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The battle cries being raged over Kaiser’s Manteca hospital

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POSTED June 9, 2014 12:52 a.m.

One hopes that some of the nurses carelessly making inaccurate representations of Kaiser’s financial picture are a bit more careful when administering medicine to patients.

They can make a valid case without contorting the truth.

The problem centers around a state reporting requirement concerning healthcare plans’ net equity.

Kaiser reported its net equity at $23 billion. The state requires a net equity of $1.3 billion. It looks obscene and some nurses have been using the numbers to show the non-profit is building up huge cash reserves at the expense of patient care.

There’s only one problem.     It’s not cash. It’s net equity. Kaiser, unlike other health plans in California, also has its own hospitals that are worth billions of dollars as an asset. In the one-size-fits-all-approach to state laws, no provisions were made for Kaiser to report the value of its hospital assets — which no other California healthcare plan has — separately. As a result, they had to lump it all together with their health plan accounting to comply with the state regulation.

Kaiser’s overall equity bottom line got a big boost due to a reduction in pension liability. Improved performance on Wall Street for pension funds allowed accounting for Kaiser’s assets and liabilities tied directly to unfunded pension liability (primarily for medical staff such as nurses and doctors) to account for $5.62 billion of Kaiser’s overall  $8.8 billion equity improvement. Even after that, however, roughly 20 percent of Kaiser’s pension obligations remain unfunded.

That said, there is still plenty of room to question Kaiser’s operating strategies.

Kaiser last year hiked individual rates by as much as 22 percent and small group plans by upwards of 56 percent. How much of that can be attributed to requirements of the Affordable Heath Act which is proving to anything but affordable for a lot of people remains to be seen.

When Kaiser took over St. Dominic’s Hospital in Manteca from Catholic Healthcare West in 2004, they agreed to keep the emergency room open for non-Kaiser patients for at least five years — which they did. What they did not agree to was to keep the sub-acute care operating that consists primarily of patients on ventilators who are typically victims of strokes and similar catastrophic events. Kaiser noted at the time that they did not provide such hospital services elsewhere within their closed system.

A report on the impacts of the sale prepared at the time for the California State Attorney General’s Office made it clear the sale of the hospital to Kaiser would financially stabilize the hospital, protect jobs due to the weak patient census at the time, and expand the availability of services. Whether that has happened is open to interpretation.

Then there is the issue of Kaiser’s net income of $2.6 billion based on 2012 reporting.

Kaiser is a non-profit just like Catholic Healthcare West. Both non-profits typically pour their “profits” into health-care related initiatives. In Kaiser’s case, it has been investing $3 billion or so a year in capital improvements ranging from new facilities to large ticket items in terms of medical equipment.

A wild card neither side is playing is how the looming 2030 deadline for mandatory compliance to Senate Bill 1953 — the earthquake retrofit law for hospitals that passed after hospitals sustained serious damage in the 1994 Northridge Earthquake — impacts decisions.

The price tag for compliance statewide has been pegged at $220 billion by some experts.

Kaiser’s Modesto hospital is in full compliance, Manteca Kaiser isn’t. Nor, for that matter, is Doctors Hospital of Manteca.

How uncertain the times are in healthcare is illustrated by the dilemma Tenet finds themselves in. Building a new hospital for Doctors Manteca would be about the same as retrofitting the existing hospital. But to make any decision at this time is dicey at best since the Affordable Health Act could substantially reshape the healthcare industry including how hospitals are utilized. In other words, moving forward with one option over another now may become a serious financial blunder regardless of how smart such a move looks at the current time,

Kaiser is under pressure to provide the best care at the most affordable price. That’s not an easy task. Healthcare is an emotional issue. We want the best care for our loved ones regardless of odds, life  expectancy and diminishing returns.

An honest, open exchange is needed — something that has yet to happen in this country despite the uproar over the Affordable Heath Act. Kaiser needs to be more open and communicative with its members.

At the same time its members need to see the big picture and Kaiser’s obligation to stay standing to serve all of its members.

That’s not to say Kaiser has got it right, or wrong.

You just can’t have a productive exchange required to improve things if either side plays it too close to the vest or distorts basic facts to gain the upper hand in a campaign being waged on emotions and not the cold hard facts of limited resources and unlimited demand.



This column is the opinion of executive editor, Dennis Wyatt, and does not necessarily represent the opinion of The Bulletin or Morris Newspaper Corp. of CA.  He can be contacted at dwyatt@mantecabulletin.com or 209.249.3519.

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