Competitors Lead Hospital's Financial Turnaround

Philip Betbeze, for HealthLeaders Media , September 3, 2010

Much of the rest of the turnaround came from canceling and renegotiating managed care contracts. "We lose money on Medi-Cal and Medicare and the uninsured," says Weis, echoing many other hospital leaders across the country. "But we were even losing money on the managed care PPO," he exclaims. "We had reverse philanthropy where we were subsidizing for-profit insurance companies!"

What's really amazing about the turnaround, however, is that it happened at all. Principals at the three hospitals spent about two years, Weis reckons, on obtaining permission from CMS that would permit the two hospitals to make the donation.

"CMS was not keen on that," Weis says. "But within about 10 days after Obama was sworn in, we received a letter from CMS that said that it was ok, and meets in essence our rules and regs. They permitted it."

Looks like it was a good decision.

Meanwhile, Natividad supports its county now, rather than the other way around, Weis says. It runs the county's medical indigent program, for which it is reimbursed to some degree, but "as a courtesy, we've capped the cash receipts we receive from them at $6.2 million and we lose about $4 million a year on that program, so that's a drag on our earnings and a way to give back," Weis says. In addition, it gave $750,000 in 2010 to the county health department, and will give $820,000 in 2011. It's also giving $280,000 for a senior in-home care program, and it won't receive a penny of the county's general fund, sales, or property tax.

Weis credits the forward-thinking leadership of his competitors for the key piece in the puzzle, however, insisting that his story shouldn't be unique—that other struggling public hospitals and their competitors should emulate it.

"They clearly recognized the critical role this facility provides," he says. "They did it first and foremost as the right and ethical thing to do. I'd like to see that kind of unselfish leadership continues to exist."

Philip Betbeze is senior leadership editor with HealthLeaders Media.
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