The Health Care Crisis

A growing threat to community hospitals

Chris Van Gorder, FACHE, President and Chief Executive Officer

A growing threat to community hospitals

Those of us who run hospitals have a unique opportunity to see the health insurance crisis from two sides. Like all employers, we feel the impact of double-digit increases for health insurance premiums for our employees. At the same time, the rising premiums, co-pays and deductibles are linked directly to the challenges we face daily operating our health systems.

Hospitals are vital community resources. We treat complex diseases such as cancer, heart disease and diabetes. We provide essential emergency and trauma care. And we are among the community’s first responders to a crisis — anything from a severe flu outbreak to a natural disaster to a terrorism attack.

Yet, the current health care crisis is threatening our ability to meet those obligations. Since January, six hospitals in Los Angeles County have closed and another in San Jose will close by year’s end. More than 70 hospitals have closed statewide over the past decade. In San Diego, our hospitals are filled to capacity, and we cannot afford to lose any more. In more than 20 years in health care, I have never been more concerned for the future of our hospitals.

While most hospitals in San Diego County are tax-exempt, all of us must operate with adequate margins to meet the health care needs of a growing community and comply with government mandates. Our margins are reinvested in the community’s health to develop needed services and maintain and replace our buildings and equipment.

Today we are operating on very thin margins to meet both our short-term and long-term obligations.

Health insurance costs are rising for everyone because health care costs are rising. The reasons are many, but the simple truth is that if hospitals are to continue to provide the care our communities need and expect, we must be fairly reimbursed for the services we provide.

There are a number of issues that contribute to rising health care costs. Here in San Diego, a growing and aging population is requiring hospitals to expand services and build new facilities. Patients are using hospitals more, also putting a strain on our facilities. Rapid advances in medical and pharmaceutical technology are bringing hopeful new technologies to our patients, but at a significant cost.

The supply and demand pressures of our work force — we suffer from extreme shortages of skilled medical professionals such as specialty nurses, technicians and therapists — drive up wages and thus our operating costs.

We are doing our best to address many of these. Hospitals have an ongoing responsibility to be more efficient in how we provide health care through technology and automation and through managing our operating costs as efficiently as possible while maintaining the highest standard of care.

Partnerships with local colleges to educate and aggressive programs to recruit and retain more caregivers are working to attract more professionals to health care careers. But the shortage will be with us for years.

We look to the community for help. Generous donors are stepping forward every day to help us purchase leading edge equipment and update our facilities, and we are extremely grateful for their support.

Without it, our health care crisis would be even more serious.

But perhaps the biggest factors causing rising health care costs are beyond our direct control.

Piecemeal legislation from Sacramento and Washington has created a daisy chain of unintended consequences. While often well-meaning, these fragmented solutions are forcing hospital costs to rise. When the Legislature passes laws that require hospital earthquake retrofitting and other mandates without any money to do it, somebody will have to pay for it. Unfunded mandates such as the seismic retrofit place a giant debt on all hospitals. For example, the cost to Scripps alone to meet this mandate will be more than $370 million and the cost statewide is $42 billion.

At the same time, the government is freezing or cutting reimbursement to hospitals for Medi-Cal (low-income) patients. The payments we receive simply do not keep pace with our expenses to care for these patients. When Medi-Cal doesn’t provide enough payment to cover our costs to treat a Medi-Cal patient, those costs are shifted to the privately insured or absorbed by the hospital. And Medi-Cal is dead last among all states in payment to hospitals.

And then there is the issue of the uninsured. Hospitals provide care to anyone who comes to our emergency rooms. Some are insured, and we are paid for our services. But a growing number of patients are not insured. In 2003, California hospitals provided $4.8 billion in uncompensated care. Last year, Scripps provided $64 million in uncompensated care. The cost of caring for these patients must be covered by someone.

Despite all of these cost pressures, hospitals continue to provide excellent care. Patients should expect the latest treatments from us, and we are doing our best to make them available. In many cases we are leading the research to develop tomorrow’s treatments.

It is not difficult to see why costs are rising. Solutions will be difficult, but there are some simple steps we can take to move us in the right direction.

Costs could be reduced if the Legislature stopped placing unfunded mandates on hospitals. Neither the government nor the private sector can afford to fund these mandates now. Relief from the earthquake retrofit requirement would provide significant help.

Cost-shifting to private insurers could be and would be reduced if government programs like Medi-Cal paid the full cost of care for the patients in that program. And if we could agree on a solution to the problem of the uninsured, health care costs would fall for everyone.

Until then, the shrinking pool of those covered by health insurance will continue to pay an ever increasing share of the costs. And we will likely see more hospitals closing.

In addition to his role as president and chief executive officer of Scripps Health, Chris Van Gorder is chair of the San Diego Regional Chamber of Commerce’s Health Care Committee and was recently appointed by U.S. Secretary of State Colin Powell to the United States National Commission for the United Nations Educational, Scientific and Cultural Organization (UNESCO).