The Future of Health Care

1. The Future of Health Care Julie Puentes jpuentes@hasc.org (714) 663-0294 1

2. CONTEXT • HASC – Who we are and what we do • The current state of hospitals • The future

3. HASC –Who We Are and What We Do • 501 (c) (6) regional trade association • 160 hospitals which operate 41,000 beds in of LA, Orange, Riverside, San Bernardino, Santa Barbara, and Ventura Counties • 29 hospitals in OC • Staff of 65; $11 m operating budget • Local advocacy and partnership with CHA on state and federal issues

4. Hospitals as Economic Contributors Statewide: • 400,000 workers; generate nearly 1.5 jobs for each hospital job • $146 b in economic activity • $59 b = wages and salaries Usually the largest or near-largest employer in a community (esp. rural)

5. Hospitals in this Economy • 33% hospitals report more ER visits • 73% now unable to pay out of pocket costs • 30% fewer elective procedures • 25% unable to access capital for seismic • 41% halting construction, equipment purchases

6. Hospitals in This Economy – 2 • Employers dropping coverage • Patients putting off primary care • Admissions AND patient acuity rising • Continuing pressure from commercial health plans • Threats to payments from county governments facing their own issues

7. Hospitals in This Economy – 3 • Union issues • Hospital-physician issues • Government programs underpaying

8. DISTRIBUTION OF COST BY PAYOR TYPE • Hospitals are reimbursed from many different sources • Large percentage of reimbursement comes from government programs, which do not even cover the cost of care • Continued pressure on Medicare reimbursement due to federal deficit • Continual state budget issues create severely under-funded Medi-Cal program Source: The Lewin Group Analysis of the American Hospital Association Annual Survey data, 1980, 2003, and 2004, for community hospitals. (1) Non-patient represents costs for cafeterias, parking lots, gift shops and other non-patient care operating services and are not attributed to any one payer. (2) Uncompensated care represents bad debt expense, at cost, and charity care

9. Hospital Payment to Cost Ratios by Payer 1.22 0.87 0.78 3% of cost is bad debt and charity care Payment-to-Cost Ratio Private Medicare Medicaid 0.45 County 35% 34% 24% 4% Percent of Cost

10. Medicaid Disparity Source: Kaiser State Health Facts ‘05 Distribution of Medicaid Payments by Enrollee.

11. CURRENT STATE: PRESSURES ON ALL FRONTS • PERSONNEL SHORTAGES • Shortage of 17,000 physicians and more than 116,000 nurses by 2015 • Additional shortages in pharmacy, medical lab technicians, and other areas Data for Los Angeles, Orange County, Ventura County, and Inland Empire

12. LONG-TERM THREATS Facility Closure History Hospital Association of Southern California For Los Angeles, Orange, San Bernardino, Riverside, Ventura and Santa Barbara Counties. Aug-07 Martin Luther King Jr. - Harbor Hospital Los Angeles Jan-07 Centinela Freeman Regional Med Apr-05 Brea Community Hospital Orange Feb-05 Valley Plaza Doctors Hospital Riverside Dec-04 Robert F Kennedy Medical Center Los Angeles Dec-04 Northridge Hospital Medical Center, Sherman Way Campus Los Angeles Aug-04 Elastar Community Hospital Los Angeles May-04 Century City Hospital Los Angeles May-04 Monrovia Community Hospital Los Angeles May-04 Angels Hospital San Bernardino Jan-04 Santa Teresita Hospital Los Angeles Dec-03 Santa Paula Hospital Ventura Nov-03 Anacapa Hospital Ventura Aug-03 Santa Ana Hospital Medical Center Orange Jul-03 Granada Hills Community Hospital Los Angeles Jun-03 St. Francis Medical Center of Santa Barbara Santa Barbara Jun-06 Santa Paula Hospital Santa Barbara Mar-03 Pine Grove Hospital Los Angeles Mar-03 Alta Bellwood General Hospital/Orange County Feb-02 St. Luke Medical Center Los Angeles Oct-00 Heritage Hospital - Inland Empire San Bernardino Sep-00 Long Beach Community Hospital Los Angeles Sep-00 Anaheim Memorial West Campus (Martin Luther) Orange Jun-00 Edgemont Hospital Los Angeles Jan-00 Charter Hospital Palm Springs Riverside Sep-99 Bay Harbor Hospital Los Angeles Sep-99 Charter Hospital Mission Viejo Orange Mar-99 Valley Community Hospital - Santa Maria Santa Barbara Feb-99 Washington Hospital Los Angeles Nov-98 Vencor Hospital - Burbank Los Angeles Nov-98 Pacific Care Hospital Center Orange Oct-98 Legacy Hospital--San Gabriel Los Angeles Jul-98 Medical Center of North Hollywood Los Angeles Jul-98 Capistrano-by-the-Sea Orange Jun-98 Pacific Shores Hospital Ventura Jun-98 Long Beach Doctors Hospital Los Angeles May-98 South Bay Hospital Los Angeles May-98 Friendly Hills Regional Medical Center Orange Mar-98 Tustin Hospital Orange Dec-97 Woodruff Community Hospital Los Angeles Dec-97 Newhall Community Hospital Los Angeles Sep-97 Pioneer Hospital Los Angeles Aug-97 Thompson Memorial Hospital Los Angeles Aug-97 SHC Specialty Hospital (was Westlake) Los Angeles Dec-96 Westside Hospital Los Angeles Dec-96 Westlake Community Hospital Los Angeles Became SHC Specialty Hospital Nov-96 Charter Community Los Angeles Aug-96 Ingleside Hospital Los Angeles Apr-96 Charter Behavioral - Los Altos Los Angeles Apr-96 Charter Behavioral - Thousand Oaks Ventura Apr-96 Charter Behavioral - Yorba Linda Orange Mar-96 Desert Palms Comm. Hospital Los Angeles Nov-95 CPC Santa Ana Hospital Orange Nov-95 CPC Laguna Hills Hospital Orange Nov-95 CPC Rancho Linda Hospital Orange Jun-95 Charter Long Beach Los Angeles May-95 Bellwood Health Center Los Angeles Jan-95 West Valley Hospital Los Angeles Sep-94 NuMed Regional Medical Center Los Angeles Sep-94 Norwalk Community Hospital Los Angeles Sep-94 Valley Hospital Medical Center Los Angeles Sep-94 Palmdale Hospital Los Angeles Jun-94 Alamar WomensCounseling and Renewal Program Ventura Jun-94 Terrace Plaza Medical Center Los Angeles May-94 Glenbrook Hospital Los Angeles Mar-94 Naval Hospital, Long Beach Los Angeles Aug-93 CPC Brea Canyon Hospital Orange Aug-93 CPC Westwood Hospital Los Angeles Jun-93 CIGNA Medical Center Los Angeles May-93 LifePLUS Coldwater Cyn Hospital Los Angeles Apr-93 Beverly Hills Medical Center Los Angeles Mar-93 Woodview-Calabasas Hospital Los Angeles Nov-92 Suncrest Hospital of South Bay Los Angeles Nov-92 Humana Hospital Westminster Orange Oct-92 Suncrest of Orange County Orange May-92 Medical Center of La Mirada Los Angeles Jan-92 Panorama Community Hospital Los Angeles Sep-91 CPC Horizon Los AngelesAug-91 Valley Hospital Los AngelesJun-91 Christian Hospital (Lakeside) RiversideJun-91 Charter Hospital Fountain Valley OrangeMay-91 Dominquez Medical Center Los AngelesMay-91 Linda Vista Hospital Los AngelesNov-90 Meadowbrook Hospital Los AngelesOct-90 Van Nuys Community Hospital Los AngelesAug-90 Rancho Encino Medical Center Los AngelesJun-90 Marina Hills Hospital VenturaJun-90 Pacific Shores Hospital Los Angeles ReopenedMar-90 Midwood Community Los AngelesNov-89 St. Jude Hospital, Yorba Linda OrangeOct-89 West Hollywood Hospital Los AngelesMar-89 Mountainview Lodge Los AngelesMar-89 LifePLUS (Pasadena Community) Los AngelesFeb-89 Channel Islands Ventura Reopened as alzheimers facilityFeb-89 Canoga Park Hospital Los Angeles PsychJan-89 Queen of Angels Medical Center Los Angeles Merged w/Hollywood Presbyterian1988 Care Unit Los Angeles Los Angeles1988 Inglewood Womens Hospital Los Angeles Converted to outpatient clinic1987 Buena Park Community Hospital Orange Converted to Psychiatric1987 Century Community Hospital Los Angeles1987 Metropolitan Los Angeles1986 Fullerton Community Orange1986 Hospital del Pueblo Los Angeles1986 Lakeview Medical Center Los Angeles1986 Los Altos Hospital Los Angeles1986 Simi Valley Hospital Ventura Converted to CD1986 Valley Park Medical Center Los Angeles Converted to psychiatric1985 Avalon Memorial Hospital Los Angeles1985 City View Hospital Los Angeles1985 Beverly Glen Medical Center Los Angeles Converted to Plastic Surgery, then CD1985 Doctors Hospital of Hawthorne Los Angeles1985 Orange Grove Hospital Los Angeles1985 Park View Hospital Los Angeles1985 Sierra Madre Hospital Los Angeles Converted to SNF1985 Valley Hospital Los Angeles Converted to podiatry/Eye Surgery1985 Counterpoint Center Los Angeles1984 La Vina Los Angeles1984 Valley Vista Hospital Los Angeles1983 Woodruff Gables Hospital Los Angeles • More ER Closures (70 ER closures and 80 hospital closures in last decade) • Hospital closures • Limited access to small number of specialists

13. “It’s the e c o n o m y, stupid!” 13

14. Projected Federal Spending as a Percent of GDP Source: CBO, “The The Budget and Economic Outlook: Fiscal Years 2008 to 2018,” January 2008. Accessed online at http://cbo.gov/ftpdocs/89xx/doc8917/01-23-2008_BudgetOutlook.pdf 14

15. WHAT IMPACTS THE COST OF HEALTHCARE? HEALTHCARE COSTS ARE IMPACTED BY SEVERAL FACTORS

16. UNDERSTANDING HEALTHCARE COSTS – WHO IS RESPONSIBLE • Premiums have far outpaced inflation and reimbursements to hospitals

17. Spending Distribution by Category Source: CHCF

18. Spending Distribution by Contributors Source: CHCF

19. Spending Distribution by Payer Source: CHCF

20. Drivers of Spending Growth Source: CHCF

21. Annual Out-of-Pocket Spending Source: CHCF

22. Affordability

23. Obama Health Proposal – “Plan for a Healthy America” • All Children Must Have Coverage – Enforcement not Specified • Voluntary Subsidized Coverage for Low-Income – Not Specified • New National Exchange as Alternative to Current Market If You Are Medicaid/SCHIP Eligible People with Employer Coverage People Without Employer Coverage and Ineligible for Medicaid • National Exchange • Private Plans • Premium Subsidies • Guaranteed Issue • Rating Limits Employer Provides Plan or Pays Tax; 50% Tax Credit for Small Low-Income Employers • New National Plan: • FEHBP Benefits • Premium Subsidies • Current Market • Premium Subsidies • Guaranteed Issue • Rating Limits Medicaid Retained and Expanded

24. The Public Plan: Impact of Using Medicare Provider Payment Rates on Premiums in the National Plan Single Adult Family

25. Reduction in National Health Spending under Cost Containment Provisions of the Obama Proposal: 2010-2019 (billions) ComparativeEffectiveness $39.9 Drug Negotiations $18.0 3.1% MedicareOverpayments $135.3 7.0% Drug Re-importation $42.6 23.7% 7.5% 23.3% 19.5% Medical Home $132.9 HealthInformation Technology $111.2 7.6% 8.4% DiseaseManagement $43.6 Pay-for-Performance $48.1 Total System Savings = $571.6

26. MegaTrends Population increases, acute hospital bed demand decreases Back to the future; all health care is local Advancements in medical technology, pharmacology and medical treatment (designer medicine) Dying becomes a treatment option Workforce shortages become a change agent; mega-licensed practitioner emerges 26

27. Something to think about? 27

28. Opportunities • Emphasis on quality and service; transparency and public accountability • Corporate Practice of Medicine • Economies of scale through consolidations • Research and better patient outcomes • Commercial health plan transparency • Healthcare reform: more covered

29. Questions? 29