Public hospitals frantic for funding
Measure A is a half-cent sales-tax hike to underwrite the medical center
By Rebecca Vesely, STAFF WRITER, The Oakland Tribune
Article Last Updated: Thursday, February 19, 2004 - 3:45:59 AM PST

Just steps away from Highland Hospital's crowded emergency room in Oakland -- which will treat 80,000 patients this year -- is a brand-new emergency department that's three times larger and hasn't seen a single patient.

Called the Critical Care and Clinics Building, the $110 million facility was set to open in January -- except for one problem: money.

"That's the sad irony," said Dr. Jim Mittelberger, a geritrician and head of medical staff at Highland Hospital. "Here we have this beautiful new building that can accept many more patients, and we can't even open it."

The Alameda County Medical Center -- the county-run hospital and clinic network serving primarily the poor, and most at Highland -- is hemorrhaging money at an alarming rate.

Like an untreated infection, the medical center's budget woes have worsened over the past year. A $12 million deficit last spring turned to a $45.5 million deficit last summer, which morphed into the $71.7 million problem facing the county today. Four-year cumulative losses are $109 million, according to the county auditor-controller.

Opening the new critical care building would bring in patients, but it also requires priceyequipment and more staff -- though county will recoup half the construction costs from the state when it opens.

The cost to open the building is $6.2 million, according to a county audit.

To open the new building -- and keep the others from closing -- the county Board of Supervisors is asking voters on March 2 to support Measure A, a half-cent sales-tax increase to underwrite the medical center.

If approved by a two-thirds majority, the county sales tax would rise to 8.75 percent -- the highest in the state.

The tax would generate an estimated $90 million a year for health services, of which 75 percent would go to the medical center. The other 25 percent would be divided among community clinics, other hospitals with indigent care and mental and public health.

The Board of Supervisors said it has no choice but to turn to voters. Federal and state funding for health care is declining, yet the county must continue to meet its mandated obligation to provide health care for the poor.

"The county is not in the position to subsidize the medical center," said board President Gail Steele. "The situation is dire beyond belief."

Critics blame board

But critics say the board created the mess -- first by spinning off the medical center in 1998 into a separate "public authority" run by an unpaid board appointed by the supervisors and, second, by not keeping tabs on that board until the budget deficit had grown out of control.

"They've done a poor job at best," said Dr. Lance Montauk, a Berkeley emergency room doctor who wrote the ballot argument against Measure A. "And the way this initiative has been proposed is another example of poor management."

Montauk said $90 million a year for 15 years -- the measure will expire in 2019 -- is too much because we can't forecast the economy that far ahead.

Supervisor Keith Carson acknowledged that the supervisors acted too slowly. "We are implementing structural changes at the medical center, but these changes really should have taken place a year ago," he told the Oakland Tribune editorial board recently.

But Carson said the county needs the added revenue in years to come because federal and state governments are allocating less -- not more -- to health care services for the poor.

Most notably, a federal program that subsidizes hospitals that treat a disproportionate share of the poor -- called DSH -- has been slashed by Congress in recent years. In 2003, California hospitals lost 20 percent of their DSH money -- $184 million. The medical center lost $7 million in DSH funding last year and is on track to lose another $14 million this year.

At the same time, the bread-and-butter of county hospitals -- Medi-Cal patients -- are being courted by fancier private hospitals. For instance, in 2001, the medical center delivered about 1,200 babies to women on Medi-Cal compared to Alta Bates Summit, which delivered 3,600 Medi-Cal babies, according to state figures. Labor and delivery is one of the highest reimbursement categories for Medi-Cal, the state's insurance program for 6.4 million poor.

Care costs are high

With an estimated 40,000 people uninsured in the county, the medical center's uncompensated care costs are high. In 2003, the medical center spent $30 million on uncompensated patient care, out of a total budget of $420 million.

Henry Zaretsky, a hospital administration expert in Sacramento with 20 years of experience, said the medical center's story is typical.

Zaretsky was hired by Alameda County in 1996 to come up with a strategic plan for the medical center to remain economically viable while fulfilling its obligation to serve the poor. He recommended building the new critical care facility to attract paying patients, in part because the county could recoup half the cost through a state program subsidizing such enhancements.

"The medical center seems to be in line with other county hospitals," he said. "I think a lot of it is a revenue problem -- there just aren't enough sources of revenue out there."

In an attempt to slow the deficit, last July the medical center closed two outpatient clinics in Oakland and San Leandro and laid off 50 people. The medical center is also attempting to route the eligible into public insurance programs, such as Medi-Cal and Healthy Families, and charge co-pays to patients who have some means of paying the bill.

Dr. Jacob Eapen, a pediatrician who works at Newark Health Center, Eastmont Wellness Center in Oakland and Juvenile Hall, and serves as a public health commissioner for the county, said closing more clinics would be a disaster.

"It would be a big public health catastrophe," Eapen said. "There aren't many places in the county for these people to go for care."

The county-run clinics are where parents bring their children for vaccinations against whooping cough -- a highly infectious disease.

"We're giving children vaccinations against whooping cough five days a week," he said.

Independent reviews of the medical center's finances show that mismanagement isn't the core problem. A study last July by PriceWaterHouseCoopers found that the medical center needed an additional, steady source of cash -- such as a dedicated sales tax -- to continue operating.

Still, in early February, the medical center hired Cambio Health Solutions, a Tennessee-based firm, for an 18-month, $3.2 million contract to identify and implement areas to trim expenses. It's a tactic Children's Hospital Oakland and Alta Bates Summit have used with success, though the move has come under fire from labor groups who call the cost outrageous.

Trying to streamline

Carson said he hopes Cam-bio can provide expertise to streamline the organization and maximize the monies raised by the sales tax. "We're not just asking for new money to throw at the problem," Carson said.

Kerry Shannon, a senior health care consultant with PriceWaterhouseCoopers who performed the study in July, said she hopes voters will choose to support Measure A. PriceWaterhouseCoopers found an underinvestment in the medical center of about $200 million.

But more is needed to save the medical center, Shannon said.

"Even if they get all the money they can get, the leadership issue is huge," Shannon said. "There's nobody in this scenario who I can see having the vision and motivation to do this correctly."

Workers' union opposes

SEIU Local 250, representing 800 health care workers at the medical center, is not supporting Measure A because of this systemic, underlying mistrust that monies raised will be used inappropriately.

The union declined comment for this article, but a flier distributed to its members explains its position, most notably that "even if voters approve Measure A, there is nothing in the initiative to require any level of funding for the medical center, leaving the Board of Supervisors free to reduce funding for the medical center as much as they want."

Some safeguards are in place. The initiative, approved unanimously by the Board of Supervisors, contains a provision that doesn't allow the funds raised to be used to replace current county funding. In other words, the supervisors can't do a "bait-and-switch" on the tax money raised.

In addition, the county must make cuts to the medical center in proportion to other health care programs if they lose discretionary revenue, such as the Motor Vehicle License fee, according to the initiative text.

Supervisor Steele said she is "very disturbed" that SEIU Local 250 would think the county would use the money for other means. "I have spent many, many hours working on this to save the medical center," she said.

Health care consultant Zaretsky said these rifts aren't the real issue.

"You can sweep up the floor as much as you want, but it won't keep the building open," he said. "I don't see a huge flood of federal funds coming in and Alameda County needs a county hospital. ... There are no easy answers other than money."

Contact Rebecca Vesely at rvesely@angnewspapers.com.