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Friday, June 28, 2013

How Alameda Health System Is Going All-In With Deals In Alameda, San Leandro

ALAMEDA COUNTY//HEALTH CARE | The fall and potential renaissance of two East Bay health care facilities in San Leandro and Alameda share similar qualities, they reportedly bleed money and struggle to compete in a market dominated by big players in the health care industry. However, while Alameda resident’s took control of their stand-alone hospital years ago with a annual $297 parcel tax, San Leandro put the onus on the local health care district and Sutter Health. Ironically, in the end, either gambit has led both into the arms of the county’s safety net health care provider, Alameda Health Systems.

This month, the formerly named Alameda County Medical Center, signed a letter of intent with the Alameda Healthcare District to operate Alameda Hospital. All sides were careful how they labeled the deal after a healthcare district’s board members recently resigned citing concerns the pact with AHS should be posed to voters. A state law exists requiring a vote of the people when the assets of more than 50 percent of the health care district is transferred to another entity. “This is not a sale, not a merger,” said Debbie Stebbins, the Alameda Healthcare District's CEO. “It’s an affiliation.”

The proposed deal includes maintaining Alameda Hospital’s emergency room, no reduction of services or loss of jobs, said Stebbins. It also extends a $3 million line-of-credit from AHS to the hospital, of which half can be immediately accessed upon signing the non-binding letter of intent. In addition, medical staff at Alameda Hospital will be autonomous from AHS, said Stebbins. “We have met these people. We have sat across the room from them,” said Alameda Healthcare District board member Dr. Robert Deutsch. “We’ve made eye contact and I think we’ve created a trust.“

Behind the novel realignment of the health care safety net in Alameda County is Wright Lassiter, the long-time CEO of Alameda Health Systems, who says, “Health care is definitely about consolidation. It’s about scale, to some extent, because we all have fixed costs.

Wright Lassiter
“There is a requirement for some level of scale for you to be able to spread your costs and that is what this is about to some extent. Every market is a little bit different. We have two well-run health care systems that cover a lot of the community. Unless you can do something similar to what Kaiser and Sutter, then it is very difficult to compete. So this conundrum is, do you stay small and cover a local community like Alameda and San Leandro has tried to do, or do you try to become more regional?”

While Alameda Health System is currently constructing an addition to its Highland Hospital in Oakland, Lassiter says his recent moves is “not about going big because big is better, necessarily. It’s about doing things to be sustainable.” He adds public-private partnerships like those with hospitals in San Leandro and Alameda “is the future” of public health care systems. “Often times you don’t see public entities doing this. You see private not-for-profit systems doing this.”

However, like the situation in San Leandro, AHS was not willing to take on the risk of an underperforming facility without some financial backing in some form. While San Leandro’s potential renaissance will be boosted by $22 million in short-term subsidies from Sutter Health, another $20 million from the Eden Township Healthcare and $3 million from both the city of San Leandro and Alameda County, Alameda Hospital will continue to rely on proceeds from its parcel tax.

Over a decade ago, Alamedans, fearful of being without an emergency room in this island city, overwhelmingly chose to tax itself through a parcel tax that contribute over $6 million to the hospital’s operations. However, the amount is still not enough. A decision by Kaiser Permanente two years ago to pull out of a partnership with Alameda Hospital hastened an already worsening financial outlook. The health care district maintains control of the hospital and its assets and will also oversee distribution of parcel tax monies, Stebbins said this week, while AHS will gain a seat on the district board.

Lassiter says the deals with San Leandro Hospital and Alameda Hospital are independent of each other. “They are really completely independent. One deal is not dependent on the other. Frankly, we look at them as some of the same reasons for us from a strategic perspective for trying to serve areas we don’t serve well today.”

The main difference, says Lassiter, is Alameda Hospital’s closer proximity to Highland Hospital’s perpetually stretched emergency room. The plan is to alleviate some of the burden on Highland’s ER to Alameda Hospital, he says. “The difference is we are not really looking at shifting volume from Highland Hospital to San Leandro like we’re looking at here.”

But like many hospitals all over the state, both Alameda and San Leandro Hospital have little recourse at this point other than to explore novel new approaches for competing on a regional basis. It is for many, either adapt or die. Added Alameda Board Director Deutsch last week, “The impossible can no longer be pulled off.”

2 comments :

"Behind the novel realignment of the health care safety net in Alameda County is Wright Lassiter, the long-time CEO of Alameda Health Systems, who says, “Health care is definitely about consolidation. It’s about scale, to some extent, because we all have fixed costs."

It would be valuable to have a discussion of the negatives of consolidation. While many of us would concede that AHS would be effectively undermined by the market shares of Kaiser, Sutter and Washington if it did not grow s well, having all acute health care in the County dominated by four main providers also is likely to drive up costs and drive down quality.

I miss the enforcements of antitrust and monopoly laws. Hell, I miss some of the laws themselves, many of which have been undermined or repealed.

Given what we have seen about the process of giving information on long term care, the consumer effects of tying the purchase of long-term care insurance to a reverse loan are daunting. Purchasing long-term care insurance policy is substantial, but obtaining a reverse loan to purchase long-term care insurance is an even larger one-time purchase, since it involves using the equity in the most significant asset most people own.

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