EL CAMINO: Financial Woes Plague Hospital
El Camino Hospital -- the sixth-largest in Silicon Valley -- is expected to post $11.5 million in operating losses for the fiscal year ending in June 2000, the Business Journal of San Jose reports. CEO Richard Warren blamed past management problems, including El Camino's change in status from public to private, but added, "Our operational problems are directly related to governmental and commercial health care purchasers who continue to ratchet down the hospital payment schedules to draconian levels." He said the hospital would "use our resources of talent, equipment and reputation to develop programs and services that are cost-effective and efficient" to raise revenues. In one such campaign, El Camino notified Aetna US Healthcare Inc., HealthNet and PacifiCare that it would "terminate its capitated contract payment arrangements" with them. Warren said the existing payments do not cover costs, but the Business Journal notes that the move may be a "negotiating tactic" that could lead those companies to increase their reimbursement rates.
Stephen Shortell, professor at the University of California- Berkeley School of Public Health, said El Camino could use its endowment to cover its losses. Rick Messman of Arthur Andersen LLP estimated El Camino's "cash and investment balance," similar to an endowment, to be $149 million, but said that amount "goes very quickly in major capital expansion and construction." El Camino is expected to reconstruct its facility to meet a 1994 state law governing seismic standards for inpatient facilities (Harris, 9/20 issue).