KPC Healthcare is a seven-hospital for-profit system in Orange County, Calif. A few years ago, it rebranded after splitting from Tenet Healthcare Corp. Four of the hospitals, previously known as Integrated Healthcare Holdings, together were losing about $2.5 million a month. Today, KPC reports $340 million in annual revenue, has over 1,900 inpatient beds and more than 5,000 employees throughout Southern California. Company officials credit much of that turnaround to CEO Suzanne Richards, who took over three years ago. Richards' tenure coincides with a spike in homelessness in the region, which has caused KPC to expand its psychiatric services. Modern Healthcare Editor Aurora Aguilar recently talked with Richards. The following is an edited transcript.
Modern Healthcare: How has psychiatric care evolved under your leadership?
Suzanne Richards: In Orange County, we have four gero-psychiatric programs and one very large acute-care psych unit attached to an acute-care hospital. With most psychiatric facilities, you'll see that they're stand-alone—which means when a patient is receiving dialysis and is a schizophrenic, for instance, those psychiatric facilities have a difficult time accepting them. We have the best of both worlds, because we have an acute-care hospital that does open-heart surgery, it's about to become a primary stroke-receiving center, and it has a large maternity unit. But it also has 90 beds for psychiatric care.
We see psychiatric care as a circle and access point. The goal is to not have to use our inpatient care. A lot of emergency rooms are being flooded with patients with behavioral health needs. They linger in the ER until they can find a hospital that can accept these patients.
We work with police and fire departments to make sure these patients get to the correct level of care. In January, we'll open a crisis stabilization unit. I call it psychiatric urgent care. If a patient's behavioral health symptoms are starting to re-occur, or they haven't taken their medication and are feeling pretty bad, they can get their symptoms under control before having to be admitted. But if they have to be admitted, a crisis stabilization unit allows them to stay for up to 23 hours so they can have that additional time to protect themselves, protect others, feel better, understand their symptoms, understand their medication. That is at Anaheim Global Medical Center.
MH: What kind of support do these patients receive in the community?
Richards: We find that it's important once we discharge psychiatric patients that they have somewhere else to go, to make sure they understand their medications, that they understand the importance of taking those medications, and they understand the symptoms before it gets too bad. They know they have somewhere to go if they're feeling suicidal or they're feeling like they want to hurt somebody. We call that our Hope Center.
It is an intensive outpatient and partial-hospitalization program. A major issue with our psychiatric population is they're healthy enough to go home, but they're not healthy enough for the family to resume their daily activities and go to work and leave their loved one alone. So this partial-hospitalization program allows the family to feel secure that the patient is getting the counseling they need and the family can go to work and know that their family member is being well taken care of. We feel that's a whole circle from the front door to the back door where we're taking care of the psychiatric patient.
MH: Behavioral health isn't a particularly lucrative business. How are you able to sustain it?
Richards: We received a grant through Orange County. That and Medicaid give us avenues for reimbursement for these services. We are also a large provider of psychiatric services and have a county contract. But looking to the future, I believe everybody understands that this issue is as important as diabetes; is as important as cardiac health. There needs to be funding for it. So a lot of not-for-profits are getting together trying to find ways to support psychiatric programs, especially in Orange County.
MH: California is currently considering an all-payer proposal. What is your stance on the bill?
Richards: I believe it would be very detrimental to the provider community across the board in California. When you take a look at how a hospital is funded, we do a Medicare cost report every year, and essentially Medicare pays the cost of care. With Medicaid, you're getting significantly less than that cost. When you get to everybody else who comes through the door, the proposal says you can only charge a certain percentage on those cases.
Four of our hospitals are safety-net facilities. That means we take care of the poorest of the poor. So when you look at a large proportion of our population—paid at cost or below cost—you now have a small population that pays you a little bit extra so you make a little bit of a profit. If you were to regulate what that profit would be, a hospital is not going to survive that.
We have seismic upgrading here in California that is going to run into the billions of dollars. A piece of equipment could actually run us several millions of dollars. Some drugs are in the $2,000 range. And when a patient comes in who is underinsured or is paid at cost and we are paying anywhere from $2,000 to $13,000 for an implant, if we were to regulate how much of a percentage can be charged to a payer outside of negotiation, those implants are no longer going to be affordable. Also, when you don't employ the doctors yourself and an uninsured patient comes in, the hospital often must pay an unfunded cost on that.
We don't want to hit people with very high bills, but when you look at it from the hospital's standpoint, we can't pay the vendors, buy the equipment, buy the drugs necessary, because those costs are too high. If we really wanted to reduce overall costs, we must look at pharmaceuticals, medical equipment, disposables and implants.
MH: You were a surveyor for the Joint Commission. How does this inform your current work?
Richards: I started as a registered nurse. I have worked effectively in just about every single department in a hospital. I am always striving for quality. Before I modify something, change something, I look at how this might affect my patients. I'm also very focused on the employees. How do I ask an employee to do something if I haven't properly trained them? So I value the experience and the education that I received from the Joint Commission because everything is about change. What it really did for me is put me in the correct focus. What am I changing, why am I changing it, who will this affect, and is it always going to be high-quality?
MH: KPC has had issues with employee satisfaction. Has that been resolved?
Richards: When I came in, the facilities were not even close to making budget, and when you can't make budget you can't have a profit. You've got seismic upgrades to work on, you've got building modifications, you've got equipment needs. There is going to be reduction in force. You're not always going to make everybody happy, but what we did was assure the number of people that we could employ. We had to right-size the building. Those employees now, by my surveys, they're extremely happy.
About two years ago, we implemented an employee stock ownership program, which gives employees stock in the four hospitals. No acute-care hospital has done this before. If the employee is over 21, worked over 1,000 hours in the plan year, and is employed by the facility, they get a stock certificate every year. After six years, they're fully vested.
We didn't want to just throw that into salary. We wanted it to be essentially a retirement benefit, though they can take it early. We wanted to say thank you, you're working toward the viability of the hospital and you should be rewarded. We've seen a doubling in the stock price of this employee stock ownership program.
MH: What's in store for KPC?
Richards: We need a physician strategy. We need to align with a few of the very large medical groups in Orange County. We are heavily managed care and heavily Medicaid in the county. Over 33% of the population in Orange County is on our CalOptima program, our managed Medi-Cal Medicaid program. So this next year we are going to really focus on our physician strategy, our medical group strategy.
A couple of months ago, one hospital went from a primary stroke-receiving center to a comprehensive stroke-receiving center. There are only 200 comprehensive stroke-receiving centers in the U.S., and we became the fourth here in Orange County. Three other hospitals are also becoming primary stroke-receiving centers. We want to be a large force for our community in stroke care. We're also improving our psychiatric care by starting that crisis stabilization unit. If that unit is successful, then we hope to start several other crisis units with the goal of keeping everybody stable, feeling well, and not having to be admitted to the hospital for psychiatric care.
Another thing I would say is we'll continue to move more healthcare into the outpatient sphere. We have some outpatient centers, but more are needed to expand access.