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Strategic Plan to Preserve High Quality Health Care for Lake County: Critical Access Hospital (CAH) Designation Decision
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Background
Our Community Benefits From Securing a Strong Financial Future
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Sutter Lakeside Hospital & Center for Health (SLH) board of directors and administrative leaders have been proactively working to preserve high quality health care services for the residents of Lake County and surrounding communities for more than 60 years. Our mission today, and for the future, is to continue this legacy. Ensuring the financial security of Sutter Lakeside Hospital is essential to maintain our level of care and provide for future community needs.
SLH has enjoyed more than 5 years of financial stability. Under the direction of chief executive officer, Kelly Mather, and a dedicated volunteer board of directors comprised of community members, strides have been made across the board in growth, exceptional quality, increased specialty services, and a commitment to the health of the entire county. In May of 2007, efforts to dodge the ever-pressing financial shortfalls finally became insurmountable without implementing substantial change.
Since 2002, SLH has been one of the last financially stable rural hospitals in California. Until recently, SLH has been successful in a number of growth initiatives and optimistic about our ability to remain financially stable. In 2003, the bankruptcy of the Health Plan of the Redwoods realized a $5 million loss for SLH. SLH implemented more creative measures for absorbing this loss and SLH managed to recover. Recently however, reimbursement for Medicare patients at SLH dropped significantly. The reduction means that SLH now loses 40% on every Medicare patient is serves. The impact was so significant that measures to address the situation require substantial and swift change.
The board of directors and administrative team spent much of the fall in 2007 proactively seeking ways to address the financial impact before financial losses became severe enough to affect the residents of Lake County. After careful consideration the SLH Board recommended seeking Critical Access Hospital (CAH) status for SLH as the strategy that will best meet the needs of the community today, preserve high quality health care for Lake County, and allow for growth in the future.
The CAH status is offered to rural hospitals of 25 beds or less to ensure that critical healthcare services are available locally. Under this CAH designation, hospitals receive higher reimbursement from Medicare which covers more of the overhead cost of care. Pending CMS accreditation, SLH will make the designation effective March 7, 2008 as a Critical Access Hospital.
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How will the Community benefit from Sutter Lakeside Hospital designated as a Critical Access Hospital?
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Today, reimbursement for only 1 out of every 5 patients at SLH actually covers the cost of providing care. The current rate SLH receives for Medicare patients is much lower than the cost of providing care. Based on discharges, Medicare was the largest payer group for Lake County patients, comprising 48% of the total cases. Under the CAH designation, SLH will begin to receive higher reimbursement rates for Medicare patients. The result will be that as a CAH designated hospital receiving those higher reimbursement rates, 4 out of every 5 patients at SLH will cover the cost of providing care.This means SLH will be in a stronger financial position to be able to ensure the high quality of care, protect jobs in the community, and expand services needed in the future. When one group of patients pays less than the true cost of their medical care, other patients cover these losses by paying more than their share. This “cost sharing” trickles down to employers who are forced to pay more for health coverage for their employees. As a CAH, SLH will be in a position to contain costs for Lake County employers. The CAH designation will preserve and protect the high quality of care legacy in our community. As a financially sound facility, we can continue to attract highly skilled and quality staff, nurses and physicians. We will be able to continue providing valuable community programs such as our Healthy Kids Are Contagious K-12 wellness educational program, financial support to Lake Family Resource Center, which provides family services to at risk populations, and free transport services to the hospital campus for patients unable to afford transportation. Since 2001, Sutter Health has spent $33 million in hospital upgrades and building a new emergency surgery department, imaging department and family medicine clinic. SLH has produced a profit of only $2.15 million over that same period. Our Sutter Health network has set a fairly modest annual earnings goal of at least five percent which allows the organization to invest over a billion dollars a year in facility improvements and new technology that helps Sutter’s doctors and hospitals provide the highest quality and safest care possible to patients. In fact, the capital needs of Sutter Health’s affiliated physicians and hospitals exceed Sutter’s ability to fund them all. Building a strong financial future locally will ensure that these kinds of investments can continue and we have plans for expanding our services. Some of the expansion projects scheduled over the next few years includes: - A 50,000 square foot Medical Office Building adjacent to our hospital campus
- Expansion of physician, ancillary and wellness services in South Lake County area ( Middletown)
- Expansion of our Rural Health Clinics into Lucerne and Kelseyville
- Expansion of our Specialty Clinics
- Wellness Center Expansion
- Community Center Expansion.
Being part of a larger network whose members support each also helps ensure that organizations like Sutter Lakeside remain responsive and available to the communities they serve in times of need. Over the longer term, however, all members of the Sutter family need to be financially self-sustaining. Otherwise, Sutter facilities in other communities would have to divert their own resources to subsidize our Sutter Lakeside organization, for example. This would deprive these other facilities of funds they need to meet their community’s needs and potentially drive up health care costs for everyone. SLH is the second largest employer in Lake County. The CAH designation will preserve the over 600 high quality jobs SLH provides in our community. With adequate reimbursement of costs for services, SLH will be able to invest more in our community and expand our services- not cut them. SLH is a not-for-profit hospital. A not-for-profit hospital is a center offering medical services to the local community whereby profits are used to improve healthcare services for the community. Profits generated in non-profit organizations benefit the community.
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Lake County Hospital Capacity and Population Projections
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Lake County hospitals ran an average daily census of between 37 patients and 43 patients from 2002 through 2006. There are currently 101 acute licensed beds between the two Lake County hospitals, and therefore, in 2006 the hospitals had an average occupancy rate of 42.5%. Outside of Lake County, Ukiah Valley Medical Center and Frank R. Howard Memorial Hospital, both located in Mendocino County, are the next closest facilities located 31 and 44 miles away from SLH, respectively. These hospitals had occupancy rates in 2006 of 41% and 33%, respectively. St. Helena Hospital in Napa County is the most popular hospital to which Lake County patients out-migrated in 2006 (36%). This hospital is located 64 miles from SLH, but just 20 miles from some South Lake County residents. In 2006, St. Helena Hospital had a 27% occupancy rate. The very low occupancy rates clearly demonstrate there is ample capacity in the community to accommodate the existing and future inpatient needs. In fact, the low occupancy and excess capacity is a key factor in the financial crisis facing most small and rural hospitals today. The population of Lake County is projected to grow by 7.8% over the next five years, or 1.5% per year. The average annual growth rate for the state of California is 1.4% and 1.2% for Northern California. Most of the growth is expected in the zip codes located more than 10 miles from SLH at a 2.4% annual growth rate; whereas, the area within a 10 mile radius of SLH expects an annual growth rate of 0.8%. Per an inpatient demand study, based on 2006 OSHPD data and Department of Finance population forecast, Lake County hospitals will have a projected average daily census (ADC) of 42 patients in 2010, and 51 patients in 2020. The 25 acute beds at Lakeside Hospital and the 25 acute beds at Redbud Community Hospital should meet the community need for at least the next ten years.
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Community Impact of Critical Access Designation
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The most significant impact is that through the benefits of the CAH designation, we can continue to meet the majority of the community’s healthcare needs and plan to expand to meet future needs. 80% of patients visit SLH for health care provided on an outpatient basis. On average, SLH sees 2,200 inpatients and more than 150,000 outpatients annually. Under the CAH status there is a requirement to limit inpatient beds to a maximum of 25 at all times (certain beds do not count toward the 25 bed limit, including examination or procedure beds, operating room tables, gurneys, and others). SLH current inpatient average daily census is 24. Therefore, the majority of the time patients will continue to be admitted locally. We conservatively estimate that we will be able to accommodate 98% of the patients we would typically admit, with the remainder transferred to nearby facilities such as Ukiah Valley Medical Center , or, depending on the level of care required, to a contracted, local skilled nursing facility. Much of what we are learning points to the greater amount of flexibility we will have as a Critical Access Hospital. This flexibility, and an efficient approach to case management, will help us substantially limit the need for transfers – allowing us to perhaps handle more than the estimated 98%. SLH currently transfers approximately 250 patients per year to other facilities to receive higher levels of care than SLH, or other local hospitals, can offer. The majority of these transfers are for cardiology care to Santa Rosa, pediatric care to Oakland, and other specialty care to U.C. Davis. Under the CAH designation, we have estimated conservatively based on our past year’s census, to transfer an additional 200 patients per year to either a skilled nursing facility (we have contracted with Lakeport Skilled Nursing), to Ukiah, or to St. Helena for the same level of care provided at SLH. We have reached out to the leadership of nearby Ukiah Valley Medical Center and St. Helena Hospital and have their assurances that their facilities have the capacity to accommodate, and would welcome, additional patients from SLH when necessary (see attached letters of confirmation).
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Impact on Trauma Status (ER)
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CAH designation will have no effect on our status and operations as a Level IV trauma center. Any unstable trauma patients will be stabilized. If the patient has neurological, or a complicated vascular or orthopedic injury, they will be transferred to the appropriate higher level trauma center. This is consistent with our current practice. Less traumatic and orthopedic injuries will continue to be treated at our facility as usual. This will not impact the CAH status - most trauma patients that are treated solely at our facility are discharged within 24 - 48 hours.
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Impact on Disaster Preparedness
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CAH status will have no effect on our ability to meet the needs of our community during a disaster situation. Our existing emergency surge (disaster) plan relies on the use of our outdoor event tents and will not increase our inpatient population. Briefly, our current emergency surge plan includes the following steps: - Setting up a Command Center (HICS)
- Discharging appropriate patients home or to Skilled Nursing Facilities
- Calling in all available staff from the labor pool
- Furnishing our Event Tent (located on our campus, below the main hospital) with the necessary amount of cots and supplies to care for surge patients
- If needed, setting up a second tent in the ER parking lot and/or using the armory to care for more surge patients. Nurse-to-patient ratios are not in effect once the state has declared an emergency.
When our plan is fully implemented, we have the capability to care for a surge of up to 350 patients, providing sufficient nursing staff is available to provide care.
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Best Solution for Our Community’s Future
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We recognize that the choice to change our status isn’t a perfect solution. We believe, however, it is the only option that avoids reducing or closing vital community health services to maintain operations. We have put a plan in place to problem solve some of the challenges. Our mission is to reinvest into the community we serve. This mission isn’t possible when operating costs exceed revenue generated. Our Board of Directors took proactive measures with this Critical Access designation to protect the long term viability of SLH. We will continue to provide information to the public we serve as we move forward implementing this new strategic effort to protect and preserve the high quality of care in our community.
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