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EXCLUSIVE: Fallbrook Hospital, healthcare district seek solution to sustain services; CHS subsidiary gives 130-day notice
Thursday, June 19th, 2014
Issue 25, Volume 18.
"The operation of Fallbrook Hospital, as it is currently, is not viable, not sustainable for the long term," said hospital CEO Kapua Conley. "We need to be more amenable to the times and the hospital is working collectively with the healthcare district to see what can be changed here for the long term."
According to Stephen Abbott, president of the Fallbrook Healthcare District, the district's contingency plan showed a loss of $5.8 million for last fiscal year and $4.5 million the year prior.
The reason for the shortfall and the need for change is due to three factors, they said.
"It's been a domino effect," said Conley. "There are three things that have crippled the operation and accelerated the need for change. First, healthcare reform (Affordable Care Act) has led to reduced healthcare payments from both federal and state sources, yet our costs have remained the same. Second, we now have competition from three new hospitals in the area (Palomar, Temecula Valley, and Loma Linda). Finally, we have experienced increased penetration of managed healthcare in our community." Some medical groups with large numbers of managed care cases have been redirecting patients out of Fallbrook to other providers for tests and treatments.
"All of these things have happened in the same, relatively short period of time," said Conley.
"The reality is that insurance carriers are driving the bus," said Vi Dupre, administrator of Fallbrook Healthcare District.
Conley said what Fallbrook needs to do is to "align its model with what the payers' (insurance/medical groups) are today. "Because right now we are at the bottom of the totem pole when it comes to receiving those managed care patients," he said.
Since the process of seeking and securing the right kind of change is just beginning, there are no specifics to share with the community yet.
"The most important thing for the community to know is that we are working together on this and the hospital is fully operational," said Conley. "The one thing that is definite at this point is that how we operate right now has to change."
Abbott said in terms of the healthcare district's financial position, "We collect approximately $1.5 million annually. Of that we award approximately $500-600,000 annually [in grants] to numerous healthcare programs throughout our community, and invest approximately the same amount into our 'lease termination contingency fund'. Presently we have $9.5 million in reserve, much of which is set aside for non-depreciated capital improvements and unused prepaid rent."
"Doing the math on income and investments versus expenditures, it's pretty clear that the present model is unsustainable, which our consultant validates in the contingency plan," said Abbott. "So, even if we could spend every nickel we had, we would be completely out of cash in less than 18 months, and we would still need to reimburse FHC (CHS) for unused prepaid rent and non-depreciated capital assets, which are numerous."
Abbott said the district had recently updated it's contingency plan in the event something like this occurred. In that plan is a list of other healthcare organizations that might be sought out to provide services in the Fallbrook market.
The potential affiliation partners suggested in Fallbrook's contingency plan include:
*Universal Health Systems – currently operates Temecula Valley Hospital, Inland Valley Medical Center, Rancho Springs Medical Center, Corona Regional Medical Center, and Surgery Center of the Temecula Valley.
*Loma Linda University Medical Center (LLUMC) – currently operates LLUMC, LLU Murrieta, LLU Children's Hospital, LL Behavioral Medicine Center, LL Heart & Surgical Hospital.
*Scripps Health – currently operates Scripps Green, Scripps Memorial La Jolla, Scripps Memorial Encinitas, Scripps Mercy, Scripps Clinic, Scripps Coastal Medical Center, and specialty centers.
*Tri-City Medical Center
*Palomar Medical Center
*UC San Diego Health Systems
*Sharp Health System
The plan, the group said, is to approach these entities and see what interest there might be in operating a share of the services currently offered by Fallbrook Hospital.
"One entity could want to come in and operate multiple items or various providers could result," said Abbott. "We need to see what they feel are opportunities for them."
Above all, both Fallbrook Hospital Corporation (CHS) and the Fallbrook Healthcare District want residents to know the hospital is still open and operational.
"We are still delivering great, quality care; there is no impact at this time on that," said Conley. "As things change, we will be very transparent and allow time for people to make transitions. We are prepared to share all information we have with prospective organizations."
Dupre said the transparency factor is very important since "entities will need information about the current hospital operation, the physical plant, etc. to develop ideas and proposals."
Whether or not Fallbrook Hospital Corporation (CHS) will continue to be in the healthcare provider mix under the new structure remains to be known.
"It's too early to tell," said Conley. "We want to come up with a solution. We want to be open-minded."
All parties involved in seeking a solution agreed that some members of the public will view the situation negatively, while others will see it as a positive move.
"It's easy to gravitate toward the negative aspect of this, but after looking at reports, there is definitely tremendous opportunity here to enhance healthcare," said Conley.
Conley said Fallbrook's situation is not unique in America's small community hospitals today, but what is different is the community's support organization.
"Fallbrook is not the only community going through this, but Fallbrook has a healthcare district and many do not," he said. "That is a definite benefit."
Abbott agreed that the Fallbrook community has strengths not found elsewhere.
"This community has supported this hospital for 15 or 20 years longer than the fate most community hospitals have experienced in this county," said Abbott. "There is enough to build on here." And with the growth coming to the Interstate 15 corridor area of Fallbrook, all agreed that the demand will do nothing but continue to grow.
While change is coming to Fallbrook, the overall medical care landscape in San Diego County has seen many changes and additions over the past few years.
"Affiliations have been happening regularly and successfully in the San Diego County market in recent years," said Conley. "We want to collaborate with others, instead of viewing everyone as competition. We have to change with the times."
To formally begin the process of finding a solution, Fallbrook Hospital Corporation (CHS) followed the procedures outlined in their 30-year lease with the Fallbrook Healthcare District, which began 16 years ago in 1998. On May 21, it notified the district that it wishes to close several of the core services at the hospital in a period of time not to exceed 130 days, unless the district could assume financial responsibility for the losses associated with providing those services.
The services marked for closure would include: obstetrics (labor and delivery birthing rooms), surgical services (general, gynecological, kidney, ophthalmologic, orthopedic, pediatric, plastic, podiatric, and urologic), anesthesia services, endoscopy procedure services, laboratory services, radiology services, pharmacy services, and emergency services (emergency communication systems, emergency room services, and orthopedic emergency services).
While a new affiliate could potentially assume all operations, it could be that a variety of entities choose to specialize in offering services locally. "Those could include a stand-alone emergency room, comprehensive urgent care, ambulatory surgery center, dialysis center, acute care rehab, psychiatric facility, imaging center, etc.," said Abbott.
According to Dupre, "It is Fallbrook Healthcare District’s intent to keep the public informed as regularly as possible, mindful of the fact that some of the initial discussions regarding services to other operators will need to be conducted confidentially."
"Although we don't know what the future looks like, there will be something viable for the community," said Abbott. "I don't think there will be a padlock on the door in 130 days. The question is just the timing of all the new plans and the transition."
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