerned about the future of San Leandro Hospital, and that concerns over San Leandro should perhaps be discussed in another forum, unrelated to the land use entitlements for Eden.
As our project team discussed in previous articles and blog posts and at the hearing, any delays in approvals and construction have serious repercussions, in terms of meeting state deadlines to rebuild, in creating a safe environment for patients and staff, and in funding this major project. The new hospital must be rebuilt, or it will close as an acute care facility effective January 1, 2013. We now have before us a fully funded hospital project—without public funding or taxes—that will secure the future of Eden Medical Center, preserve jobs and bring nearly 1,000 construction jobs to the region at a time when the economy is depressed and construction is drying up.
As I stated before, the issues around San Leandro Hospital are complex and important. The community has a right to know what is happening. But the information being discussed now is no different that it has been for the past several years: the hospital is struggling and must be reinvented to bring value to the community and ensure that it can sustain itself over time. It is clear to me that the residents of San Leandro desire a full service community hospital, yet the majority of them will never use it. The community and local elected officials have known that this is a concern, and yet this last minute effort to stop the EIR based on what some claim to be “new information” is not justified. San Leandro Hospital, its employees, physicians and patients need to be part of the solution for the hospital, to be discussed in its own forum with regional providers who can bring truth and substance to the discussion. It should not be used as a political maneuver to stop Sutter Health from rebuilding Eden.
Please speak up, let our Board of Supervisors know they must not delay any further. These delays put both hospitals in jeopardy. I encourage you to stand up and let your voice be heard on this issue. Don’t just wait for the next hearing, but instead pick up the phone or send a letter to the Board and let them know you support the new hospital project, and encourage them to certify the EIR so the project can move forward before it’s too late.
Supervisor Nate Miley — 510-272-6694
Supervisor Alice Lai-Bitker — 510-272-6693
Supervisor Gail Steele — 510-272-6692
Supervisor Keith Carson — 510-272-6695
Supervisor Scott Haggerty — 510-272-6691