Public hospitals across the United States are under severe financial and political pressure. Their reimbursements are being cut, competitors are vying for their patient base, and certain political leaders think the role of governmental hospitals should diminish in a time of provider surplus. Individual public hospitals may fail.
Yet despite those threats, or perhaps because of them, some public hospitals and health systems are adapting to the new environment and even prospering. Over the next few months, MODERN HEALTHCARE*will look at some of the innovations and creative solutions to the quandary of government hospitals in a market-driven healthcare economy.
This week, we visit San Joaquin General Hospital near Stockton, Calif.
As you drive south on Interstate 5 from Sacramento, pass through Stockton and note the sign that says "County Jail Next Right." Just past the sign, a blond brick building, its prow turned toward the highway, gleams in the sun.
No, it's not the jail, though some locals think it is. It's the new San Joaquin General Hospital, which opened its doors to patients the first week in March.
A 97-bed partial replacement for the neighboring 212-bed county hospital built in the 1920s, the new building is the latest flagship of a health system that started in 1857 as a general hospital and "pestilence house" for quarantining those with infectious diseases during the Gold Rush boom in San Joaquin County.
San Joaquin General is the first major county hospital reconstruction undertaken since the 1960s in California.
More significant, this is the first major hospital replacement built under a state program. passed in 1989 that pledged state funds to help California's beleaguered disproportionate-share hospitals finance necessary expansions, renovations, replacements and seismic upgrades. Disproportionate-share hospitals treat large numbers of poor people. To qualify for the state replacement funds, a hospital's ratio of Medicaid-known as Medi-Cal in California-inpatient days to total days must be at least 40%.
San Joaquin County Health Care Services, the hospital's parent organization, serves Medi-Cal and uninsured patients in one of California's poorest regions, nestled in the fruit basket of the vast and arid Central Valley.
The new emergency department waiting room is as multicultural as the concourse at Los Angeles International Airport. Vietnamese and Cambodians sit beside Mexicans who came to work in the fields. There are multigenerational black families and a smattering of Anglos. A woman wears an Islamic headdress. In 1990, 22.6% of San Joaquin County's population was foreign born.
The demographics of the multicultural population put a heavy load on San Joaquin County Health Care Services, which by state law is the provider of last resort. In 1990, the county had a 10.3% unemployment rate, and 21.4% of its people lived in poverty, the highest rate of any city in California except Fresno. Thirty-two percent of children lived in poverty.
Today the county's population is 520,000, of whom 200,000 live in Stockton. About 250,000 in the county have no health insurance or are underinsured. Medi-Cal covers 125,000 people.
"We got this hospital because 50% of our patients were Medi-Cal," said Michael N. Smith, director of San Joaquin County Health Care Services. Now the challenge is to hold onto that Medi-Cal base while luring privately insured patients.
Hospital officials are hopeful that the building's handsome design, comfy accommodations and state-of-the-art technology will make it a viable competitor in the dawning age of competition for Medi-Cal patients.
The new facility has 12 labor and delivery rooms with imitation-wood floors. The 11-bed intensive-care unit allows unrestricted views from the nurse's station.
The building has two medical-surgical units of 25 beds each and 25 progressive-care beds.
The surgery department uses a case-cart system to distribute instruments from a basement sterilization center. The emergency department is equipped to be upgraded to a trauma center. The radiology center can do mammography for the first time and has a spiral computed tomography scanner.
The hospital has two circulation systems, one for the public and one for patients and medical personnel. Though only three stories tall, the new structure is as tall as the four-story building behind it because 8-foot-high interstitial spaces between floors let workmen upgrade wiring, plumbing and ventilation without disturbing patient care on the floors.
In short, the hospital has everything a new private hospital would have. A sky-bridge connects it to the old building, which is being renovated for medical-surgical space.
"We want to make a bold statement. When they see that place they will never again think of this as a `county hospital.' They used to call it the Castle. Now they call it the Hilton."
Smith was referring to a newspaper headline in the Stockton Record-"`Health-care Hilton' nearly ready for visitors"-over a photograph of a balcony's-eye view of the glittering glass facade and tiled entrance court. Some have complained that the facility is too plush for a public hospital, but Smith counters: "I'd hell of a sight rather be called the Hilton than the Motel 6."
When Smith mounted the campaign to rally the county behind construction of a new hospital, San Joaquin General had the Medi-Cal and uninsured population all to itself. But during the term of the hospital's construction, the state revised the Medi-Cal program to create competition.
Under the two-plan model, Medi-Cal beneficiaries in each of 12 major counties will be able to choose between a private commercial health plan and a "local initiative" HMO, in most cases based around the public hospital or county health authority.
Denise Martin, president of the California Association of Public Hospitals, said it's "fortuitous that they've converged at the same time." The county has got a sensational new hospital at just the moment that San Joaquin County Health Care Services is being required to compete for the first time in the market for patients.
"The main competition is for Medi-Cal OB," Martin said. "Those labor-and-delivery rooms are going to pull them in." Obstetric services are key because the Medi-Cal reimbursement rates are now attractive to private hospitals.
The hospital and local initiative Medi-Cal plan are leveraging their marketing efforts largely on the magnetism of the new building and the county's history of providing good care to its poorest residents. And marketing is something the hospital and the county health services never had to think about before. "I've got to believe we turn some heads," hospital Director Steven P. Ebert said.
On Feb. 16 and 17, some 10,000 county residents came to look, in a sort of county fair for healthcare. On Feb. 20, more than 200 community doctors were given a tour, in hopes they would refer more private-paying patients to the county facility.
The county needs those patients, plus the Medi-Cal clients, to make its bond payments. Now there is a chance that private payers, such as Kaiser Permanente, may be willing to contract for inpatient services.
The total project budget was $106 million. Of that, $72 million was budgeted for construction. The project came in at $62 million, $10 million under budget. Capitalized interest accounts for $24 million, and debt service reserve for $10 million. The annual debt service on the project over 25 years is about $8 million. The state pays the portion of the debt service that equals inpatient days billable to Medi-Cal. "We've been running 52% Medi-Cal utilization, so the state is paying 52% of the debt service," Ebert said.
The problem is, that's the wrong incentive. The county local-initiative health plan, for which San Joaquin General is the participating hospital, must curb inpatient utilization to be economically competitive. The hospital can't very well try to boost its Medi-Cal patient days at the expense of the HMO.
"Our concern is to keep the percentage of Medi-Cal patients the same as overall utilization declines because we know utilization and length-of-stay will decline over time for everybody," Ebert said.