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Hospitals: Lawsuit funds only the start

California hospitals, Barton among them, have settled a 10-year-old lawsuit with the state for $350 million to cover Medi-Cal reimbursement rates that a federal court said were set too low.

But these monies may only be the tip of the iceberg in a bigger picture yet to come.

The California Healthcare Association sued the state Department of Health Services in 1990 over Medi-Cal reimbursement rates for outpatient services at hospitals, such as X-rays or emergency room treatment in which the patient isn’t admitted.



Medi-Cal is California’s version of Medicaid, the federal health insurance program for the poor. It’s jointly funded with state and federal funds.

Like all the other hospitals, the amount of money Barton Health Care will see from the settlement is unknown, as the formula for divvying up the monies has not been developed, association spokeswoman Jan Emerson said Wednesday.




The association may average the number of Medi-Cal days or the amount of reimbursement losses, she said.

“We’re very pleased we’ve come to a settlement agreement, but this shouldn’t be viewed as a panacea for hospitals’ financial problems,” Emerson said. “It’s just a piece of the puzzle.”

The windfall is not only long overdue, Emerson said, but the fight didn’t come easy for the association. Before coming to an agreement, it involved all three branches of government – judicial, legislative and executive.

Fifteen years ago, the hospital advocacy group based in Sacramento tried to work with the state administration under former Gov. Pete Wilson to resolve the disparity paid out to hospitals, to no avail.

The rates equalization died a slow death in the state legislature.

It was left to the 9th District Court of Appeals, which ordered the state to set rates more reasonably related to hospital costs.

The settlement calls for the state to make one lump sum payment to the hospitals by June 30. By the following month, hospitals will receive a one-year, 30 percent increase in Medi-Cal reimbursements – the first increase since 1985. The boost will be equally funded by the feds and the state.

To the world of health care, the settlement amounts to a flea on an elephant’s back in comparison to the revenue hospitals have lost – especially following the Balanced Budget Act of 1997. The cost-cutting watershed that clamps down on health care reimbursements has progressively sent hospitals, skilled nursing facilities, home-health agencies, community clinics and medical groups into a financial downward spiral.

Of the 450 California hospitals, 64 percent are losing money in operations, Emerson reported. A third are enduring losses from all sources of income, she added.

If that’s not enough, California hospitals must meet a seismic retrofit by 2008 that could cost $24.5 billion. The legislative mandate calls for a seismic evaluation plan filed by January.

“One of our greatest concerns is that small, independent, rural hospitals may not be able to afford this retrofit,” Emerson said. “This could absolutely push them over the edge.”

Barton has filed its plan, Director of Facilities Rich Belli said Wednesday.

Belli indicated Barton is budgeting more than $30,000 a year to complete the retrofit project by 2007 on its old structure built in 1963. The 60,000-square-foot building houses its skilled nursing facility and administration. Its new, acute-care structure built in 1995 is already in compliance with the exception of a plumbing upgrade, Belli said.

He indicated Barton is ahead of the game in that regard, among other saving graces.

The South Lake Tahoe health system’s year-end fiscal bottom line amounts to $1.5 million of excess revenue over expenses, said Chief Financial Officer Richard Derby, who came on board Nov. 1 from Valley Care Center Health System in Livermore.

“I want to help Barton avoid problems and stay out of that 64 percent,” he said.

Derby was pleased with the extra kick-out from the state, but he did agree with Emerson that the amount represents a drop in the bucket in terms of what health care facilities have lost.

“Something is better than nothing,” he said.

And this spurt in income may be only a first round, if the U.S. Senate comes through.

There, a $30 billion Medicare relief package attached to a pending federal tax-cut proposal may grant California hospitals $1.5 billion in withheld reimbursements. The bill has already passed the House of Representatives.


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