California has given birth to the HMO, lunch-hour plastic surgery and hospitals trained in handling celebrity patients. Such images are linked to the glitz of Los Angeles, where even the county hospital gained fame by doubling as "General Hospital."
Yet, an entirely different view of California can be seen just a hundred miles to the north. That's where the San Joaquin Valley begins, a nearly flat expanse stretching 250 miles from Bakersfield to Sacramento and spanning eight counties. Here beet farms have supplanted back lots. Sermons and bluegrass and Mexican ranchera music compete on the radio as residents make the long drives from town to town.
The change is so dramatic that the San Joaquin Valley might as well be a different state.
"Some would say this is the heartland of California. There's no real industry at all here; it's all agriculture," says Chris DiCicco, chief executive officer of 289-bed Doctors Medical Center of Modesto, one of two hospitals serving a city of 270,000-and among its largest employers.
Healthcare providers in the San Joaquin Valley face problems: First, there's the diversity of the 2.5 million population that includes migrant farm workers from Latin America; very poor and difficult-to-assimilate immigrants, such as the Hmong from Cambodia; and many middle-income families that have sought cheap housing. Second, the cyclical, low-paying agricultural work that dominates the area translates to unemployment rates double the statewide average. In some counties unemployment approaches 20%. County by county, per-capita income falls 25% to 40% below the state average.
"Giving appropriate healthcare is a big challenge for providers throughout the valley," says Edward Schroeder, CEO and president of St. Joseph's Regional Health System in Stockton. St. Joseph's is an affiliate of San Francisco-based Catholic Healthcare West, which operates a 312-bed acute-care hospital and a 35-bed behavioral health facility in Stockton, as well as three other properties in Manteca, Merced and San Andreas. Like other area providers, St. Joseph's treats its diverse patient base with the help of multilingual telephone operators, a Latino outpatient program and roving clinics operating from vans.
In such an environment, it's not uncommon for hospitals to spend 10% to 12% of their revenues on indigent and charity care, more than twice what hospitals in other regions of California typically spend, according to officials.
"Medi-Cal (the state's Medicaid program) is a huge provider of care in the valley," says Butch Enkoji, regional vice president for the Hospital Council of Northern and Central California, a local trade association.
Medicare, meanwhile, doesn't pick up much of the slack: The state's lowest reimbursement rate is in Fresno, by far the largest city in the San Joaquin Valley. Officials say the region's rural population has been underserved historically, which has kept reimbursement low.
"The area tends not to have as many trauma or major tertiary programs as other parts of the state," Enkoji observes. Quaternary care for the 25,000-square-mile area is virtually nonexistent, with most major transplants performed at the University of California Davis Medical Center, west of Sacramento. Doctors Medical Center in Modesto transfers about 15% of its neonatal intensive-care patients 100 miles to Stanford University Medical Center. Kaiser Permanente, the largest HMO in California, controls nearly 20% of the San Joaquin Valley's managed-care enrollees yet operates a single hospital in the region.
Market forces have put the squeeze on smaller providers and public facilities. Many smaller hospitals have gone out of business in the past decade, while county governments of several of the region's largest cities have begun handing over healthcare duties to private organizations.
Three private hospitals in three contiguous counties-Fresno, Merced and Stanislaus-have been leased to private operators in the past 18 months. Officials in Kern and San Joaquin counties also are mulling possible transfers, even though San Joaquin's 195-bed facility in the tiny village of French Camp is just 5 years old.
"It's clear (the counties) all sort of came to the conclusion that continuing to run their own programs in an area with the primary payers being Medi-Cal and the medically indigent, and without adequate contracting relationships, no longer made sense," Enkoji says.
"Running a healthcare system may not necessarily be the core competency of county government," says Michael McGinnis, chief financial officer of Fresno-based Community Health System. Community took over Fresno County Hospital in October 1996 with a 30-year lease agreement that pays Community $17.5 million a year.
"We feel this might be a sign of things to come in other regions of the state," says Mike Cohill, CEO of the Central Valley market service area of Sacramento-based Sutter Health. Sutter took over 158-bed Merced Community Medical Center from Merced County in early 1997.
Merced is one of the toughest cities in the valley for healthcare delivery. Nearly 40% of its residents are Medi-Cal recipients or medically indigent, according to Sutter's market research. Merced Community's accounts receivables consistently exceed 100 days. Sutter consolidated accounting within its own centralized operations, became self-insured and made other benefit changes for employees, cut some administrative positions and tweaked the hospital's purchasing arrangements. Within months of its takeover, costs per adjusted patient admission had fallen by more than 10%. The hospital turned a profit of $447,000 in 1997 compared with a $904,000 loss during the last year of county operation.
In Fresno, the county facility was renamed Community Hospital and Medical Center in late 1996. In the fall of 1997, Doctors Medical Center in Modesto, a Tenet Healthcare Corp. property, took over Stanislaus Medical Center from Stanislaus County. It closed the 84-bed hospital last December and transferred all of Stanislaus' programs, including the medical residency program, to Doctors' campus. Doctors nearly tripled the size of its emergency room, to 22,000 square feet from 8,000 square feet, and constructed a 21-bed pediatric unit.
Meanwhile, other private operators have begun to address the geographic challenges of keeping commercial patients in a far-flung area.
"Networking here is particularly essential to making services available to enrollees in HMOs," Schroeder says.
For the past five years, Sutter has been cobbling together a network of hospitals, medical groups and independent practice associations in the San Joaquin Valley. It now has five hospitals and a physician network with 80,000 capitated patients extending 120 miles from Sacramento to Merced. It also is exploring opportunities in the Fresno area, although it wouldn't make specific information available.
"It's our desire to keep as much care in the local communities as possible and to make expansion contiguous, so people don't have to travel long distances," says Patrick Fry, president of Sutter's eastern division.
In January, Tenet created a joint networking venture with Catholic Healthcare West through a limited liability company called Central Valley Healthcare System. Stretching 80 miles from Stockton to Merced, Central Valley Healthcare ties St. Joseph's facilities to Tenet's Doctors Medical Center of Modesto and nearby Doctors Hospital of Manteca.
St. Joseph's also is in the midst of negotiating a management contract with Oak Valley District Hospital, a 141-bed facility in Oakdale, about 25 miles east of Modesto.
"Referrals from Oakdale often go to Doctors Medical in Modesto, so we think that deal, along with entering into an agreement with Tenet, makes sense," Schroeder says.
While there is no evidence that such efforts have reduced the number of patients traveling for healthcare to San Francisco's East Bay suburbs, anecdotal evidence suggests private operators have contained that practice.
"When I came here in 1990, probably 40% of the residents here left the valley for healthcare. That's probably down to 15% or 20% now," DiCicco says.
That is not to say that the valley's residents-among the most politically conservative in the state-have been wooed by large hospital operators in the area.
With religious and anti-abortion billboards jockeying for space between fast-food signs on area highways, executives acknowledge that winning the hearts of citizens is not easy.
"(Being large) in small communities is not an asset, and to work closely with the community and physicians is very important," Schroeder says.
As part of its efforts, Sutter has held several town hall meetings to talk to the residents about possible changes at Oak Valley District Hospital.
In other areas, private operators are striving to do much more than improve healthcare to win over residents.
At Fresno's Community Hospital, for example, patients and their families are greeted by valet parking and a piano player in the lobby.
And as part of the takeover of the county facility 18 months ago, Community Health System is constructing a $158 million, six-story, 300,000-square-foot critical-care tower, scheduled for completion in 2001. The construction will add 15 operating rooms, 66 intensive-care beds and two helicopter pads, significantly beefing up the region's burn and trauma units.
In addition, Community will close two streets to traffic and join county and city agencies in redeveloping the downtown area, including landscaping around the campus. The city also has agreed to widen nearby Fresno Street and refurbish the housing projects adjacent to the hospital.
"This is to give (the hospital) a secure and safe setting it really doesn't have right now," says Bryn Forhan, Community's vice president of development. "It will be a world-class facility, but it will also be more parklike. It will be key to the revitalization of downtown Fresno."