12 August 2010
California Edition
Calendar
August 18
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E-Mail
info@payersandproviders.com with
the details of your event, or call
(877) 248-2360, ext. 3. It will be
published in the Calendar section,
space permitting.
District Scrutiny Could Get Tougher
Bill Would Impose More Rules On Hospital Leases
The legacy of Sacramento-based Sutter
Health’s management of district hospitals in
the Bay Area has been controversial enough
to spur legislation placing closer scrutiny
on how such arrangements are structured.
SB 1240, authored by Sen. Ellen
Corbett, D-San Leandro, and sponsored by
the California Nurses Association, would
forbid private entities from transferring any
funds or assets out of hospital districts. It
would also require annual – and publicized
– audits of both the hospital operator and
the district. Losses incurred by a private
operator of a district hospital would also be
barred from use as credits in purchasing a
district hospital or any of its assets.
The bill was approved by the Senate on
June 1 by a 22-12 vote, and passed the
Assembly Health Committee on June 22. It
is currently awaiting a vote in the Assembly
Appropriations Committee.
CNA officials say the legislation is in
response to the way not-for-profit Sutter
Health has operated hospitals in the Marin
Healthcare District in Greenbrae and Eden
Township Healthcare District in Castro
Valley.
Both CNA and Marin Healthcare
District officials claim Sutter transferred as
much as $200 million in assets out of the
district, which operates 235-bed Marin
General Hospital. Sutter officials have
claimed that it had invested some $235
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million in Marin General during the 14
years it managed the hospital, and was
entitled to recoup the funds.
Control of the hospital was returned
to the district in late June. However, the
transfer did not occur until the district
waged an acrimonious lawsuit against
Sutter over which entity would pay for
seismic retrofitting at the facility.
Sutter settled the suit in 2006,
agreeing to terminate its lease of Marin
General five years prior to its 2015
expiration. But the same year it settled
with the district, Sutter transferred nearly
$50 million alone from Marin General to
its corporate entity.
Just before the transfer of the hospital
back to the district, more than 30 Marin
County officials signed a full-page ad that
appeared in the San Francisco Chronicle
and other Bay Area newspapers
demanding Sutter return assets to the
district. The Marin County Board of
Supervisors also demanded Sutter do the
same.
“Sutter used Marin as a corporate
ATM,” said CNA spokesman Nato Green.
In the case of Eden Township, which
includes Eden Medical Center and San
Leandro Hospital, the CNA claimed that
Sutter negotiated a lease of San Leandro
Continued on Next Page
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In Brief
Kaiser Reports Lower
Net Income For Quarter
Kaiser Permanente’s hospitals and
health plans reported a 35% drop
in net income for the second
quarter ending June 30, although
it’s year-to-date profit is about the
same as it was in 2009.
The Oakland-based and not-
for-profit Kaiser reported net
income of $404 million for the
quarter, down from $620 million a
year ago. Year-to-date net income is
“approximately $1.1 billion
consistent with the same period in
2009,” according to a prepared
statement.
Revenue for the first six
months of 2010 was $22 billion, up
4.1% from the $21.1 billion
reported during the first half od
2009.
Despite the dip in net income,
Kaiser reported spending $576
million on capital expenditures, up
3.1% for the year-ago quarter.
“Through our financial
performance we are able to support
our capital expenditures as well as
our ongoing efforts to deliver high-
quality, affordable healthcare,” said
Kaiser Chief Financial Officer Kathy
Lancaster.
Kaiser does not report the
financial results for its Permanente
medical groups, which are for-profit
operations.
. to be completed within two years.
Tougher Rescission
Rules To Go Into Effect
New regulations championed by
California Insurance Commissioner
Steve Poizner that tighten the ability of
insurers to rescind individual health
insurance policies go into effect on
Aug. 18.
Continued on Page 3
NEWS
Districts (Continued from Page One)
in 2008 that allowed it the right of first
refusal to purchase the facility, as well as
use operating losses as credits against the
purchase price. Green claimed the deal
not only prompted Sutter to “run San
Leandro into the ground,” but that it used
claimed losses to try and purchase the
hospital for virtually nothing.
The Eden Township district has sued
Sutter over the agreement, claiming a
conflict-of-interest.
Sutter officials declined comment on
the legislation, which is supported by
both the Marin and Eden Township
districts.
The California Hospital Association
opposes SB 1240. “CHA believes existing
healthcare district law already provides
L.A. Care Grants $529K For Health IT
Five Community Clinics in Region Receive Funding
L.A. Care Health Plan has granted $529,000
to ve Los Angeles-area clinics to help them
install electronic medical record (EMR
systems).
The grants, which ranged from $99,000
to $115,000, went to Asian Pacic Health
Care Venture; St. John’s Well Child and
Family Center; the Venice Family Clinic and
the Family Health Care Centers, all in Los
Angeles. The fth recipient was Northeast
Valley Health Corp. in the city of San
Fernando. All treat primarily low-income
uninsured and Medi-Cal patients.
The grants are enough to outt the
clinics with full EMR systems, according to
Roland Palencia, L.A. Care’s director of
community benets. Installation is expected
A total of 45 clinics throughout Los
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Page 2
for adequate protections and public
review prior to a district entering into a
major contract,” stated correspondence
from the hospital lobby to lawmakers.
State law prohibits transfer of more
than 50% of a hospital district’s assets
without approval of district voters. In
2011, legislation that allowed for-profit
entities to transfer assets from a district
expires, allowing such transfers only to
not-for-profit entities.
Green noted that the legislation
would affect only a handful of district
hospitals in California that are leased or
operated by private entities.
“But we want to guarantee that assets
are reinvested,” he said.
Angeles County were approached to submit
grant applications, L.A. Care ofcials said.
Twenty-ve initially participated in
conferences about the grant process, but
only 12 submitted formal applications.
“Some had already received (EMR)
grants, and others felt they were not yet
ready to go through the process,” Palencia
said.
The recipients may receive technical
assistance from L.A. Care in installing the
systems.
The grants were intended to close the
gap between federal stimulus funding to
clinics for purchasing EMR systems, and the
actual cost for installation.
To date, L.A. Care has given 27 health IT
grants totaling about $3.8 million.
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Payers & Providers
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In Brief
The regulations streamline and
clarify insurance applications; require
insurance agents to disclose whether
they helped a policyholder apply for
coverage. They also impose a 15-day
time limit on opening an investigation
once an insurer receives information
that suggests contradictory
information on an insured’s
application.
“Keeping your health insurance can
literally be a matter of life and death,
and I have zero tolerance for insurers
who use pretexts to illegally rescind
policies," Poizner said. “These tough
regulations embody my commitment
to enforce the law and to protect
consumers who buy medically
underwritten insurance coverage.”
Health Net Pledges
$7M To Keep SJV
Clinics Open
Woodland Hills-based insurer
Health Net and its charitable
foundation have pledged $7
million in interest-free loans to
keep community health clinics in
the San Joaquin Valley afloat
during the current state budget
impasse. The loans will be
available should the state halt
Medi-Cal and other payments to
the clinics.
“Health clinics are the main
source of primary and specialist
care for millions of Californians,”
said Dave Meadows, vice president
of State Health Programs for Health
Net of California. “Clinic
shutdowns could have terrible
health implications for residents.”
The loan offers would mark
the fourth year in a row Health Net
and the Health Net Foundation
have extended such aid to
community clinics.
NEWS
Stanford, SVMHS In Transplant Deal
Salinas-Area Patients Will Receive Local Care
Stanford Hospitals and Clinics perform
scores of kidney and pancreatic transplants
on its Palo Alto campus. However, residents
of the Monterey Peninsula region have had to
commute hours each way to receive crucial
pre-operative and post-operative care.
Such treks – which can be particularly
debilitating to patients with chronic illnesses
or recovering from major surgery – will end
as part of a new pact with Salinas Valley
Memorial Healthcare System.
Although transplants will continue to
take place on the Stanford campus, Stanford
physicians will be provided ofce space on
the Salinas Valley campus in Salinas. Starting
at the end of this month, they will use that
hospital’s facilities to provide the extensive
preparatory and post-operative care to the
transplant patients.
Ofcials with both hospitals say not
having to travel the approximately 150-mile
round trip between Salinas and Palo Alto
could improve outcomes. Patients who
qualify for organ transplants have to undergo
a battery of pre-operative tests to qualify for
the transplant waiting list, and years of
Earnings Down At Molina Healthcare
Revenue is up, But YTD Numbers Are Similar to 2009
Long Beach-based Medicaid managed care
insurer Molina Healthcare reported a 27.4%
decline in net income for the second quarter
ending June 30, impacted in part by rate cuts
imposed the state of Michigan. However,
company ofcials say the plan is well-
positioned for the long-term.
Net income for the quarter was $10.6
million, compared to $14.6 million for the
second quarter of 2009. Revenue was $999.3
million, up 7.2% from the year-ago quarter’s
$927.6 million.
Revenue for the rst six months of 2010
was $1.97 billion, up 9.7% from $1.78
billion for the rst half of 2009.
“Our second quarter results reect
improvement across our business despite a
very difcult premium rate environment,”
said Molina Chief Executive Ofcer J. Mario
Molina, M.D. “Although a few states have
provided rate increases, most states remain
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Page 3
ongoing monitoring after a transplant is
performed.
“(This) will provide patients greater
convenience in terms of location to non-
surgical transplant care,” said Eric Williams,
Stanford’s administrative director of its solid
organ transplant service line. Williams
estimates about 40 to 50 patients in the region
will use the services at Salinas Valley every
year.
Although Stanford is underwriting the cost
of providing care at Salinas Valley – including
the rental of ofce space – Williams did not
disclose the annual budget for the program.
The deal between Salinas Valley and
Stanford is part of an ongoing agreement
between the two hospitals, the former a 269-
bed community hospital in a fast-growing but
still rural community, and the other a 630-bed
world-class teaching and research facility. In
2008, Stanford began providing cardiac
surgical care on the Salinas Valley campus,
and later began providing on-site neonatal
intensive care in conjunction with its pediatric
facility, Lucille Packard Children's Hospital.
burdened by their budget shortfalls.”
Michigan, for example, cut premiums by
$5.5 million, retroactive to October 2009. The
total rate cuts for the rst six months of the
year was $8.7 million, Molina reported.
Molina’s medical cost ratio, under
pressure in recent quarters due to high rates of
patients who contracted the H1N1 swine u,
declined to 86%, compared to 86.8% during
the second quarter of 2009. The year-to-date
ratio is 85.9%, down from 86.4% for the rst
half of 2009.
Overall plan membership was up 8.7%,
to just under 1.5 million, compared to 1.4
million a year ago.
In addition to its nancial results, Molina
announced a public offering of 4 million
shares of stock at $27 a share. The paid-in
capital from the stock offering will be used to
reduce Molina’s revolving credit debt.
Payers & Providers
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OPINION
Finding Meaning In Meaningful Use
Although Lengthy, Regs Pave Clear Path For EHRs
The healthcare industry is abuzz about the
final regulations released by the
Department of Health and Human
Services on July 13th that define the
Meaningful Use of Electronic Health
Records (EHR).
The final Meaningful Use
rules incorporate changes
designed to make the
requirements more
achievable. Although the
guidelines are 800-plus
pages, the principles
contained in them are not
that complicated; they
promote 10 key changes in
how health care providers
deliver care.
Most of us would agree
that these changes are
sensible and needed and
that the federal
government is moving
medical practice in the right
direction. For example, giving
patients’ their own clinical Batchlor, off to some future date is not sensible
information will help them become
real partners in their care.!Sharing
clinical information, such as lab results
and prescribed medications, with other
health care providers will improve care
coordination and reduce wasteful
duplication.
The real controversy is about how fast
these objectives can and should be
achieved and whether existing systems
can support them. An April 2010 Health
Affairs study found that many of the
Meaningful Use rules align with how
physicians are already using basic EHR
systems. This suggests that Meaningful Use
is achievable with existing technology.
Providers at Kaiser Permanente are
demonstrating that the technology is
usable, and their early studies are showing
that they support better care.
The final Meaningful Use rules
incorporate changes designed to make the
requirements more achievable. For Stage
1, which begins in 2011, the rules call on
physicians and other eligible professionals
to meet 15 objectives to qualify as
Meaningful Users of EHRs. The rules
include a “core” group of 10 required
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Page 4
objectives and a “menu set” of 15 objectives
among which providers can choose. This two-
track approach ensures that the basic
elements of meaningful EHR use will be met
by all providers qualifying for federal
incentive payments, while allowing flexibility
to accommodate different
needs and capabilities.
The elegance of Meaningful
Use is that it’s about more
than health information
technology; it’s about
transforming health care
delivery.! The biggest
challenge is not the
capability of the technology,
but the capacity of people
to change. Meaningful Use
calls on providers to
significantly change how
they deliver care. And we
all know that change makes
most people anxious. Yes, it
By
will be hard work, and it will be
Elaine uncomfortable at times. But, putting it
given the urgency of the challenges
M.D. facing our health care system. It’s work
we need to expeditiously move forward in
order to create health care that is efficient,
affordable and high quality. !
To help health care providers implement
the changes promoted by Meaningful Use, the
federal government is establishing regional
extension centers covering the entire country.
These centers will provide onsite assistance to
providers to help them purchase, implement
and meaningfully use electronic health record
systems to provide better care. For a regional
extension center in your area, visit: http://
healthit.hhs.gov/portal/server.pt/community/
healthit_hhs_gov__rec_program/1495.
Elaine Batchlor is the chief medical officer of
L.A. Care Health Plan. She is a member of the
Payers & Providers Editorial Board.
Op-ed submissions of up to 600 words are
welcomed. Please e-mail proposals to
editor@payersandproviders.com, or call (877)
248-2360, ext. 3.
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