Officials at four San Fernando Valley hospitals say the exodus of two other Valley-area hospitals from the Medi-Cal system may portend their own eventual departure from the state's health care program for the poor.
Although the officials said Medi-Cal contracts will not be discontinued immediately, they described terminating their contracts as an option they will consider within a year because they face the same financial problems as Northridge Hospital Medical Center and Henry Mayo Newhall Memorial Hospital in Valencia.
Northridge and Henry Mayo administrators, citing million-dollar losses each year, said Tuesday that they are leaving Medi-Cal because the program's reimbursements cover only part of their treatment costs.
Similar concerns were expressed a few days later by administrators at Van Nuys Community Hospital, AMI-Medical Center of North Hollywood, Simi Valley Adventist Hospital and Pacific Hospital of the Valley in Sun Valley, formerly known as Serra Memorial Health Center.
"We lose money on every Medi-Cal patient," said Darwin Remboldt, president of Simi Valley Adventist Hospital.
Departures Cause Concern
"It barely covers our costs . . . in the future we may drop it," said Jim Rush, vice president and chief financial officer at Van Nuys Community Hospital.
The departure of Northridge Hospital and Henry Mayo from Medi-Cal will create aftershocks, but it is too soon to say how patient loads at other hospitals may change, the administrators said.
The hospitals plan to watch the situation carefully. Simi Valley Adventist Hospital, for example, will track its Medi-Cal patients by checking ZIP codes to see whether they come from Northridge or Valencia, Remboldt said.
Administrators at two other Valley hospitals--Granada Hills Community Hospital and AMI-Tarzana Regional Medical Center--said they have not decided whether to continue or drop their Medi-Cal contracts.
Officials at six other Valley hospitals pledged to continue with Medi-Cal as long as they can: Burbank Community Hospital, Holy Cross Hospital in Woodland Hills, St. Joseph Medical Center in Burbank, Valley Presbyterian Hospital in Van Nuys, Valley Hospital Medical Center in Van Nuys and Olive View Medical Center in Sylmar.
Regardless of their plans for Medi-Cal, the 12 remaining Valley hospitals with Medi-Cal contracts agree there is cause for concern and that the program falls short of paying for the health needs of the poor.
Helping the Poor
They also add, however, that hospitals don't expect to make money off Medi-Cal because of its structure. Unlike Medicare, a federal program targeting needs of the elderly, Medi-Cal is a state-administered effort aimed at helping the poor, regardless of age. Hospitals with Medi-Cal contracts agree to accept set daily fees for patient services. The fees are negotiable and vary.
Generally, Medi-Cal payments equal only 30% to 40% of a patient's expenses, said David Langness of the Hospital Council of Southern California. Hospitals realize Medi-Cal won't cover their costs when they sign a contract, he said, but participate as a public service nevertheless.
"We're committed to taking care of the poor," said Christine Karlsen, director of community relations at Holy Cross Hospital.
Rhoda Weiss, a spokeswoman at St. Joseph Medical Center, agreed: "We're owned by the Sisters of Providence, and that's our mission."
Joe Brotnow, vice president of finance at AMI-Medical Center of North Hollywood, likened the situation to department stores that assume their overall income will cover losses from shoplifting. As the department stores do, the hospital passes some of the costs to other customers by raising the hospital rates.
How do hospitals survive this arrangement?
It depends on two factors: the reimbursement rate the hospital has negotiated with the state and the percentage of Medi-Cal patients treated at the hospital, administrators said.
At Simi Valley Adventist Hospital, for example, an average 5.5% of the monthly patient load receives Medi-Cal--a relatively low percentage. But, because the hospital receives less than 40% of its costs from Medi-Cal reimbursements, the hospital may have to sever its ties with Medi-Cal if the caseload increases.
Conversely, Medi-Cal is the largest source of revenue for county-owned hospitals such as Olive View, where 55% of the monthly patients are Medi-Cal recipients and reimbursements from the state run higher.
Generally, a large county hospital system would have more negotiating power to levy against the state than one private hospital, said Douglas Bagley, administrator at Olive View.
The termination of Medi-Cal contracts at Northridge Hospital and Henry Mayo could cause an increase in the number of Medi-Cal patients treated at the other 12 Valley-area hospitals.
Even without the contracts, Northridge Hospital and Henry Mayo will continue to provide emergency care under Medi-Cal, as do all hospitals. Northridge also will accept Medi-Cal outpatients.