CRESCENT CITY – Sutter Coast Hospital has a lot to balance besides its budget.
While it’s a business and a major employer; it’s also a life-saving facility and a tax-exempt charitable organization, providing certain services regardless of a patient’s ability to pay.
Some local doctors are decrying a business decision they say imperils the medical functions of the only general hospital in Del Norte County, which state audits show made money by healthy margins every year from 1989 to 2010, all the while providing millions annually in unpaid charity care.
Defenders of a controversial plan to dismantle the hospital's local Board of Directors in exchange for an authority based in the Bay Area say that in this case, good business is good medicine, and that “regionalizing” will help keep the hospital operational, even if it’s no longer profitable.
The debate has given rise to public outcry and anxiety, which was vented Tuesday night at a town hall meeting hosted by the local Tea Party, where the chief opponents of regionalization presented their case to at least 160 concerned citizens.
Audience members asked a lot of tough questions:
Will local control over health care be lost if there’s no local people overseeing hospital operations and finances? Does local control even exist now? Is this merger a ploy to utilize federal funding mechanisms at the expense of broader access to health care? Will people lose their jobs? Can the public know, let alone do, anything about what happens in a confidential board room?
Why did the local Board of Directors vote to radically change the operational structure without consulting more public entities first?
Three doctors, one Del Norte County Healthcare District representative and a member of the public at large with past experience on a hospital board fielded the questions. They all described regionalization as a dangerous, undesirable undertaking.
Dr. Kevin Caldwell was the only speaker who had a say in the board’s November 2011 decision to pursue a corporate consolidation, a decision that has yet to have any impact. As then-Chief of Medical staff, Caldwell was also the only person on the 10-member board to vote “no.”
Several other board members, including hospital CEO Eugene Suksi, Dr. Thomas Polidore and retired Del Norte County Judge Philip Schafer, answered questions from the Triplicate this week about why they voted “yes” and what it could mean for future health care access in Del Norte and Curry counties.
Both sides cited the same goal: to keep providing high-quality care here. But they come to different conclusions about how to do that. From either perspective, money makes all the difference.
Profitable or not?
Sutter Coast Hospital is an affiliate of the Sutter Health non-profit corporation, a multi-billion-dollar network of health care facilities and organizations based in Sacramento. The local hospital pays an annual fee of around $1 million for its Sutter name and access to resources: capital, technology, staff and the like. (In this article, the name Sutter Coast Hospital refers not only to the building on Washington Boulevard in Crescent City, but also two outpatient clinics and a long list of associated labs and services.)
The doctors opposed to linking Sutter Coast Hospital even more inextricably with the corporate structure are not employees of Sutter Health or the hospital. They are independent physicians, who utilize hospital resources to diagnose and treat patients.
As Caldwell put it at the meeting, this system creates “two columns of power” in the local health care arena. The idea is that profit-motive and patient care function separately from one another, hopefully toward the same end — accessible health care.
State-vetted audits show that the hospital made $5.2 million in net income (before some hefty deductions) in 2010. That same figure took a $7.3 million downturn the very next year, putting Sutter Coast’s net income $2.1 million in the hole as of New Year’s Day 2012, according to hospital financial data obtained by the Triplicate, which has not yet been audited by outside agencies.
Suksi said these losses are indicative of a new trend, one that demands cost-saving measures only available under a regional board of directors, charged with overseeing five other hospitals and two medical foundations.
He attributed last year’s financial downturn to a dramatic decrease in revenue from patient services.
“Consumers are paying more, so they wait. When they do show up, we get paid less,” he said.
When asked why they aren’t telling the public Sutter is losing money now, the dissenting doctors questioned the reliability of last year’s books, which were presented to the Board of Directors in February.
Caldwell told the crowd at Tuesday’s town hall meeting about a recent outsourcing of billing services, which he said resulted in Sutter “losing millions of dollars.”
The billing for two hospital-based clinics was “transitioned” to a Sutter Health office last year, as part of the switch to electronic health records, a new industry standard being implemented independent of regionalization, Suksi explained.
“There have been some issues with the switch to electronic medical records and electronic billing, which has been problematic to say the least,” Polidore said.
As for the alleged multi-million-dollar billing screw-up:
“There was a significant failure to bill for a period of several months,” Schafer said. In addition to serving on the hospital board for the last eight years, he’s chairman of the Finance and Planning Committee, on which Polidore also sits.
“I believe it’s now all been properly billed,” Schafer said. “How much has been paid or will be paid, I don’t know. There could be a significant adjustment there and if there was, it would be to the positive.”
Suksi said these uncollected bills won’t put Sutter Coast back in the black for 2011.
What’s at stake?
The fact that local residents Schafer and Polidore were informed enough to even field a finance question raises another question: what’s really on the line with regionalization?
For the last 26 years, a local Board of Directors has been in the loop, making key decisions about budgets, hiring and sustaining services that benefit the community as much as the bottom line.
Under regionalization, the local board becomes an advisory council and would not have oversight of financial reporting.
Still, Sutter Health has long had final authority over the local board, including nine out of 10 appointments to it and many of its functions. And in May 2011 the local board, (Caldwell included), approved amended bylaws preventing it from hiring an independent auditor.
Six out of 10 current board members have no financial ties to Sutter Coast Hospital whatsoever, Schafer among them.
“We all live here ... Our desire is to make sure that we have a hospital that provides for good medicine to be practiced,” Schafer said. “That’s our goal. As a group we believed that regionalization would further that goal. Given the opposition, I personally have to back up and reassess it.”
The administrative duties of running a multi-million-dollar business fall to Suksi, CEO and board member since 2008.
“I have a day-to-day responsibility to look at how we can do things, better, faster and cheaper,” he said, explaining that ongoing “consolidation” in response to lower revenues is a reality, regardless of who’s on which board.
“I’m the one who sits across the table from someone and says your position has been eliminated. That’s not fun,” he said, likening that part of his job to “pruning a branch in order to save the tree.”
Business decisions independent of regionalization have already led to layoffs, mostly through the form of reduced staffing hours, rather than officially eliminated positions, Suksi said.
Possible status change
Dr. Greg Duncan is the current chief of medical staff and perhaps the most vocal opponent of regionalization. He wasn’t yet on the hospital board when it voted on the issue. He’s said the plan is an obvious precursor to downsizing in order to qualify for a federal program that better reimburses the hospital for Medicare patients.
The program was designed to increase access to health care in underserved, rural communities. Sutter Health was the first corporation in the nation to downsize a hospital in order to fit the bill, namely Sutter Lakeside in Lakeport.
Scores of the questions asked at the town hall centered around a possible “critical access” designation, whereby the 49-bed hospital would become a 25-bed facility in which patient stays are limited to four days and all acute cases are likely to be air-lifted out to bigger facilities.
“The reason critical access is tied to regionalization is because it dissolves the local hospital board — we are no longer informed and certainly would have no vote on whether or not we become critical access,” Duncan told the town hall crowd.
The average number of admitted patients per day at the hospital in 2011 was 20.7 and the average length of stay per patient was 3.4 days, according to documents obtained by the Triplicate.
Sutter Coast already meets the criteria for critical access, Suksi said, but since most of the business is with out-patients, the funding mechanism probably isn’t advantageous.
The last assessment on critical access was performed in 2010 and hospital officials are running those numbers again, he said.
“Do we want to go to critical access designation? It’s not a question of want ... the real question is do we need to go to critical access to sustain services? Even if we went to critical access, our goal would be to continue to sustain our existing services and have a sustainable hospital,” said Suksi.
Schafer called critical access a “bogeyman,” adding that it’s never been seriously discussed. Polidore also didn’t see the connection.
“Critical access has nothing to do with regionalization,” Polidore said.
“This is a potential merger that may save the hospital. Is it going to happen? I don’t know. What we are looking at is ways to keep the hospital open and solvent. You can talk all you want about the last 25 years ... for now the economy is really poor,” he said.
The hospital board voted to pursue regionalization, but it must also sign off on merger documents to seal the deal.
Over the next few months members of Sutter Coast’s medical staff are scheduled to meet with other doctors and Sutter Health administrators working out of 28 hospitals already consolidated into the corporation’s five-region system. Suksi said the goal is to smooth things out with the medical staff before holding any public forums.
He was also invited to speak at the town hall meeting, but declined, partly because the forum was not hosted by a public entity, like the Health Care District, he said.
Duncan invited everyone at the town hall to be his guest at the next joint medical staff-Board of Directors meeting, scheduled for 6 p.m. on Aug. 2.
Board Chairman Andy Ringgold told Duncan this would not be permitted in an email sent Friday, but that “the board intends in the next few months to provide other opportunities for interested parties and groups and the general public to provide input on this matter.”
The Del Norte County Board of Supervisors provided its own input this week, unanimously agreeing to draft a “robust” letter of opposition to regionalization and send it off to Sutter Health, Sutter Coast Hospital and statewide elected leaders.
Two supervisors volunteered to work with the Healthcare District on a Sutter-specific committee.
“There’s two issues here, one is the regionalization ... and one is the old switcheroo for what our hospital is going to look like here. Maybe we don’t want representation (on the regional board) if we are going to get outvoted anyway. Maybe we want to get rid of Sutter,” said Supervisor David Finigan.
This sentiment was echoed by both doctors and attendees at the town hall.
After the doctors left the stage, Tea Party organizer and Sutter Coast Emergency Room nurse Tonya Pearcey said she was ready to speak her piece.
“I’m really concerned about critical access ... I think it’s already been decided and I’m not one to roll over and wait,” Pearcey said. “I believe in standing up and fighting to the end. You gotta try.”