Hospital working to address loss of Kaiser contract
New services, better outreach and salary reductions and freezes are some of the key strategies the leadership of Alameda Hospital is undertaking to boost the hospital’s bottom line and to tackle the loss of a surgical services contract with Kaiser Permanente, which cost the hospital $9.8 million in revenue a year.
The hospital has also found a potential source of funding for $10 million in seismic upgrades it must complete by 2013, Chief Executive Officer Deborah Stebbins told the City Council on Tuesday night.
Stebbins called the loss of the Kaiser contract in March “a kick in the teeth” but said she thinks the hospital has recovered from it. Her presentation showed the hospital as being $1.83 million in the black for 2010, according to unaudited numbers. The hospital’s latest management analysis, which was current as of May 31, showed a deficit of $692,000, though the hospital received $2.2 million in federal funds on June 3 plus the return of $2 million of its own money for restarting its Medi-Cal contract.
And Stebbins said she thinks the loss of the contract, which had paid for for 14 percent of the hospital’s $60 million budget, could be a blessing in disguise. The hospital has been recruiting doctors to perform surgeries there in lieu of the Kaiser business.
“While some of us felt the Kaiser contract expiring was a monumental impact on us, I think it’s a good thing,” Stebbins said. “Because it allows us to put Alameda patients into what was previously a very crammed surgical program that had no room for expansion.”
Kaiser let its contract with Alameda Hospital expire this year in the face of a massive reduction in patients and the completion of new facilities in Oakland and Richmond. Alameda Hospital hosted about a third of the surgeries it expected to host in May, the hospital’s most recent management analysis shows.
Alameda Hospital’s mission is to provide general acute care services to the local community. But Stebbins said the hospital needs to provide secondary services to a broader geographical area in order to pay for those services.
“We need to provide niche services to sustain core services. We plan to draw from the broader East Bay for those,” Stebbins said.
The hospital is working to create a stroke program with Eden Medical Center in Castro Valley and also a wound care center intended to treat people with persistent, non-healing wounds, she said. They have also been focusing on services for the area’s growing aging population, increasing sub-acute services and skilled nursing beds.
Stebbins said the hospital has also inked a new contract to take patients who have Medi-Cal. The hospital had dropped its Medi-Cal contract because the reimbursements didn’t cove the cost of the services the hospital provides, but decided to sign a new one when federal money became available to help meet those costs.
The hospital has also expanded its outreach efforts, meeting with local business associations and reaching out to residents of Bay Farm Island, the local Asian community and residents of nearby portions of Oakland, Stebbins told the council.
It has also worked with its 575 employees to cut or freeze wages. The hospital’s management and unrepresented employees took a five percent wage cut, Stebbins said, and three of its five unions – those representing nurses, imaging technicians and lab technicians and phlebotomists – agreed to wage freezes.
The hospital had hoped to save $2 million with an across-the-board wage cut; the cuts that were made have saved about $500,000, associate administrator Kerry Easthope said.
Stebbins said the hospital may also have found a source of financing for an estimated $10 million in state-required seismic retrofit work – something that’s been a challenge for the hospital due to the lack of construction lending and the hospital’s weak financial track record. She said hospital leadership expects to make its pitch to Cal-Mortgage, a state outfit offering hospitals loans, in December or January.
“It’s not in the bag by any means, but we’re hopeful that would be favorably looked upon,” Stebbins said. We’re not the only hospital in a financially challenging situation.”