Fatal System Error 

Private nonprofit hospitals, which benefit from huge tax breaks, fail to care for the East Bay's poorest residents — and now one public hospital is on the verge of collapse.

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And although the Affordable Care Act is helping the poor get healthcare coverage, an estimated 3.1 to 4 million California residents will still be uninsured in 2019, according to a 2012 report by UC Berkeley and UCLA.

That means healthcare and hospital officials need to develop a financially sustainable way to care for the region's poor and uninsured. "Everyone agrees that private nonprofit hospitals are essential for the future of healthcare," said Alex Briscoe, director of Alameda County Health Care Services Agency, adding that he is grateful for the ongoing contributions of nonprofits. But the reality of the current system, he said, is that "a few hospitals see the vast majority of the underinsured."

Those few hospitals, like DMC, are being pushed to the brink of extreme financial instability — and if they collapse, so will the critical safety net they provide for the entire region.

Federal law mandates that all hospitals treat and stabilize emergency patients who show up at their doors, regardless of the person's ability to pay. However, privately run nonprofit hospitals can limit the extent of the care that they provide to uninsured and underinsured patients.

And in the East Bay, this is not uncommon. Dr. Richard Stern, a DMC cardiologist and the hospital's former chief of staff, said that the San Pablo hospital regularly receives phone calls from Kaiser Richmond, the only other West County hospital, about patients that Kaiser staffers say are better suited for DMC. "There's an uninsured patient at Kaiser, and they call us and they say, 'Your patient is here.'" Stern said the calls aren't generally that explicit, but that it seems clear that Kaiser staffers, in some cases, transfer patients to DMC largely because the patients lack private insurance.

"They're uninsured so they're just looking to move them on to somebody else," said Dawn Gideon, interim CEO of DMC. "Anecdotally, we receive too many telephone calls about patients that turn out to be uninsured for there not to be some screening in place."

Dr. Sharon Drager, a DMC vascular surgeon, added of Kaiser: "Our patient means anyone they don't consider their patient."

Regardless of why public hospitals end up seeing such a high rate of uninsured and underinsured patients, data show that DMC doctors' frustrations are warranted. Private nonprofit hospitals, especially Kaiser facilities, provide significantly lower rates of care to low-income people than the public health systems.

In the East Bay, Kaiser has hospitals in Oakland, Richmond, San Leandro, Fremont, Walnut Creek, and Antioch. Kaiser Permanente — which is headquartered in Oakland and runs hospitals across the country — is also a health insurance provider through its Kaiser Foundation Health Plan, which currently has 9.5 million members. Kaiser offers an integrated model of healthcare, meaning members pay monthly premiums to the health plan as well as access services at Kaiser facilities. (Kaiser also has a for-profit arm, the Permanente Medical Group, which employs the physicians that staff the nonprofit hospitals).

In 2013, Kaiser's hospitals in Alameda and Contra Costa had a total of 61,991 discharges — meaning all those formally admitted into the hospital as inpatients (as opposed to outpatients who are typically treated and released in the same day). Of the patients discharged in 2013, only 996, or 1.6 percent, were uninsured, according to data from OSHPD. Roughly 41 percent were patients with Medicare (insurance for seniors and people with disabilities), Medi-Cal (coverage for low-income people), or other government insurance. And 57 percent of the inpatients had private insurance.

Kaiser was the only nonprofit hospital system in the East Bay to admit more privately insured patients than government-sponsored and uninsured ones (with a breakdown that was not far off from the population mix in the region's sole for-profit hospital in San Ramon). Kaiser also had by far the lowest rate of uninsured care of any of the major hospital systems.

Further, while Kaiser's hospitals were responsible for 26 percent of all inpatient care in both counties in 2013, they provided a disproportionately low amount of the uninsured care in the region — just 7.7 percent of all the discharges in both counties for people without insurance. In 2013, DMC admitted nearly twice as many uninsured patients as Kaiser Oakland and Kaiser Richmond combined — despite the fact that those two Kaiser hospitals admitted more than three times as many patients overall as DMC did. (Kaiser Oakland and Richmond share a license and report as one entity; Kaiser representatives declined to provide me with hospital-specific numbers).

On the flipside, while Kaiser provided roughly one-quarter of all inpatient services in the two counties, it captured a significantly higher rate of privately insured patients — 40 percent of all commercial patients admitted into hospitals in the East Bay. And Gideon, DMC's CEO, estimates that Kaiser Health Plan likely provides healthcare coverage to as much as 60 percent of all privately insured people living in DMC's service area, making it especially hard for the San Pablo hospital to attract commercial payers.

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