Scripps Health is facing some “not in my backyard” backlash for its plans to open a psychiatric hospital in the San Diego suburb of Chula Vista. The hospital is being built through a private equity partnership with Acadia Healthcare, a behavioral health provider with locations across the U.S., Puerto Rico and Great Britain. While the community’s complaints stem from safety issues, Acadia has a checkered past that Scripps CEO Chris Van Gorder knew he’d have to navigate. Most recently, an Acadia subsidiary agreed to pay the federal government $17 million to settle allegations it defrauded Medicaid in West Virginia. But as more private investors enter the healthcare space, providers must weigh the pros and cons of entering into such partnerships. Van Gorder recently visited with Modern Healthcare’s editorial board. The following is an edited transcript of that conversation.
MH: Tell us why you partnered with Acadia Health.
Van Gorder: Behavioral health is the most significantly underfunded and underaddressed issue we have nationally, and certainly in the state of California. We have one 36-bed inpatient behavioral health unit. We offer a lot of outpatient programs, but only the one inpatient unit. That’s Scripps Mercy Hospital, but we have to replace it by 2030 because of the Seismic Safety Act.
We’re very strong from a balance-sheet standpoint and we have a couple billion dollars in the bank, but Mercy alone is going to cost us $1.3 billion to replace. I can’t spend the entire balance sheet. So we asked, “How do we address that?” We decided a partnership was the way to go.
We looked at a bunch of companies and found Acadia. Now, Acadia has had some issues. If you look at them in Oklahoma and other places, they’ve had challenges. But they have a new CEO and they have 580 hospitals that include a lot of partnerships.
We engaged them in discussions about a year ago. They bought a piece of property in Chula Vista, which is where we’re going to build a 120-bed hospital. They will own 80% of it. We do want skin in the game, so we put in 20% and we have a joint management committee because we needed to meet our mission. So we asked Acadia to take Medi-Cal, which they normally wouldn’t do. We told them they have to take on our charity-care policies, which they agreed to do. We’ll have a very strong say in who will be the CEO and who will be the chief medical officer at the hospital. It will be an Acadia hospital and part of the Scripps Health network, but it won’t have the Scripps name on it.
MH: What are the benefits of this partnership?
Van Gorder: We have control over admission of those 36 beds. This is important because there’s a reason we lose so much money—it’s because we have a hospital and emergency room. We have to take everybody, so as a result I end up filling up our 36 beds with pretty much the uninsured, under-insured, and Medicare/Medi-Cal, and we lose money. Acadia, since it doesn’t have an emergency room, can fill a majority of its hospital with commercially insured patients, which offsets the losses of the 36 beds. That’s the only way economically it’s going to work.
If you were to look at the Scripps system today, Green Hospital is a pretty profitable hospital. It doesn’t have an emergency room. The other hospitals suffer because we take everybody who comes to us. So how do we balance the paying patient with the lower-paying patient to make the economics work? This model will allow us to do the mission piece that we do and still allow the commercial work to go in there to make it work economically. Otherwise, Acadia wouldn’t have done this either.
To be honest with you, I was really nervous about announcing this one. Because we were going to move out of the downtown Hillcrest area, down to Chula Vista. But we’ve had nothing but positive feedback. There’s some worry about it being private equity, and the need to be conscientious, but the person raising the concern wasn’t aware of the deal we crafted with Acadia. We are very sensitive to the community and will do everything we can to build and operate a facility that is sensitive to our neighbors’ concerns.
MH: Are there areas for providers to start seeing private equity as an option?
Van Gorder: I think there’s going to be other service lines where we can do the same thing. We’re going to have to move away from, “We’re all things to all people,” to more regionalized care, more specialization, and ultimately admitting we are not the best at everything.
A classic example is when I came to Scripps 20 years ago, I was chief operating officer for six months. We were losing money as a system. I said, “I’m going to have to offload some things to be able to turn that around.” We had three skilled-nursing facilities and we weren’t very good at running them, and because of the economics we didn’t have the capital to invest in them appropriately. So we sold those facilities and changed our approach from saying, “We’re going to do everything, the entire continuum of care,” to “We can do that it in partnership with others.”
In recent years, economics have started to drive other relationships. Even our very different relationship with MD Anderson Cancer Center. They have their network of hospitals. We reached out to them and said, “Look, we want to have a very good cancer program. There are about 10,000 papers a day that are published on cancer. I have 15,000 employees, 3,000 doctors who are doing everything. You have 23,000 employees who are just doing cancer. Maybe there’s an opportunity for us to work with you so we can have the expertise we would never be able to build ourselves. We’ll build an economic relationship to do that.” And that’s what we did.
Some of our competitors said it was nothing but a marketing deal. Believe me, it was anything but. There were 98 different standards we had to comply with before we could even say we were part of MD Anderson. There were big-time clinical changes to the point where we went nose to nose with some of our doctors who said, “That’s not how we want to practice.” At MD Anderson, every patient goes to a tumor board? Our independent doctors, some of them didn’t take the patient to a tumor board. Well, now all of our patients go to a joint MD Anderson and Scripps Health tumor board. That’s a significant change of practice.
We already have 10% more patients coming to us as a result of the MD Anderson relationship. But we now have a mechanism of patient navigation that we never had before.
MH: Talk about the state legislation (Assembly Bill 329) on healthcare workplace violence.
Van Gorder: We’re seeing an increase in violence because hospitals are at the end of the food chain. Nobody else knows what to do with behavioral health patients, so they’re bringing them to the ER. Our nurses are saying, “What are you going to do to help protect us?” We can build some barriers and things like that but in the end, patient care means you’ve got to actually touch somebody. You can’t do that through a barrier.
“Mary” is one of our operations supervisors. Last summer, she was on a unit and a patient heaved a chair at her, charged at her, starts pummeling her, bites her, pulls out her hair. It took nine people to get this guy off of her. Including one patient. The police arrested him. They prosecuted him with a felony because he threw the chair. He got six months in jail. He’s out. She’s still a wreck emotionally.
If this guy had not thrown a chair, the person would have been charged with a misdemeanor. That’s the way it works in California.
It’s a dilemma for us. The minute police bring in this person who may be a criminal and the minute they cross into our doors, they’re a patient. We have to take care of them.
So how do you protect your staff? Society doesn’t much like us shooting patients. Well, OK, let’s use pepper spray. Use pepper spray in a hospital and if it gets in the HVAC system and it gets to respiratory-compromised patients, you’re going to kill them. Well, we’ll tase them. You tase a heart patient, you can kill them. There’s no perfect nonlethal weapon to use. But because of the increase in violence, I am equipping and training our people to use Tasers. It scares the daylights out of me.
I’ve met with police officials. The police department is great, but they say, “We can’t be there all the time.” I know of two instances last year where border patrol agents at our Chula Vista Hospital encountered patients who tried to take their weapons away in the ER.
We had 800 incidents last year, 24 that involved serious injuries to our employees.
MH: So what does the legislation entail?
Van Gorder: I went to the California Hospital Association. They worked with Assembly Member Freddy Rodriguez, who represents the Pomona area and happens to be a practicing EMT. He introduced legislation that would at least make the penalties equal to what they would be if violence were to happen outside of the hospital.
A number of other states have implemented this kind of legislation. We’re going to have to do things differently. We’re going to have to use technology differently than we have in the past, as well as other things, to try to create as safe of an environment as we can.
The Cleveland Clinic’s CEO said that they took 30,000 weapons away from patients last year. We do that all the time. The police department will usually confiscate the weapon but not arrest the patient. That’s the deal we have with them. We see weapons all the time.