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20 January 2011

California Edition

California Edition


January 20






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January 23-25






February 9






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.

Hospitals Face Bigger Cost Pressures

Burden of Funding Employee Benefits Still Growing

California’s hospitals are already under cost pressures ranging from uncompensated care to seismic compliance mandates, but providing health coverage to their employees continues to gain traction as a major concern. A new survey by Torrance-based insurance brokerage Keenan & Associates indicates that healthcare coverage costs for hospitals rose

by 9%

between 2009

and 2010 for those offering HMO and PPO plans, and 11% for those offering


service plans. Although that is generally in line with premium increases in other industries, the hospitals report enormous pressure on the institutions to cost shift or nd other ways to save money, as providing coverage to a single employee approaches $10,000 per year. The report noted that fewer than half of the 94 hospital organizations and 231 hospitals in the state represented in the survey will be able to fully absorb the premium increases they expect in 2011. “They’re under immense pressure, and if you look at their cost centers, more than half is in labor,” said Steve Richter, a Keenan

senior vice president. “They cannot give as generously on the bene ts side.” Richter added that in addition to the rising employee healthcare costs, hospitals are also confronting decreased levels of reimbursement from the Medi-Cal and Medicare programs and commercial payers. Fifty-four percent of hospitals surveyed offer full

healthcare bene ts to their employees. However, 73% say they intend to increase payroll

deductions to offset some of their cost increases this year, and 66% say they will increase co-payments and deductibles. Healthcare labor leaders con rmed that more institutions are looking to have employees share the cost burden. About half of the hospitals surveyed had union representation. “We’re seeing more healthcare costs increasingly shifted to our people,” said Charles Idelson, spokesman for the California Nurses Association, which represents about 75,000 healthcare employees statewide.










California Hospital Employee Average Monthly Healthcare

Bene ts Cost in 2009, By Region

Source: Keenan Healthcare

Continued on Next Page


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Page 2

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In Brief

Blue Shield Brings in Actuary To Examine Rate Hikes

Under pressure from regulators and consumers, San Francisco-based Blue Shield of California has hired an independent actuary to study the data justifying rate increases as high as 59% on individual policyholders. Blue Shield hired David Axene, a Riverside County-based independent actuary whose work last year on behalf of the California Department of Insurance proved pivotal in prompting Blue Cross of California to scale back rate hikes as high as 39%. Axene had discovered errors in Blue Cross’ actuarial work that prompted its rate pullback. Although Insurance Commissioner Dave Jones has called on Blue Shield to delay implementing its rate hikes until they have been actuarially reviewed, Blue Shield has refused to do so. The hikes go into effect March 1, on top of a previous hike implemented between October and January. However, Blue Shield officials have said that they would abide by Axene’s conclusions, which will focus on whether Blue Shield’s actuarial calculations are accurate, and whether the rate hikes are discriminatory, excessive or unjustified. "If this independent review finds that the rates are not sound, we will hold our members harmless by refunding the difference with interest," said Blue Shield Chief Executive Officer Bruce Bodaken. Axene’s review is expected to take between 30 and 45 days, and he is free to confer with the Department of Insurance as part of the review process, according to a statement issued by Blue Shield.

Continued on Page 3

Survey (Continued from Page One)

Joe Lindsay, the CNA’s collective bargaining director, noted that Childrens Hospital of Oakland is currently asking for a 15% employee contribution toward premiums, which would average about $300 per month per employee for family coverage. Maintenance employees at the Alta Bates Summit Medical Center campuses in Berkeley and Oakland recently agreed to a similar cost-sharing arrangement. At the University of California hospital system, Lindsay estimated that out-of-pocket costs for employees have doubled in the past ve years. In an odder twist, he noted some UC employees enrolled in certain Health Net plans had their hospitals omitted from their provider network at the start of this year, a situation conrmed by other well-placed sources. Health Net, which has been touting narrower networks as a cost-saving device, declined comment on this matter last year. However, not every hospital system is trying to cost-shift bene ts. Lindsay noted that a recent labor agreement between CHA and Oakland-based Kaiser Permanente preserved healthcare bene ts at their previous levels. He add that Kaiser’s self-contained system gives it advantages in controlling healthcare


In addition to the cost-shifting on the

health benets side, other cuts have taken place. For example, 16% of the hospitals surveyed in Southern California have recently ended the match of employee contributions toward their retirement plans. Ofcials with the Hospital Association of Soutnern California were not immediately able to comment on the phenomenon. Hospitals are also more aggressively using resources such as disease management. Nearly three-quarters of respondents say they have some form of a disease management program in place, while 70% have employee risk-assessment programs in place. Hospital management also expressed relatively strong antipathy toward the implementation of the Patient Protection and Affordable Care Act. Fifty-six percent of those surveyed say they believe the overall impact on their facility will be negative, and only 30% believe it will be benecial. Among the concerns are further loss of both payer and disproportionate share revenue. “Hospitals have to do more than in the past, and they have less reimbursement to work with. That’s reected here,” Richter said.

New Phase For Medical Foundation

Hospital Associations Out of Picture As Planned

An effort by California’s hospitals to create a medical foundation model to directly employ physicians is moving forward, although the hospital associations that began the effort are no longer involved. Daniel Settlelmayer, a partner in the Los Angeles rm of Latham & Watkins who represents the hospitals involved in the medical foundation project, con rmed that the Hospital Association of Southern California and the Hospital Council of Northern and Central California exited the effort late last year. “We’ve completely handed the ball over to the hospitals that are pursuing it,” said HASC President James Barber. “That’s always been the plan, to get it to the point where the hospitals would form their own board.” Barber added that Settlelmayer is working with The Camden Group, a hospital consulting rm in El Segundo, on forming a cohesive organization. A call to that

organization was not returned. Settlelmayer said that a “number of hospitals” in both Southern and Northern California are now involved in the medical foundation effort, but declined to name speci c numbers or institutions. The group’s intent is to form an umbrella organization and name an executive director during the year, he added. “They’re looking at normal things – building up staff and outsourcing some functions,” Settelmayer said.

A not-for-prot foundation model is seen

by some as an effective form of an accountable care organization, which would control costs by streamlining the chain of command between physicians and provider organizations. ACOs are being pushed as part of the Patient Protection and Affordable Care


Continued on Next Page

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Page 3

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In Brief

CMS Lauds IEHP For Part D Plan

San Bernardino-based Inland Empire Health Plan was only one of five Medicare Advantage Part D plans in the United States and the only one in California to win the highest rating from the Centers for Medicare and Medicaid Services. IEHP, a Medi-Cal managed care plan that also enrolls dual- eligible individuals who qualify for both Medi-Cal and Medicare, received a five-star rating from CMS last month. Only five plans nationwide received such a rating. CMS reaches its ratings based on 19 different criteria, including customer service, enrollee complaints, pricing and patient safety. “This great achievement is the result of our dedicated IEHP Team Members, the support from our pharmacies and our pharmacy benefit management administrator, all working diligently together to provide our Members with a high quality drug plan,” said IEHP Chief Executive Officer Bradley Gilbert, M.D.

Kaiser Taps New Leader For Research Efforts

Elizabeth McGlynn has been appointed by Oakland-based Kaiser Permanente as director of the organization’s Center for Effectiveness and Safety Research. The center uses data culled from Kaiser’s 8.6 million enrollees to perform effectiveness of care and safety studies. Its findings were published more than 600 times in 2010. The center receives funding from the National Institutes of Health, the Food and Drug Administration and the Agency for Health Research and Quality. McGlynn formerly held a top healthcare post at the Santa Monica-based think tank RAND.

Foundation (Continued from Page Two)

California law mostly prohibits the direct employment of physicians except in a medical foundation model. In most instances, that is a hospital operating community clinics or large teaching facilities. A minimum of 40 physicians in such a group is required to receive medical foundation status. Although the California Medical Association has issued past objections about

medical foundations, expressing fears that they would provide greater economic leverage to hospitals, Settelmayer noted that the number of physicians interested in this project now far exceeds that number. “The physician component these hospitals represent would provide far beyond the compliance requirements,” he said.

Payers & Providers Expands Reach

National, Midwest Editions to Launch This Quarter

A new electronic edition of Payers &

Providers covering the Midwest and a print national edition will launch on Feb. 15 and March 1, respectively. The Midwest edition will publish every Tuesday and will cover breaking healthcare news in nine Midwestern states. Based in Chicago, the Midwest edition will be edited by J. Duncan Moore, Jr., a veteran of Modern Healthcare, Bloomberg News and the Kansas City Star.

The Midwest edition will be similar in structure to the California edition, with three pages of news and a weekly opinion article. An editorial board is currently in the process

of being convened.

The Midwest edition will also publish quarterly white papers on cutting-edge healthcare business topics and convene webinars on subjects relevant to its readership. The rst white paper will exam hospital CEO compensation in the Midwest. “This expansion is the rst step in a vision

I have toward making Payers & Providers a producer of healthcare publications of national scope,” said Ron Shinkman, publisher of Payers & Providers. The national edition of Payers & Providers will be published monthly, both in print and electronic formats. It will contain an eight- page mixture of news, data and opinion articles. It will be edited by Shinkman, who currently edits the California edition of Payers & Providers. An annual subscription for the Midwest and national editions is $99 per year. As with the California edition, paid subscribers to the Midwest edition will receive the quarterly white papers for free, as well as discounts on webinars. Those interested in subscribing to either the Midwest or national editions may call (877) 248-2360, ext. 2, or click here. Moore may be reached by e-mail at dmoore@payersandproviders.com.

Payers & Providers


Page 4

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Is OSPHD An Obstacle To Growth?

Its Excess Deliberation Slows Many Hospital Projects

There’s been a lot of grumbling from the hospital industry over the years about SB 1953 and regulations issued in the early 2000s mandating the state’s acute care

facilities meet certain seismic standards between 2013 and 2030 or shut down. Although SB 1953 is an unfunded mandate that could cost California’s hospitals more than $90 billion, there have been some silver linings. Many hospitals that would be otherwise kept operating with glue and baling wire have been reborn. El Camino Hospital, Valley Presbyterian Medical Center and the Ronald Reagan UCLA Medical Center immediately come to mind. The other silver lining is jobs. In a state where the unemployment rate is more than 12% and the building industry has been put into a virtual standstill by the housing crash, building a hospital can generate

hundreds, if not thousands, of well-

paid construction jobs. And since it can take a year or more to build a hospital, it’s the type of job that’s relatively secure. Moreover, shepherding a hospital through the design and approval process can take years more, guaranteeing many white collar jobs as well. So why is the state of California – which was responsible for SB 1953 in the first place – stymieing such a dynamic job- creation engine? This is not a wide-ranging governmental conspiracy, but rather the fault of the Office of Statewide Health Planning and Development, the single most important agency in guaranteeing hospitals in California are built, and funded entirely by fees levied on the hospital sector. Like many other governmental organizations, OSHPD accomplishes its tasks informed by clock or calendar intermittently at best. Its efficiency has been further hobbled by cuts in staffing and personnel furloughs. It currently takes an average 15 months worth of reviews by OSHPD before a hospital construction project reaches groundbreaking, a timeframe that does not even include the reviews required on the federal and local levels. Recent anecdotal evidence shows that the timeframes are stretching even further into the future.

Working with OSHPD has become so challenging that it’s ill-advised for architectural firms and building contractors that have never worked with the agency before to take on a new project. A recent example of this was Palmdale Regional Medical Center, whose doors opened more than a year behind schedule because its Pennsylvania-based parent company primarily used out-of-state firms, making final construction approvals from OSHPD maddeningly elusive. Of course, the demand on the relatively limited number of firms with extensive experience in California can delay projects

even further. California law also requires architects and engineers involved in such projects be expert in state building standards, particularly the Hospital Facilities Seismic Safety Act. The Los Angeles County Economic

Development Corp. recently estimated that OSHPD’s lengthy deliberations is

holding back hospital construction projects worth an estimated $23 billion. These projects would generate about 232,000 jobs, pay $15.6 billion in wages and generate nearly $2 billion in state and local tax revenue. OSHPD is taking some steps toward improving the approval process, by putting a fast-track approval system into place to review projects valued at less than $100,000, and installing Web-based software that will allow it to track ongoing projects more efficiently. Of course, it would be helpful if the agency could stop furloughing its employees and hire new ones as well. Although these are commendable steps, it remains to be seen how they will affect the largest projects that create the most jobs. The slowness in approving and completing these projects is a drag on California’s economic revitalization. More aggressive steps must be taken to get through its growing backlog of projects.

By Jim


Jim Lott is executive vice president of the Hospital Association of Southern California.

Op-ed submissions of up to 600 words are welcomed. Please e-mail proposals to editor@payersandproviders.com,

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