San Diego Business Journal Health Care: Insurance Woes, Personnel Shortages Expected to Plague Industry

Local experts predict San Diego's sickly health care industry will decline even further in the coming year.

Old problems of inadequate reimbursements from health plans, the alarming rise of the uninsured and critical shortage of nurses continue to plague San Diego.

A slowing economy, fears of a recession, and new federal regulations add to existing woes, the experts said.

"If we continue along the same line we are going right now, it's going to get much worse," said Gary Stephany, president and CEO of the Healthcare Association of San Diego and Imperial Counties.

The majority of the health care industry officials responding to the 11th Annual San Diego Business Journal/Deloitte & Touche Economic Outlook Survey agreed with Stephany's bleak outlook for the industry.

Out of seven respondents, four said the economic condition of the health care industry in the nation will be "worse" in 2001 compared to last year.

One participant said it will be "much worse." Two said it will be "about the same."

Two local experts, Ruth Riedel, CEO of the Alliance Healthcare Foundation, Steve Escoboza, acting director for the San Diego County Health and Human Services Agency, also see worse times ahead.

Riedel, an advocate for San Diego's indigent population, said the national economy has slowed since last June, and the threat of a recession is looming.

Downward Trend

While it is too soon to predict how the Bush administration will handle health care issues, locally the trend is downward, she said.

Escoboza, whose agency provides health care to 2.9 million uninsured, said the county is not getting its fair share in federal and state dollars to provide adequate health services.

The county ranks among the top counties nationwide for uninsured people, with more than 600,000.

Escoboza fears more working adults will be without health insurance in 2001.

With health plans raising rates up to 13 percent this year, many businesses will no longer offer coverage to employees instead of inking new contracts with health plans this month.

The resulting rise of the uninsured will raise the burden on local hospitals, Stephany said.

People without health insurance typically wait until they are seriously ill and need emergency care , the costliest care provided by hospitals. This puts more strain on already overcrowded emergency rooms and on hospitals' bottom-line.

A Few Highlights

A few highlights, however, are on the horizon.

Stephany said he's thrilled President Bill Clinton signed a bill to restore $1.2 billion in Medicare funding removed under the 1997 Balanced Budget Act.

Escoboza hopes to get additional state funds to provide health care for San Diego's working adults who earn too much to qualify for Medi-Caid, but not enough to buy commercial insurance. He is also excited about the prospects of a "Wellness Surgeon General" being named by president-elect George W. Bush.

Riedel is excited about another Bush nominee. She hopes William Roper will become Bush's health advisor. Roper is the dean of the school of public health at the University of North Carolina.

So much for the experts' New Year's wish list.

For San Diego's hospitals, 2001 will be gloomy, Stephany predicts.

A federal mandate and the state's seismic requirements forces hospitals to dig deeper into already strained pocketbooks this year.

He said by 2002, all U.S. hospitals are required by law to adopt a uniform billing system.

The price tag to gear up for this event is estimated at $40 billion nationwide. Locally, Stephany estimates it will cost hospitals some $400 million , so far unfunded.

Hospital operators are also faced with a state requirement for earthquake safety retrofitting.

Hospital officials, many of whose hospitals already operate in the red, say they don't have the millions of dollars needed to comply with the retrofitting mandate.

Some hospitals have already closed facilities considered too costly to rebuild.

Mission Bay Hospital, owned by Dallas-based Triad Hospitals, and Scripps Memorial Hospital East County, part of Scripps Health, closed only weeks apart in 2000 despite concerns voiced by the public and political leaders. Hospital officials cited seismic requirements, low reimbursements rates and financial pressures for the shutdowns.

Among the biggest concerns raised by the closures was that they would divert emergency care to other already overburdened hospitals.

In addition to these closures, there were shutdowns forced by bankruptcies.

Charter Behavioral Health Care Facility, Villa View Hospital, Bayview Hospital, and Vencor Hospital all filed for bankruptcy.

Stephany worries fiscal pressures will lead hospitals to cut vital programs in mental health, education, home health and emergency services this year.

He also fears more hospitals may close.

"I wouldn't have predicted two closures last year," Stephany said.

Doctor groups also criticized low reimbursement rates last year. A doctor rally in Old Town late last year was aimed to create public awareness of San Diego's worsening health care climate.

But so far, not much has changed.

Last year some physician groups integrated with larger systems or closed down altogether, forcing thousands of patients to switch doctors.

Many doctors who haven't already left San Diego are contemplating leaving, said Stephany.

That, coupled with a shortage of nurses, increases the challenge of delivering quality health care.

Six respondents out of the seven respondents to the Economic Outlook Survey said they had "extreme" difficulties recruiting qualified employees last year. This year is likely to be the same, or worse, Stephany said. San Diego has some 750 openings for nurses.

When asked about the political leadership in San Diego, Escoboza, Riedel and Stephany expressed optimism, as did those who responded to the economic survey.

Out of seven respondents, five said they are "satisfied" with local leaders. Two people said they are "disappointed."

Escoboza praised the San Diego County Board of Supervisors for committing tobacco settlement dollars to health care issues. He is also pleased that $10 million in state funding will be allocated to building a center devoted towards caring for the mentally-ill homeless.

Riedel praised legislators for their efforts to address the problem of uninsured patients.

Stephany said he is satisfied with local leaders. But he fears San Diego's health care climate will continue to worsen before it gets better.