CONTRA COSTA COUNTY: John Muir/Mt. Diablo a Mixed Bag
Two years after the merger of Mt. Diablo and John Muir hospitals, the Contra Costa Times reports that both critics and supporters of the combination "are right on some counts." On one hand, the merger has fulfilled the prophecies of supporters who said it would provide the facilities with increased bargaining clout. On the other hand, however, some opponents' fears of job cuts, less public input and medical consolidation are coming to pass. While a local board of business leaders, doctors and hospital officials oversee the system, the Times reports that "public input is limited." A few jobs have been cut, "but medical services have not been cut."
The Good News
The John Muir/Mt. Diablo Health System now "dominates the central Contra Costa County health market through its hospitals and two allied groups of physicians." Wanda Jones, president of the New Century Healthcare Institute, said, "Insurers cannot do without them and now they can't play one off the other." But it remains to be seen if the system possesses the same type of bargaining clout enjoyed by larger systems such as Sutter Health and Catholic Healthcare West. According to CEO Kendall Anderson, the system now has $280 million in cash reserves, $63 million more than it started with two years ago, and met a goal of saving $3.5 million from operating expenses in 1998. "Relative to other systems, we are looking very, very good," he said.
Everyone's a Critic
The Times reports that the system lost $6.2 million on revenues of $338.2 million in 1997 and lost a projected $1.6 million in 1998. Anderson said the operating losses were a result of capital improvement projects, Medicare cutbacks and inadequate payments from HMOs. "Our losses could have been reduced. All I had to do was not buy capital equipment," he said. The Times reports that the system spent $50 million on capital projects over the last two years, $7.5 million of which went to build a new administrative headquarters. Jones said the administrative office was "pure ego." Moreover, some insiders criticize the system for not yet merging medical services, leading them to call the experience "the merger that wasn't." Wendy Everett of the Institute for the Future said, "They never got efficient, they never took advantage of the economies of scale to the degree that other industries have in the merger process." But Anderson countered that the system saw more patients in 1998, eliminating the need to merge services. Patient counts were up 6% at John Muir and 23% at Mt. Diablo. "Counting on those numbers to stay high, however, could be risky," according to the Times. The system's contract with Kaiser Permanente expires this year, and some suspect that Kaiser may not renew it, or send fewer patients its way (Appleby, 1/31).