Hospitals Struggle with Costs vs. Quality Service

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"Sonoma County doctors and hospitals are in the midst of a difficult balancing act."

"Doctors are struggling to improve the quality of health care in an environment where government and private health plans pay them less than doctors in other parts of the Bay Area.Hospitals, meanwhile, have undertaken $800 million in new construction projects at a time when the skyrocketing cost of providing unreimbursed medical care to the poor and uninsured is gnawing away at their bottom line."

"Total operating revenue for all seven hospitals in Sonoma County was up 14 percent in 2005, but operating expenses were up 18 percent, according to the county Economic Development Board."

"It's an ominous signal in a state where 70 hospitals have closed their doors in the past 10 years, said Jan Emerson, a spokeswoman for the California Hospital Association, a trade group based in Sacramento."We're very concerned about access to care," Emerson said."

"Hospitals can't continue running with a deficit situation over the long term. You can't continue to lose buckets and buckets of money and keep your doors open."

"High operating expenses are due in part to the rapidly increasing cost of providing care to the one out of four Sonoma County residents who is either uninsured or on Medi-Cal, a state low-income health plan that does not fully cover the cost of services."

"People who lack adequate health insurance delay getting health care and often end up in emergency rooms when they do get sick. Federal law requires hospitals to treat the people who show up, regardless of their ability to pay."

"Sonoma County hospitals saw the cost of providing charity care double last year, according to Moody's Economy.com, a West Chester, Pa., research firm.Sonoma County hospitals spent more than $2 million on what is known as charity care in the second quarter of 2005, up from $900,000 in the same period a year earlier."

"The figure jumped to $3.7 million in the first quarter of 2006."It's quite a significant problem in Sonoma County, and a problem for hospitals across the country," said Rakesh Shankar, an analyst with Moody's Economy.com."

"Another big expense is capital improvements.More than $800 million in construction projects are planned or under way at local hospitals. All seven in Sonoma County face a deadline of 2013 to bring their facilities up to state seismic safety standards."

"Some are replacing or retrofitting aging structures, while others are expanding their facilities to improve patient care.Sutter Medical Center, Sonoma Valley Hospital and Petaluma Valley Hospital expect to build new hospitals."

"Santa Rosa Memorial Hospital is building a new cardiac center and Kaiser Permanente is expanding both its hospital and its medical office buildings. Healdsburg and Palm Drive hospitals will be retrofitting existing structures."

"The cost of installing electronic medical records also is weighing heavily on hospitals' bottom lines. Startup costs for these systems are high, even though they may eventually save money because of better coordination of patient care."

"With such a system, doctors can access a patient's complete medical record online, together with the results of lab tests and the images made by X-rays, MRIs and and CT scans. A doctor in an emergency room who had never seen the patient would instantly be able to tell what medications the patient was taking and any drug allergies."

"Sutter Medical Center of Santa Rosa plans to implement a comprehensive electronic medical record system within two years, at a cost of $4 million to $5 million.By the end of 2007, all 20 physicians in the Sutter Medical Group will be using electronic medical records and the hospital is expected to be online in 2008, said Mitch Proaps, a Sutter spokesman."

"The system, which will be integrated with other Sutter Health providers, is expected to be the most comprehensive in the western United States, Proaps said. Santa Rosa Memorial Hospital expects to roll out its system in spring 2007 and be fully operational in 2008, at a cost of $5 million to $10 million."

"To eliminate medication errors, Kaiser plans to have a bar code system for patients. Drugs will be given a bar code when they leave the pharmacy and must be matched against a code on a patient's wristband before they are administered."

"Like hospitals, physicians are under pressure to invest in costly, but potentially life-saving, electronic medical records systems. Unlike hospitals, however, reimbursements to doctors are remaining flat. Partly because of the grim reimbursement picture, doctors are moving more slowly than hospitals to install electronic medical records systems."

"The initial cost for a physician's office is typically between $100,000 and $150,000, and most doctors' offices in Sonoma County are small.Most physicians will probably wait until there is a national standard that guarantees the system a doctor buys will be able to talk to every other relevant system, said Brad Drexler, a Healdsburg physician and a director of the Sonoma County Medical Association."

"The biggest stress cited by many physicians is wrangling payments from health plans, which peg their reimbursements to Medicare, the federal health plan for the elderly. And, Medicare pays Sonoma County physicians about 8percent less than doctors in the rest of the Bay Area, putting the county in the same basket as rural counties where the cost of living is much lower."

"In addition, doctors say the formula for annual increases does not keep pace with the skyrocketing cost of providing care."This remains the major issue for Sonoma County and the reason for the physician shortage," Drexler said.

"Unless both the formula for yearly growth and the (payment) inequities are fixed, the ability to attract and keep physicians in Sonoma County practices will continue to erode."

"The Sonoma County Medical Association, working with the California Medical Association, appealed to Medicare last year to change the ranking, without success."

"This year, the two associations will press for legislation instead. The California Medical Association is building a coalition with other states whose counties also have fallen behind, said Peter Warren, a spokesman for the California Medical Association."