May 5, 2010

El Camino Hospital suffered an $11.3 million loss for the first eight months of its fiscal year. It is one of many Northern California hospitals instituting plans to become more efficient and innovative in the face of the poor economy and low private and public insurance reimbursement rates.

In December El Camino, a nonprofit with hospitals in Mountain View and Los Gatos, implemented a productivity initiative to start shoring up the organization. That has evolved into an initiative called Accelerating Continuous Excellence (ACE) which El Camino is launching this month. It contains hundreds of methods for saving money and generating revenue, said hospital spokeswoman Chris Ernst. The organization is shooting to achieve between $50 million and $70 million in savings and new revenue annually, she said.

“If they’re losing money, they’re not alone,” said Jan Emerson, spokeswoman for the California Hospital Association in Sacramento. “Half of California hospitals are losing money from operations,” she said.

Children’s Hospital & Research Center Oakland announced in April it will launch a restructuring plan to address the $26 million it lost in 2009. In the last four years losses have amounted to $80 million, the hospital reports. Children’s Hospital plans to restructure services, pursue new business opportunities and negotiate higher private insurance and government reimbursements.

Last year California Hospitals had $12.2 billion in uncompensated care and of that $8.3 billion was from shortfalls in Medicare and Medi-Cal funding. Overall California hospitals had a negative 3.83 percent revenue margin, Emerson said.

“We see the landscape is only going to become more challenging,” Ernst said. El Camino is concentrating its efforts on ways to shore up its bottom line. Staff is being trained to double check things like patient registration documents, patient categorizations, billing documents and medical codes. For instance sometimes patients come in with two diagnoses but they only get coded for one, Ernst said.

Like El Camino Santa Clara Valley Medical Center is also trying to recover its lost revenue. Last year the hospital instituted its Denials Management Team and in fiscal year 2009 it recovered $6.7 million in claims, up from $1.2 million in 2008, said Joy Alexiou, hospital spokeswoman.

Valley Medical staff is training members of the team to determine the cause of denials, resubmit the claims and to make sure the mistakes don’t happen again.

Reasons for the huge hospital losses are numerous. Ernst attributes most of El Camino’s losses to the recession. People are not opting for elective surgeries, more patients are being managed medically rather than surgically and there’s a big increase in the number of people who are paying out of pocket for care rather than deal with high deductibles. El Camino offers a 75 percent discount for cash payments on some services.  There are also less labor and deliveries and with 12 percent local unemployment, people are delaying care and taking less aggressive steps regarding their health right now, Ernst said.

Hospitals like Valley Medical and Children’s Hospital see a huge number of Medi-Cal patients, especially given the economic downturn. Children’s Hospital saw its percentage of Medi-Cal patients jump from 60 percent to 71 percent by the end of 2009. And the hospital states that Medi-Cal’s reimbursement is among the lowest in the nation. Children’s Hospital states it gets between 10 cents and 30 cents for each $1 of care provided. Valley Medical gets 50 cents of reimbursement through Medi-Cal per dollar of care provided, Alexiou said.

“At this point we’re doing everything we can to retain the number of services we provide,” Alexiou said.