San Fernando Valley Hospitals Face ‘Financial Meltdown’
Long-term budget deficits caused by rising costs and declining revenue have left hospitals in the San Fernando Valley region facing a "financial meltdown" that could force many to close, the Los Angeles Daily News reports. Based on a review of area hospitals' financial statements, the Daily News found that about half operated at a loss in 1998 and nearly as many operated in the red in 1999. Hospital officials say inadequate reimbursement, increasing numbers of uninsured patients and rising labor cost are to blame. Jan Emerson, vice president of the California Healthcare Association, said, "We are at the brink of a meltdown. I think that we as a society are really going to have to decide who pays for this. We can't keep operating in the red." Tom Wallace, president and CEO of Granada Hills Community Hospital, which posted $5 million deficits in 1998 and 1999, said, "If something doesn't happen in the next year and a half to two years (you're) going to see tremendous numbers of hospitals, physician groups [and] nursing homes just go out of business." Some hospitals have tried different strategies to stave off the losses, including cutting staff and offering discounts to patients who pay in cash. In addition, some hospitals have challenged health care plans and received higher reimbursement rates.
But state and federal reimbursement rates have been reduced in recent years. In addition, hospital revenue has been cut as some "traditional" services are performed in outpatient settings, often for less money. Further all acute-care facilities statewide will be required to meet state-mandated seismic standards by 2008, a requirement that will cost "billions of dollars." Assembly member Keith Richman (R-Granada Hills), a physician, said, "I think hospitals are in a very precarious situation. If they're not losing money, they're making only a very little. ... There are some hospitals that are in severe financial trouble" (Mascaro, Los Angeles Daily News, 5/20).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.