St. Rose Hospital

2013 HCE College Bowl Case Study

Kevin Cao, La Ronda Jones, Wenbin Zhang

As the CEO’s of Alecto Healthcare Services, we must address the following issues in managing St. Rose Hospital

◦Financial hardship

◦Addressing provisions of the Patient Protection and Affordable Care Act

Alecto’s Vision for the Future of St. Rose Hospital

Current Ratio per Alecto Audit

2007 2008 2009 2010 2011 20120

0.5

1

1.5

2

2.5

0.931.07

2.21

1.69

0.81

0.36

Current Ratio

Alecto Audit Net Income

2007

2008

2009

2010

2011

2012

($25,000)($20,000)($15,000)($10,000)($5,000)

$0 $5,000

$10,000

($2,361)

($3,049)

$5,850

($390)

($23,371)

($7,074)

Net Income Alecto Audit Present

*Numbers in Thousands* See calculation in Appendix

Net Income Without InterventionProjected

($25,000)

($20,000)

($15,000)

($10,000)

($5,000)

$0

$5,000

$10,000

($2,361)

($3,049)

$5,850

($390)

($23,371)

($7,074)

($14,143)($16,736)

($19,330)($21,923)

Net Income Alecto Audit Projected

*Numbers in Thousands

* See calculation in Appendix

Healthcare Exchange

Medicaid Expansion

Potential Growth Opportunities

Due to Healthcare Reform

Initiative 1

• Revamping Financial Outputs

Initiative 2

• Patient Inreach Program

Two Step Initiative for Hospital Survivability

Initiative 1Revamping Financial Outputs

In order to reduce costs we must restructure our expenditures to remain financially viable for the future

◦Reducing Community Benefit Service Expenses

◦Addressing the suspended SNF Unit Beds

◦Administrative Services Budget Cut

Strategies for Cost Containment

The Skilled Nursing Facility was closed and the beds were put in suspense as a reaction to the financial losses incurred

We recommend the continued suspense and closure of the Skilled Nursing Beds due to reduced SNF reimbursement rates from CMS

Skilled Nursing Facility Beds

Skilled Nursing Facility Beds

There are over 10 Long Term Care facilities located in the Health Service

Area of SRH

Currently, this program costs the hospital over $290,000 each year in volunteer hours

◦While we recognize the significance of this program, cuts across the board are required for financial survivability

Integrated Nurse Leadership Program (INLP)

Integrated Nurse Leadership Program 25% Reduction

20072008200920102011$0

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

Integrated Nurse Leadership Pro-gramINLP reduced 25%Total Community Benefit ServicesTotal with 25% reduction

$61,000 Decrease in Expenses

The Tattoo Removal Program involves 30 participants

With a goal of adding 5 additional participants every year, the hospital will incur an additional $76,500 in expenses over 5 years

We recommend that the program continue with a maximum of 30 participants for an interim period to reduce the amount of excess costs

Tattoo Removal Day

Tattoo Removal Day Data

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$35,700 $40,800

$45,900 $51,000

$56,100

Tattoo Removal Day Projected with 5 additional participants a yearTattoo Removal Day Projected with 30 partici-pants

$25,000Increase in expenses

*See calculation in Appendix

Our management team will keep administrative costs down to 6.5% of our total expenses from the previous year

◦This will help us keep our total expenses down from year to year in an effort to implement new programs that will positively affect patient care

Administrative Services Budget Cut

0

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

12,498,858

$20,521,142

Admin Ser-vices Ex-pense at 6.5% of to-tal ExpensesAdmin Ser-vices Ex-pense without In-tervention

An $8 Million reduction in

Administrative Expenses

Administrative Services Data

*See calculation in Appendix*Source: OSHPD HAFD

Initiative 2 Patient Inreach Service

Implementation

Patient Inreach Service

Target Population 2

Receive Staff Training

Patient Education, Enrollment and

Retention

Target Population 1

Increased Patient VolumeIncreased Service Quality and

Patient ValueIncreased Revenue

Patient Inreach Service Target Group I, Uninsured

Population• Approved Staff to

Training/Interpreter Services

• Patient Assessment

• Patient Enrollment Assistance

Benefit Enrollment Program

Covered California supports consumers benefit training through a Benefit Assister Training program

Employees selected for training

◦ Inpatient Services will utilize Discharge Planners and Social Workers for enrollment

◦ Outpatient Clinic Services will utilize the business office staff for enrollment

◦ All St. Rose Certified Interpreters

Benefit Enrollment ProgramTraining

Educate

Enroll

Retain

With a total of 22, 289 uninsured patients in Hayward 32.5% are not proficient in English

At no additional cost St. Rose Hospital can enroll current employees who are interpreters in the program for training which will be vital for our non-English speaking patient population

*Source:US Census Bureau, American Community Survey, 2008

Benefit Enrollment ProgramInterpreter Services

Utilizing our EHR for the enrollment process

Capturing enrollment opportunities 24 hours around the clock

This flowchart will explain in detail the patient discharge process for the benefit enrollment program and patient follow up to decrease Medicare 30 day readmissions

Benefit Enrollment ProgramPatient Enrollment

Continue with discharge process

Physician

orders Dischar

ge

Proceed with

discharge collect

insurance

Patient goes home

Notification to Staff

Visits patient in ED or

follow-ups within 72

hoursEducate patient about

Covered California

Educate about

benefits of the selected

program

Patient is then matched and enrolled

Assist patient

with submission

Determine

Eligibility

YESNO

Patient Follow Up Call Post-Discharge

St. Rose Hospital Payer Mix

*Other include self-pay, workers* compensation, other government, and other payersSource: OSHPD Financial Disclosure Report, FY 2011 (based on inpatient discharges)

Medicare Traditional 35.1

Medicare Managed Care; 4

Third Party Managed Care, 13.2Third Party Traditional; 1.1

Medi-Cal Managed 14.1

Medi-Cal Traditional 24.8

Indigent; 5.9 Other; 1.8

Target Group

21 Million uninsured in 18-34 age group

Projected decrease of the 42% of uninsured currently existing between the ages of 18-65 due to Covered California enrollment

Benefit Program Target Group

Alameda County Uninsured by Age Group

18-24 25-39 40-640

5

10

15

20

2522.5

11.6 10.6 Percentage of Uninsured in Alameda County in 2010 for Age Group

Age Group

Perc

enta

ge o

f Uni

nsur

ed Target

Population

*Source: County of Alameda

Patient Inreach Service Target Group II, Medi-Cal Population

Streamline Eligibility and Enrollment Process for Potential Medi-Cal Patients

It requires that states make DSH payments to hospitals treating large numbers of low-income patients because:

◦Low-income patients are more likely to be uninsured or Medicaid enrollees.

◦Uncompensated Care◦Low Medicaid Payment Rate

Medicaid Statue

*Mitchell 2012

2006 2007 2008 2009 2010 2011 2012$0.0

$500,000.0$1,000,000.0$1,500,000.0$2,000,000.0$2,500,000.0$3,000,000.0$3,500,000.0$4,000,000.0$4,500,000.0

0

5000

10000

15000

20000

25000

DSH Funds Received Adjusted Medi-Cal Patient Days

DSH Funds Received by SRH

*Source: OSHPD HAFD

Total Medicaid DSH Allotments

*Mitchell 2012

( Middle Class Tax Relief and Job Creation Act of 2012 )

Num

bers

in B

illion

s

Californians under Age 65 Newly Eligible for

Medi-Cal with Expansion

2014 2016 2019660,000.0670,000.0680,000.0690,000.0700,000.0710,000.0720,000.0730,000.0740,000.0750,000.0

*Lucia & etc. 2013

Lack of awareness of Medi-Cal Lack of awareness of eligibility standards Dislike of the program Belief that they are insured Paperwork is too difficult

Being Eligible Does Not Mean Being Enrolled

*Lucia & etc. 2013

Predicted Increase in Medi-Cal Enrollment of Newly Eligible

Californians

2014 2016 20190.0100,000.0200,000.0300,000.0400,000.0500,000.0600,000.0700,000.0800,000.0900,000.0

1,000,000.0

*Lucia & etc. 2013

2014 2016 2019 - 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000

10,000

Predicted Increase in Medi-Cal Enrollment of Newly Eligible SRH Service Area Population

*See calculation in Appendix

2014 2016 2019$0

$1,000,000

$2,000,000

$3,000,000

$4,000,000

$5,000,000

$6,000,000

Predicted SRH Potential Increase in

Medi-Cal Net Patient Revenue

*See calculation in Appendix

Revenue from newly enrolled Medi-Cal Patients

2011

2012

2013

2014

2015

2016

$110,000,000

$120,000,000

$130,000,000

$140,000,000

$150,000,000

$160,000,000

$170,000,000

$180,000,000

Net Patient Revenue with newly Enrolled MediCal PatientsNet Patient Revenue

*Source: OSHPD HAFD

Initiative 1

• Revamping Financial Outputs

Initiative 2

• Patient Inreach Program

Two Step Initiative for Hospital Survivability

Our findings indicate that the current state of St. Rose is undesirable

Without intervention the hospital would not be financially viable for the future

Our recommendation is for a two step initiative that places the hospital in a better position

Conclusion

Alameda County. (2013). Preparing for 2014 ACA implementation. Retrieved fromhttp://achealthcare.org/wp-content/uploads/2013/03/Eligibility-Enrollment-Maps-Presentation-2.11.13.pdf

California Health Benefit Exchange. (2013). Covered California. Retrieved from http://www.coveredca.com/about_us.html

California State Office of Statewide Health Planning & Development. (2007-2011). Healthcare Information Division. Retrieved from http://www.oshpd.ca.gov/HID/DataFlow/HospMain.html

Eden Youth & Family Center. (2012). New Start Tattoo Removal Program. Eden Youth & Family Center. Retrieved from http://www.eyfconline.org/programs/new-start-tattoo- removal-program/

Flex Monitoring Team. (2012). Why Do Some Critical Access Hospitals Close Their Skilled Nursing Facility Services While Others Retain Them? Flex Monitoring Team. Retrieved from http://flexmonitoring.org/documents/Briefing%20Paper32-CAH-SNF

Lucia, L. Jacobs, K. Watson, G. Dietz, M. Roby, D. H. (2013). Medi-Cal Expansion under the Affordable Care Act: Significant Increase in Coverage with Minimal Cost to the State. UC Berkeley Center for Labor Research and Education. UCLA Center for Health Policy Research. Retrieved from http://laborcenter.berkeley.edu/healthcare/medi-cal_expansion.shtml

References

Medical Development Specialist, LLC. (2012) Effect of Alecto Healthcare Services Hayward LLC’s Management and Acquisition of Rose Hospital in the Availability or Accessibility of Healthcare Services. Retrieved from http://oag.ca.gov/sites/all/files/agweb/pdfs/charities/pdf/srh_health_impact.pdf

Mitchell, A. (2012). Medicaid Disproportionate Share Hospital Payments. Congressional Research Service. Retrieved from https://www.fas.org/sgp/crs/misc/R42865.pdf

Moore Foundation. (2013). Betty Irene Moore Nursing Initiative. Gordan and Betty Moore Foundation. Retrieved from http://www.moore.org/nursing.aspx

OSHPD Hospital Annual Financial Data Pivot Table 2007-2011. Retrieved from http://www.oshpd.ca.gov/HID/Products/Hospitals/AnnFinanData/PivotProfles/default.Asp

Preliminary Medi-Cal Enrollment by Zip Code Pivot Table. Retrieved from http://www.dhcs.ca.gov/dataandstats/statistics/Pages/Medi- Cal%20Enrollment%20by%20Zip%20Code.aspx

References (Continued)

United States Department of Health and Human Services. (2012). Initial Guidance to State on Exchanges. Retrieved from http://www.healthcare.gov/law/resources/regulations/guidance- to-states-on-exchanges.html

U.S. Department of Commerce United States Census Bureau. (2008) Retrieved by http://www.census.gov/acs/www/data_documentation/2008_release/

References (Continued)

APPENDIX

Alecto Audit Net IncomeNet Income Audit 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Net Operating Revenue $118,445 $128,931 $142,322 $147,013 $160,444 $136,070 $157,606 $162,959 $168,312 $173,665

Operating Expense $117,898 $128,501 $141,234 $146,565 $180,413 $143,275 $171,776 $180,003 $188,231 $196,458

Net from Operations $547 $430 $1,088 $448 ($19,969) ($7,205) ($14,170) ($14,129) ($16,548) ($18,966)

Net Non Operating Rev. $115 $61 $1,787 $188 ($84) $131 $171 $115 $59 $3

Extraordinary Items ($3,023) ($3,540) $2,975 ($1,026) ($3,318) $0 ($144) $193 $529 $866

Net Income ($2,361) ($3,049) $5,850 ($390) ($23,371) ($7,074) ($13,855) ($14,207) ($17,018) ($19,829)

Integrated Nurse Leadership Program

Integrated Nurse Leadership Program $80,000 $280,000 $280,000 $290,000 $290,000

Total Community Benefit Services without INLP $170,910 $224,935 $215,495 $253,160 $267,070

INLP reduced 25% $60,000 $210,000 $210,000 $217,500 $217,500

Total with 25% reduction $230,910 $434,935 $425,495 $470,660 $484,570

INLP Reduced 50% $40,000 $140,000 $140,000 $145,000 $145,000

Total with 50% reduction $210,910 $364,935 $355,495 $398,160 $412,070

Tattoo Removal Day

Tattoo Removal Day Projected with 5 additional participants a year $30,600 $30,600 $30,600 $30,600 $30,600 $35,700 $40,800 $40,800 $40,800 $40,800

Tattoo Removal Day Projected with 30 participants $30,600 $30,600 $30,600 $30,600 $30,600 $30,600 $30,600 $30,600 $30,600 $30,600

Administrative Services Cut

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Admin Services Expense without Intervention

$8,132,366

$9,538,877

$12,133,070

$12,296,979

$13,472,203

$15,146,032

$16,489,809

$17,833,587

$19,177,365

$20,521,142

Admin Services Expense at 6.5% of total Expenses

8,132,366

9,538,877

12,133,070

12,296,979

13,472,203

9,794,306 10,305,092 11,036,347 11,767,603 12,498,858

Total Expenses102,241,

023115,181,

914125,041,

938130,801,

560150,681,6

28158,539,

869169,789,95

5181,040,04

1192,290,12

6203,540,21

2

Admin Svcs % of tot. Expenses With Intervention @6.5% 7.95% 8.28% 9.70% 9.40% 8.94% 6.50% 6.50% 6.50% 6.50% 6.50%

In 2011, SRH service area has 74,981Medi-Cal beneficiaries(page 37). In 2011, there are 7,790,828 total Medi-Cal beneficiaries in CA (Preliminary

Medi-Cal Enrollment by Zip Code Pivot Table). The ratio is 74981/7790828 = 0.96% Thus, the increase of new eligible enrollment in SRH service area will be: 0.96% x California number of increase For example: In 2014, there will be 0.96% x 480,000 = 4608 newly eligible enrollment in

SRH service area under base scenario.

Calculation of SRH new Eligible Enrollment

In 2011, SRH Net Patient Revenue from Medi-Cal was $47,434,200 (OSHPD HAFD Pivot Table 2011)

In 2011, SRH service area had 74,981Medi-Cal beneficiaries (page 37). The ratio is 47434200/74981 = 632.62 dollars/ beneficiary The potential increase in Medi-Cal net patient revenue is: 632.62 dollars/ beneficiary x number of newly enrolledFor example: the number for 2014 under base scenario will be: 632.62 dollars/ beneficiaries x 4608 = $2,915,113

Calculation of SRH potential increase in

Medi-Cal net patient revenue after 2014