Article Archive
Paying the Bills: How One Independent Hospital Stays Afloat During Tough Economic Times
Cover Story
Issue: January 2010
By: Juliet Farmer
The economy has affected everyone in one way or another, but for Children’s Hospital & Research Center Oakland, a not-for-profit pediatric medical center, trying economic times are met head on, all with the goal of helping children.
Being located in Alameda County poses a challenge in and of itself, as the health disparities are wide and the asthma rate among children is one of the highest in the nation.
“Years ago, our hospital assumed the care of most children seen in county facilities covered by Medi-Cal,” explains Bertram Lubin M.D., Children’s president and CEO, and a pediatrician. “Today, we average more than 200,000 outpatient visits per year, and we’re the largest outpatient facility in Northern California. Geographically, there is no pediatric inpatient facility nearby for Medi-Cal, and few outpatient facilities for Medi-Cal. As a result, 70% of our patients have Medi-Cal.”
With an annual budget of more than $350 million, Dr. Lubin says that Children’s loses millions each year from Medi-Cal alone. “The challenge of being a safety net hospital at 70% Medi-Cal is that it depends on the rates Medi-Cal reimburses us for the care we provide. Children’s was founded on the mission to care for all children almost 100 years ago. All kids [seen here] receive the highest level of care available regardless of their ability to pay.”
Making Ends Meets
While California may be referred to as the golden state, in the case of medical reimbursement, Dr. Lubin notes, “California has the lowest reimbursement rate of any state in the U.S., mainly because we cover the most children.”
“If we had a better Medi-Cal reimbursement rate, we would not have such a challenge. That’s why we’re trying to establish partnerships with community, federally-qualified health centers, which get better reimbursement rates,” he adds.
There are also issues with managed care (insurance). “Recovering costs, compared to other hospitals serving children, we have some of the worst contracts currently, and we want to change them to obtain reasonable reimbursements,” observes Dr. Lubin.
Faced with these issues, Children’s relies heavily on philanthropic contributions. “The economy makes this challenging and complicated, but not impossible,” Dr. Lubin explains. “We need to get creative, and get people to recognize the gem this hospital is.”
In addition to contracts to serve children with managed care insurance (third-party payors) and those with Medi-Cal (federal and state governments), Children’s also receives other government funding, including for its medical education programs and other grants and awards, and by private philanthropic donors.
The most dramatic example of private funding came in June 2009, when Children’s received a $9.8 million gift to fund research in cellular therapies, such as bone marrow and cord blood transplantation, from donor Dolores Jordan, who made the donation on behalf of her late husband, Hanabul “Bud” Jordan, and her late brother-in-law, Lowell Jordan, all longtime East Bay residents.
Of course, private donations don’t need to be designated for one particular use; they can be as specific or unrestricted as the donor wishes. “Children’s can create something that can meet any donor’s desire,” Dr. Lubin notes.
While the Jordan donation is the largest single gift to date, no donation is too small, notes Brad Barber, senior vice president of external affairs and chief development officer. “Those small donations can add up to significant support. Kids donate the contents of their piggy banks, and this is significant to them and so meaningful to us,” he says. Though Children’s raises millions of dollars annually from individuals, businesses, sponsors, organizations, and public and private foundations, the most frequent gift is probably closer to $50.
Children’s is also receiving help from the federal government’s efforts to keep people employed and keep research on track. The research arm of Children’s, Children’s Hospital Oakland Research Institute (CHORI), recently received 16 American Recovery and Reinvestment Act (ARRA) of 2009 grants. These add up to more than $14.5 million so far from the National Institutes of Health (NIH) over a two-year period.
One of the largest grants was awarded to Edward Lammer M.D., whose study of the genetics of heart defects will be supported by $1.3 million of government funding over a two-year period. The NIH grants will also help other CHORI researchers studying cancer, investigating lipids and heart disease, and researching cholesterol-lowering drugs.
Mission Driven and Child-centric
The mission of Children’s is “to ensure the delivery of high-quality pediatric care for all children through primary and subspecialty networks, a strong education and teaching program, a diverse workforce, nationally-recognized research programs, and child advocacy efforts.” In order to fulfill that mission, Children’s, the first children’s hospital in the East Bay, is freestanding (not connected to a university or other institution) and is the only independent pediatric medical center in northern California. In fact, Children’s is one of only 45 freestanding children’s hospitals in the nation. Additionally, the hospital is a designated Level 1 pediatric trauma center, as well as the largest and busiest pediatric critical care facility in the region.
According to Dr. Lubin, being freestanding is critical. “When pediatrics is a small part of a medical center or hospital, it’s never child-centric, and less priority is placed on resources to care for children,” he explains. “Because we’re pediatric only, our nurses, physicians, social worker and other staff can focus on our mission, and use all of the resources we get–including medical managed care, grants and private donations–to take care of children.”
With an inpatient facility comprised of 190 general acute care beds, and 201 full-time, hospital-based physicians, Children’s admitted 10,843 patients during 2008, and in that same year, Children’s emergency department had 50,394 visits..
In addition, CHORI conducts basic and clinical research into the molecular, cellular and biochemical bases of disorders such as cancer, diabetes, nutrition, infectious disease, genetics, and heart defects. This research is primarily supported by grants from the NIH and other federal government programs, and CHORI’s technology transfer program. In some cases, specific inventions have led to licensing arrangements with third parties to commercially develop and market the invention. Research institute efforts have also led to Children’s operating the first nonprofit sibling donor umbilical cord blood bank in the U.S.
CHORI is the only non-university-affiliated pediatric medical center in the U.S. to have a research institute of this magnitude, with a yearly institute budget of more than $50 million. CHORI has more than 300 research and support staff, and it ranks sixth in NIH funding to children's hospitals in the nation.
Serving the Entire Region
Children’s also offers a wide variety of community-based programs, including school-based clinics, an adolescent medicine clinic (the only one of its kind in Alameda County), teen AIDS prevention, medical clinics that service homeless children under 19 years of age and their families, a family outreach and support clinic for those in the foster care system, assistance for children in the child welfare system, a pediatric domestic violence program, early intervention services, parent support groups, a hemophilia treatment center, pediatric sports medicine, and much more.
Children’s also operates specialty care centers throughout the region. There were 227,114 outpatient visits in 2008 to Children’s Hospital facilities, including visits to Children’s subspecialty centers in Brentwood, Larkspur, Pleasanton, Modesto, and Walnut Creek.
While Children’s focuses its needs assessment processes and community benefit programming on children and families in Alameda and Contra Costa counties, they are also a regional provider of pediatric services throughout northern California. In 2008, 60.7% of the children seen at the facility were residents of Alameda County.
According to Dr. Lubin, Children’s also trains many of the pediatric doctors in the area and has the second largest residency program in California. “In short, we’re the key center of a cog that relates to the entire needs of our community,” he says.
“Safety nets have needs,” concludes Dr. Lubin. “We need to bring insured patients in from outlying areas and have them recognize us as a go-to facility. We provide a huge community benefit, and we need the entire community’s support.”
