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January 18-24, 2006

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Hospital Checkup

How healthy are our major medical facilities?


By Patricia Lynn Henley

It's never been cheap to build a new hospital, but costs have spiraled far beyond what the average person can imagine. In the 1950s, the norm was $10,000 a bed, says Sutter Medical Center spokesman Mitch Proaps. In the 1980s, that rose to $100,000 per bed; in the 1990s it was $625,000. Today, the cost of building a new hospital is $2 million-plus per hospital bed. Aging buildings plus new seismic retrofitting requirements equal major expenses for most North Bay hospitals.

Southern California's 1994 Northridge earthquake destroyed several key medical facilities. Now the state is saying that hospitals have to meet much higher seismic standards than other structures. Each facility must have a plan in place by 2008, detailing how it will meet the tough new guidelines by 2013. Almost every hospital has to build or retrofit, and only a limited number of construction firms are qualified for medical work.

"Every hospital in California is undertaking major construction projects. That has created a huge demand which has caused costs to skyrocket," Proaps explains.

This is just one of a number of forces--financial, bureaucratic, societal--squeezing California's major medical facilities. Exactly how healthy are North Bay hospitals, and will they continue to be there when needed?

Many factors press on local institutions, and reimbursement rates are a major issue. Despite its growth, Sonoma County remains classified as a rural area by Medicare, which means hospitals and physicians there get paid at a lower rate for identical medical procedures performed at a higher rate in Napa, Marin and other Bay Area counties. Most insurance carriers base their rates on Medicare, making it even more difficult to cover costs.

There's also the legal requirement to care for everyone who needs emergency treatment, regardless of ability to pay. It's a compassionate approach, but the number of low-income, uninsured patients keeps rising, making it that much harder to keep the hospital itself financially healthy.

Another concern is the recruitment and retention of trained medical personnel in a region where housing costs take a big bite out of salaries, even those of doctors. Then there's the related issue of soaring staffing costs, especially at those older facilities that aren't laid out to efficiently use modern technology with a minimum of personnel. Ironically, as major employers, hospitals are hard hit by the rising costs of health insurance for their staff.

And finally, many patients now see themselves as empowered healthcare consumers who have become much more informed--both correctly and incorrectly--through Internet research. Such patients are often more expensive and demanding to treat.

With so much pressure to perform, how are local facilities coping?

Palm Drive Hospital in Sebastopol is doing quite well, says spokeswoman Judy Farrell. In 1998, the corporation that owned this 37-bed facility said it would be closed in 90 days. A group of citizens bought and operated the facility until November 2001, when it was taken over by the voter-created Palm Drive Health Care District. Voters also approved parcel taxes in 2001 and 2004 to help with hospital operating expenses. "A lot of people in the community think of us as struggling as we were in the past five, six years," Farrell says. "With the support of the community, we've been able to stabilize. We've turned a corner. We still have to watch what we spend, but we're here to stay."

Palm Drive has increased its surgery capacity and plans to expand its orthopedic program, says CEO Shawndra Simpson. It's also working with local physicians to emphasis prevention efforts. Fortunately, the one-story structure, built in the 1970s, didn't need extensive retrofitting. "We're the only [local] hospital that is not on a fault line," Simpson explains. "We're lucky in that we don't have facilities issues."

Sonoma Valley Hospital is "doing well," says Scott Gregorson, vice president of business development. For the first time in a decade, the hospital isn't running a deficit. "We've had our challenges financially in the last decade, and we've done some major renegotiations with our managed-care contracts. We're able to anticipate for the first year that we'll be in the black." And that's without factoring in the five-year parcel tax approved by voters in March 2003, raising about $2 million annually. Unfortunately, "the primary part of our hospital was built in the 1950s, and we need a new facility," Gregorson says.

The preliminary estimate is $125 million. Officials will be asking voters to approve another bond measure in the future to cover the costs. "If we don't pass a bond, it is more than a possibility [that there would be no hospital in Sonoma Valley]," warns chief financial officer Jim McSweeney. "It won't be economically viable and it won't be legally viable."

Healdsburg District Hospital still has red ink on its books, but things are better than they have been, says CEO Dale Iverson. Expenses for the 43-bed hospital will outrun income by about $500,000 to $600,000 this fiscal year, but a few years ago the annual deficit was almost $2 million. In 2002, voters approved forming a new hospital district and a parcel tax to support it. They OK'd another parcel tax in 2003. Iverson agrees small hospitals like Healdsburg have a steep uphill battle in remaining healthy, but, he says, "we are optimistic mainly because we have the community and the staff support." That doesn't mean things are easy. Recruiting and retaining medical staff are a crucial issue.

"Our nursing wage scale is below the area and makes it difficult both to attract and retain registered nurses. And we lost several primary-care physicians either through retirement or relocation. As a result, it's very difficult to find a personal-care physician in Healdsburg or Cloverdale," Iverson says.

Kaiser Permanente's North Bay facilities are "robust and growing" says spokeswoman Meg Walker. "Kaiser is really benefiting from its integrated healthcare model, where everything is under one roof." Staffing is easier, since its doctors are salaried employees instead of having to act as entrepreneurs who run their own private practices. Kaiser operates two North Bay hospitals, with a 117-bed facility in Santa Rosa and 124 beds in San Rafael, along with medical offices in Rohnert Park, San Rafael, Novato, Petaluma and Napa.

In the next few years, Kaiser's Santa Rosa hospital will add 92 more beds in a new five-story wing, which will also double the size of its emergency department. This spring, construction begins on new medical offices on Old Redwood Highway. San Rafael is slated to get a new, state-of-the-art facility by 2013. But the biggest growth will be in technology, as Kaiser works to give patients and personnel online access to test results, medical histories and other information.

Sutter Medical Center of Santa Rosa is in "fair but stable condition, and the prognosis for recovery is good," says spokesman Proaps. Sutter has 244 beds in Santa Rosa on two sites, the former Community Hospital on Chanate Road and the former Warrick Hospital in eastern Santa Rosa. Both are in a fairly active earthquake fault region, so Sutter plans to build a state-of-the-art facility on 25 acres next to the Luther Burbank Center. Erecting such a structure is no routine matter, and specialty contractors are usually employed. One such builder that Sutter had hoped to employ is completely booked for the next five years. The initial cost estimate was $203 million but that has already climbed to around $250 million to $255 million for scaled-back plans.

Like Kaiser, Sutter is hustling to apply technology to all aspects of its services. "We will be among the first hospitals in the nation to go live with an electronic health record," says Proaps. With roughly 26 hospitals in its overall system, Sutter is investing at least $150 million in this online system. "It's going to be a lot of work, but when it's all said and done, it's going to be a wonderful, wonderful thing," Proaps adds. "Some of the challenges we face are not necessarily bad."

Novato Community Hospital is also a Sutter affiliate and is "healthy and growing," says spokeswoman Mary Strebig. The hospital moved into its 47-bed state-of-the-art facility in 2001. Strebig said the main focus this year is celebrating the hospital's fifth anniversary, as well as the fact that the Chamber of Commerce just named it the outstanding large business in Novato for 2006.

Marin General Hospital is also a Sutter affiliate, but officials there decline to provide any information. "We will not be participating in your hospital roundup," hospital spokesman Jim Loveland tersely informed the Bohemian by e-mail. The hospital signed a 30-year lease agreement with Sutter in 1985. A recent story in the Marin County daily newspaper quoted a letter from a Sutter attorney detailing "a structure for discussions regarding a potential early termination of the lease," which indicates that Sutter and Marin General are contemplating the equivalent of divvying up the household goods during a divorce. With 235 beds, Marin General is the largest acute-care hospital in Marin County. It has been suggested that the cost of the state-required seismic retrofit may be a major factor in the potential split between the hospital and Sutter.

Queen of the Valley Hospital in Napa is part of the St. Joseph Health System. Despite repeated requests from the Bohemian, a spokesman for the 179-bed hospital refused to provide any information about its health or the challenges it faces.

Santa Rosa Memorial and Petaluma Valley hospitals are also operated by St. Joseph. Santa Rosa Memorial--with 346 beds on three campuses--and 82-bed Petaluma Valley Hospital are in good health, says Dr. Gary Greensweig, chief medical officer for St. Joseph in Sonoma County. These hospitals' buildings are comparatively new and will be retrofitted rather than rebuilt. Staffing recruitment and retention are challenges, but "we are doing relatively well," Greensweig says. He adds that St. Joseph puts an emphasis on employees' quality of work life, listening to their opinions and ensuring that they feel valued and a part of any decision-making process. Both hospitals have recently upgraded their technologies and are working to give physicians online access to patients' medical information.

"Our major challenges involve continuing to invest resources in improving the quality of care as we face declining revenues from Medicare and Medi-Cal as well as increased costs for caring for unfunded and underfunded patients," Greensweig says. "The healthcare industry, and specifically the hospital community, is asked to do more and more each year relative to caring for patients from all levels of government with less and less resources.

"That's a significant challenge."


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