Shifts in fiscal landscape creates threat of severe cuts to health care treatments

Originally published in The Mercury News

By Joe DeVries, Alameda Health System Board President | June 12, 2019

Across the state, public hospitals and health systems operate under highly challenging financial circumstances and are faced with the herculean task of developing financial strategies that will contain costs yet allow them to provide comprehensive care to California’s large population of low-income, uninsured and underserved residents.

Public hospitals face extraordinary shifts in their fiscal landscape that threaten their sustainability. Federal Medicaid Disproportionate Share Hospital (DSH) payments support safety net hospitals, including public health care systems like Alameda Health System (AHS), providing over $1.2 billion in California. Despite the critical role of Medicaid DSH, this funding is at risk for the safety net in California.

Medi-Cal, the Medicaid program in California that provides health coverage to low-income people in California, has always reimbursed at lower rates than the actual cost of service and hospitals have relied on supplemental payments like DSH to reduce the gap.

Between Medi-Cal’s inadequate reimbursements and loss of supplemental funding from state and federal sources AHS expects to lose almost $60 million in supplemental payments in 2020. AHS simply cannot sustain losses of this magnitude. It puts our most vulnerable residents at increased risk of losing access to essential health care services.

Over the years, Alameda County leaders have demonstrated their commitment to providing access to health care for all its residents. The county provided and advocated for bond financing, special purpose taxes and other funding to rebuild Highland Hospital, create a Level-One trauma center, support behavioral health services, and fund care for the remaining uninsured. This support has always been necessary for AHS to survive, but it has become increasingly insufficient as other reimbursement programs decline or grow at a pace that hasn’t kept up with the inflationary growth in expenses.

Compounding the revenue shortfall are AHS financial obligations – significant debt to the county (including pension obligations), major capital investments (including the costs of a seismically compliant acute rehabilitation facility) and a critical overhaul of our electronic health record. In other counties, public health systems receive substantial county general funds to help cover these costs. Alameda Health System does not.

Despite successfully reducing expenses by nearly $15 million over this past year, rising wages, pharmaceutical, and other operating costs will outpace future revenue unless there are significant changes in the financial, structural relationship between Alameda Health System and Alameda County. The AHS Board welcomes the opportunity to partner with the county to find creative solutions to shore up the fiscal foundation for AHS. Options could include debt forgiveness, state and federal advocacy to increase funding for AHS, and strategic investments in services that address social factors such as adequate housing and nutrition that disproportionately impact a number of our patients.

The AHS Board of Trustees face some impossible and painful choices. Without additional local support, the trustees will have no other alternative but to make significant cuts in order to honor AHS’s debt obligation to the county. These cuts will include the elimination of critical community services such as psychiatric emergency services, outpatient primary and specialty clinic sites, women’s services, reduction in wages and benefits, and even possibly closing facilities.

AHS Trustees and leaders appreciate the importance of the partnership between the county and the health system to sustaining our ability to serve the community. With the county’s support, our providers deliver services that continue to garner local and national recognition for success in combating opioid misuse, lowering maternal health disparities, eliminating pediatric dental health disparities, caring for immigrant and refugee communities, providing trauma care and prevention services, advancing end-of-life care, and highly-ranked wound and skilled nursing care to patients who often have some of the most complex medical and social challenges like homelessness.

We remain committed to our mission of caring, healing, teaching, and serving all. Now, more than ever, it is imperative that we look to our county partners to help to identify additional funding that will help Alameda Health System continue fulfilling this mission next year and for the years to come.