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NorthBay Healthcare trims $15 million from budget

MEDI-CAL CUTS TO BLAME, NEW PROJECTS UNDER OLD BUDGET IN THE WORKS

FAIRFIELD, VACAVILLE – NorthBay Healthcare, which operates two hospitals and several medical buildings in Solano County, recently announced that expected Medi-Cal cuts have forced officials to implement a 5 percent mid-year cut in the group’s budget, resulting in layoffs, dropped services and closure of one occupational medicine site.

About 25 percent of the nonprofit’s revenues come from the state, and the group’s two hospitals are considered disproportionate-share facilities because the portion of its patients on Medi-Cal or Medicare is more than a typical hospital’s patient load.

Even though the hospitals’ daily patient visits have slowly increased, the demographics of insured versus non-insured or underinsured have changed drastically in the past few years, and without a county public hospital, they will continue to see a majority of those patients.

Just from 2007, the amount of unpaid care provided by Northbay increased from $1.3 million at the beginning of last year to more than $6 million in January 2008. The organization’s has a total budget of about $304 million.

“When we made our budget for 2008 last October and November, we did not know that the state would cut Medi-Cal reimbursement by 10 percent,” said NorthBay Healthcare President and Chief Executive Officer Gary Passama.

Mr. Passama estimated a net income of about $18 million for 2008, but in the first four months of the fiscal year, revenues have just broken even.

“So even with the cuts we are making it’s doubtful that we will make [the estimated profit] this year.”

The group made the announcement June 3, notifying 63 of its 1,750 employees of the layoffs, though some will be offered similar positions in the system. The affected employees will also receive severance and first opportunity for available job openings, as they occur in the next six months. The organization has laid off employees in the past, including about 120 in the 2004 and in smaller numbers in the ‘80s and ‘90s.

In addition to the payroll reductions, officials decided to cut two pediatric programs that lose an average $1.3 million a year.

“Losing our outpatient pediatric rehabilitation services was a painful decision to make. It serves between 200 and 300 patients a year, but because of the nature of the funding system, in most cases we only collect about 25 cents for every $1 in services,” Mr. Passama said.

“The pediatric acute-care unit is also difficult to eliminate because we are the only ones in the county who offer that.”

The unit saw an average two patients per day – though 10 percent of the time the number was zero per day.

Both will be phased out by August, though they will continue to treat children in the emergency department or transfer them to a location where they can receive appropriate care.

As a final cost-saving measure, the group is consolidating its two occupational medicine programs into one building and will close its Fairfield office.

At the same time, several projects under last year’s budget were recently completed or near completion, and several others are in the pipeline. A recently completed 69,000-square-foot headquarters office, training center and conference space in Green Valley has opened up space in a medical office, which will be transformed into new specialty doctors’ offices.

The building has been in the works for several years on a plot that could later accommodate another medical office building or even a 50-bed hospital, depending on need, according to spokesman Steve Huddleston.

As part of a 15-year strategic plan passed last year, NorthBay Healthcare decided to put an increased focus on acute and adult care. As part of that effort, it has plans in the works to add 25 beds to NorthBay VacaValley Hospital, though that project is still at least two years from breaking ground.

Also, the NorthBay Heart & Vascular Center has signed a contract with a cardiovascular surgeons group to perform open-heart surgery in a new surgical suite that begins construction June 16. When it opens for care early next year, it will be the only facility in the county providing that service.

Also in the works, the company has begun the preliminary planning for an expanded and upgraded pharmacy at its NorthBay Medical Center in Fairfield and will break ground on expansions to lab facilities sometime this year.