Inland Empire Provider Positioning for Growth in Reform

SAN BERNARDINO — Marking yet another step in the steady expansion of its reach in the Inland Empire, Loma Linda University Health is planning to construct a medical and educational complex in San Bernardino that could serve up to 250,000 patients each year.

Experts said the expansion is likely part of the health system’s strategy to better position itself for changes to health care reimbursement and hospital patient volume expected as a result of the Affordable Care Act.

In recent years, Loma Linda University Health has undertaken a number of construction projects in San Bernardino County, where its main medical campus is based, and in Riverside County. The health system, which includes the region’s only Level 1 trauma center and children’s hospital, now has more than 1,000 beds in six hospitals in the Inland Empire.

In 2009, the health system opened a 90,000 square-foot outpatient satellite campus in Beaumont. Through partnerships with Beaver Medical Group and Redlands Community Hospital, Loma Linda University Health’s Highland Springs Medical Plaza offers specialty services, such as oncology, cardiology, neurosurgery and orthopedics.

Two years after the completion of Highland Springs, the health system opened Loma Linda University Medical Center-Murrieta, a 106-bed hospital and medical office complex with clinics near Temecula.

Now, the health system is expanding into San Bernardino. LLUH expects to close escrow on a seven-acre parcel near highway 215 this month, said LLUH President Richard Hart. The new medical campus will be an extension of a three-clinic system called Social Action Community Health System that was started by volunteers from Loma Linda University and its medical center in the 1960s. The main clinic near the former Norton Air Force Base recently obtained status as a federally qualified health center, which will be extended to the new clinic, Hart said.

Hart said the health system is seeking to use its medical campus in Loma Linda for more complicated cases and the outlying facilities for community health services, including primary and secondary care.

He said it is difficult to foresee how finances will shake out when health care reform takes effect.

“There are a lot of unknowns in Obamacare that none of us can see our way through,” he said. “We’re all nervous about what reimbursements will come out of this.”

He anticipates increasing the health system’s affiliations beyond Beaver Medical Group, Redlands Community Hospital and San Gorgonio Memorial Hospital to include more community hospitals and county hospitals to prepare for new Medi-Cal beneficiaries in 2014.

“That’s going to push the volume of patients up considerably, and we’re striving to help prepare for that,” he said.

Bracing for Health Care Reform

Experts said that with the opening of all these new facilities, Loma Linda University Health is strategically positioning itself to have a strong foothold when federal health care reforms roll out.

“I think Loma Linda and the county hospitals are pretty hard to compete with,” said Dylan Roby, a professor and researcher at the UCLA Center for Health Policy Research. “Loma Linda can do it in Banning-Beaumont and San Bernardino because they know their population.”

He explained that in a growing market like the one in the Inland Empire, you don’t usually see hospitals built by new players because they won’t want to develop a new strategy from scratch. In addition, with unknown financial risks related to health care reform, such a move could be viewed as too dangerous. Loma Linda, however, is well-established and knows its market, he said.

“It’s not easy to pick up and start in a whole new area unless infrastructure is in place,” said Craig Garner, a health care reform law professor at Pepperdine University. “It’s much easier to come in and take over a struggling entity than to start a new one from inception.”

He identified two advantages for LLUH: a number of its facilities are affiliated with an academic institution — Loma Linda University School of Medicine — and the health system is expanding to other types of health care delivery beyond hospitals, which could see reductions in revenue as a result of health care reform.

Loma Linda appears to have another competitive advantage: The Inland Empire region has a chronic shortage of primary care physicians and hospital beds. Plans for new medical schools and hospitals have been ramping up in recent years to meet demand from a population that has grown to more than four million.

“It is one of the fastest-growing areas in California,” said Jim Lott, vice president of the Hospital Association of Southern California. “They are in a growing market, so I would think they are certainly a system to watch.”

Consolidation, Rise of ACOs Go Hand-in-Hand

LLUH’s increase in affiliations fits with a general trend in diversification as more and more health care systems and organizations are banding together to form accountable care organizations, experts said.

“You’re seeing physicians groups and health plans coming together with hospitals,” Lott said. “Right now, the Affordable Care Act has set integrated delivery systems on steroids.”

Meanwhile, health care reform has had at least one unforeseen consequence for Loma Linda. In January, the health system bought out the physician group that it had partnered with to launch Loma Linda University Medical Center-Murrieta and obtained not-for-profit status for the hospital because health care reform prohibits hospital ownership by physician groups. The new status, however, seems to be in keeping with the religious not-for-profit status of the faith-based health system, which is a Seventhday Adventist organization, Lott said.

Roby said the expansion could be a way for LLUH to attract commercial insurers and compete against Kaiser Permanente, which has a strong presence in the region. Under the ACO model, employers might see Loma Linda as a worthy investment of premium dollars since the health system will have a wide network of high-quality facilities.

“They’re bringing a lot more into the fold if they have a campus in Murrieta, Banning-Beaumont, San Bernardino and Loma Linda,” he said.

The expansion also could help ensure that LLUH will be well-positioned to provide services to Medi-Cal beneficiaries. Hart confirmed that one of the goals of the San Bernardino medical center will be to serve patients coming into the health care system through the ACA, particularly Medi-Cal beneficiaries. The new facility will offer primary care and have a number of specialty clinics.

He also said that expansion is warranted not only because of the region’s growing population, but because 50% of patients go outside of the Inland Empire to Orange County and Los Angeles to seek health care.

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