PH5-020 2015 Alameda Health System - Case-Based …caseresources.hsph.harvard.edu/files/case/files/alameda.pdf · This case was written by Nancy M. Kane, ... PH5-020 2015 Alameda

© 2015 by the President and Fellows of Harvard College. This case was written by Nancy M. Kane, DBA, Harvard T.H. Chan School of Public Health, as the basis for class discussion and education rather than to illustrate either effective or ineffective handling of an administrative or public health situation. This publication may not be digitized, photocopied, or otherwise reproduced, posted, or transmitted, without the permission of Harvard T.H. Chan School of Public Health.

PH5-020 2015

Alameda Health System “Helping an institution survive that used to serve people with no choices.”

In July 2013, Bill Peruzzi, MD, MS (MHCM), FCCM, commented on the reason he recently accepted the position as Chief Medical Officer at Alameda Health System (AHS) (a.k.a. Alameda County Medical Center):

“The focus of the challenge is: How does one evolve a virtually pure public hospital system into something that can compete in a competitive market when a large portion of the current population served will quickly have choices that did not exist previously?”

Almost a year and a half later, in November 2014, many challenges remained for AHS. Its CEO of nine years, Wright Lassiter, had accepted a new position as President of the Henry Ford Health System in Detroit, Michigan, beginning in December. During his tenure at AHS, Mr. Lassiter led California public hospitals in negotiating an agreement with the state that resulted in $3 billion in supplemental revenue over a five-year period, which contributed to a financial turnaround and expansion of AHS. Mr. Lassiter also was a key player in the effort to obtain a 20-year voter reauthorization of Measure A, a local county sales tax that generated approximately $100 million annually to support the health service needs of indigent, low-income, and uninsured residents of Alameda County; 75% of those proceeds were transferred directly to AHS. He also led the master plan for a replacement hospital on the Highland campus, which was owned and financed by the county. However, starting in 2012, financial performance, while still profitable, was deteriorating. 2014 was projected to incur a loss. The health system was unable to reduce its working capital loan from the county by a scheduled $15 million in 2014; instead the system was frequently hitting its $200 million limit during 2014. Roughly $130 million of the county loan was a carryover of operating losses incurred prior to 1998, when governance changed to an independent authority. The balance was related to the ongoing cash needs of AHS operations. Also of concern, AHS had missed an opportunity to retain many of its patients newly-insured on the state health exchange, Covered California, because its largest affiliated managed care plan, Alameda Alliance for Health, had been financially disqualified from offering a privately subsidized plan on the exchange.

Alameda Health System PH5-020

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In addition, AHS had recently acquired two community hospitals, Alameda Hospital (AH) and San Leandro Hospital (SLH), in order to diversify its payer mix and increase volume. SLH also offered the opportunity to acquire a newer, more seismically compliant facility that could be renovated for rehabilitation function at a lower cost than new construction; however, subsequent local political pressures compelled AHS to maintain it as an acute care facility, as well. This perpetuated a revenue/cost imbalance when expected supplements from the local township did not materialize. As the President of the AHS Board, Kirk Miller, explained,

“Combining multiple cash-strapped organizations does not automatically create strength.”

Most concerning of all, long-standing tensions between the medical staff and administration threatened efforts to transform the quality and accessibility of patient care at AHS.

Background on Alameda County

Located on the eastern shore of San Francisco Bay, AHS served Alameda County, which in 2014 had a population of 1,565,0001 and an expected average annual growth of roughly 1% over the next five years. Unemployment was 5.7% in 2014, down from 9% in 2012, due to strong job growth particularly in professional services, education, and healthcare. Per capita income in the county was $57,595, and median household income was $69,151, well above that of California in general. Despite this prosperity overall, 9.2% of households were at or below the federal poverty line in 2014, and the county ranked the 57th worst in violent crime out of the 58 counties in the state. Oakland (population 399,000) was the largest city in the county, and included the Port of Oakland, the fourth busiest container port in the United States. There were 13 other incorporated cities and six unincorporated areas in the county; Fremont (203,000) was the next largest, then Hayward (102,000) and Berkeley (103,000)—home to University of California at Berkeley, the flagship university of the University of California (UC) system. As of 2010, 34% of the county’s population was white non-Hispanic, 25% Asian, 23% Hispanic, 12% African American, 4% multi-race, and roughly 2% either Pacific Islander or American Indian. Forty-four percent (44%) of residents did not speak English at home. The ethnic percentages masked considerable change over time. Since 2000, the white and the African American populations shrank by 13% each, while the Asian and Hispanic populations grew by 33% and 24%, respectively. There were pockets of high poverty in areas around Berkeley (generally reflecting the poverty of students) but it was especially high in Oakland. Exhibit 1 illustrates where those high poverty pockets were in the county—which mirrored the locations of major AHS facilities. High poverty neighborhoods had a much higher proportion of African American and Hispanic residents than did lower poverty neighborhoods; they also had higher unemployment, lower-paying jobs, and

1 CalTrans, “California County Level Economic Forecast, 2014–2040,” http://www.dot.ca.gov/hq/tpp/offices/eab/socio_economic_files/2014/FullReport.pdf


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less education. Homicide rates were eight times higher in high poverty neighborhoods, and youth in those neighborhoods experienced incarceration at 5.4 times the rate of youth in low-poverty neighborhoods. Teen birth rates were also significantly higher in the higher poverty areas. There was a nearly seven-year difference in life expectancy across Alameda County neighborhoods based on the level of poverty. Rates of use of the emergency room for diabetes, asthma, obesity, and assault followed a similar pattern relative to poverty. Oakland was among the top two to four of the 20 cities/towns in the county with the highest rates of hospitalization for chronic conditions (diabetes, severe mental illness, stroke, congestive heart failure, and asthma). Oakland also had the highest assault-related rate of visits to the emergency room, and the highest homicide rate in the county. The city had the third highest rate of avoidable emergency admissions (for conditions that would be better cared for in community/primary care settings), the second highest rate of preventable admissions for chronic diseases in the county, and the highest rate of emergency visits for mental disorders.2

Alameda Health System3

Founded in 1864 as Alameda County Infirmary, AHS grew to include five hospitals with 800 beds, close to 1000 physicians, and four “wellness” centers for primary care.

• Highland Hospital, located in Oakland, was the major tertiary hospital; it opened its doors in 1927, and as of 2014, was a 198-bed regional trauma (Level II) and teaching hospital affiliated with UCSF Medical School.

• John George Psychiatric Pavilion, with 80 beds, was located in San Leandro, providing emergency and acute inpatient care; it treated 95% of all psychiatric emergencies in the county.

• Fairmont Hospital, also in San Leandro, had 50 rehabilitation beds and a 109-bed skilled nursing facility.

• San Leandro Hospital was a 93-bed community hospital, located in San Leandro, acquired by AHS in 2013 from Sutter Health.

• Alameda Hospital was a community hospital located on Alameda Island, with 100 acute, 35 sub-acute, and 146 skilled nursing beds. While the real estate remains owned by the city of Alameda health care district, operational and governance control of the hospital was acquired by AHS in 2014.

• Four “Wellness” centers, two in Oakland, one in Hayward, and one in Newark, all of which were Federally-Qualified Health Centers under an Alameda County Health Department subcontract.

The primary care physicians operating in the wellness centers were unionized employees of AHS. Many of the other physicians practicing at Highland (Emergency, Internal Medicine, Pediatrics, OB/GYN) were employed by Oak Care Group, an independent physician organization contracting with AHS. A small number of specialty physicians (orthopedics [4], urology [2], 2 Source: Alameda County Health Data Profile, 2014 at http://www.acphd.org/media/353060/acphd_cha.pdf 3 Alameda Health System had been called Alameda County Medical Center until 2013. The name was changed as part of an effort to change the public perception of the system as a public provider of last resort.


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general surgery [2]) were employed directly by AHS. Other specialty groups (< 30 physicians) of the Highland, San Leandro, and Alameda medical staffs were contracted in either as 1099 relationships (anesthesiology) or through regional (pathology) or national firms (radiology) by AHS. Roughly 260 independent community-based physicians were associated with Alameda Hospital and another 95 with San Leandro Hospital. The total medical staff of the combined enterprise as of 2014 was around 1000 active physicians. As of 2014, the system had 4,545 employees and provided 14,241 discharges, 100,809 emergency visits, 304,447 outpatient visits, and 2,084 trauma visits. Twenty-six different languages were interpreted for a racial and ethnically diverse patient population that was 27% African American, 16% Asian/Pacific Islander, 43% Hispanic/Latino, and 13% White/Caucasian. 71% of the patients were adults 25 and older, 17% were children 0–15, and 9% were youth 16–24.

Major Turnaround of 2005–2013

When former CEO Wright Lassiter first arrived at AHS (then called Alameda County Medical Center) in 2005, the system was struggling on many fronts. It was facing a $20 million operating loss; 90% of the workers were in unions; over half of the nursing positions were vacant. The organization was reeling from high executive turnover (10 CEOs in 12 years), resulting in an organization that had “developed antibodies to the virus of change.” Elected officials were directly engaged in operating the hospital even though the county board of supervisors had turned governance over to an appointed board of trustees in 1998. The good news was that voters had passed Measure A in 2004, providing a 15-year sales tax add-on to provide core funding for the medical center (extended in 2014 for 20 more years), and the board was reformed to focus on governance rather than operations. The current President of the Board, Kirk Miller, described the proper role of the board in 2014 as having the primary responsibility to

“insure that management is thoughtful and careful in their decision making.” When asked why he took the job, Lassiter explained:

“I saw an organization with great bones: wonderful purpose and people. And the stars were aligned for success. It was a great opportunity to architect a new vision.”

With the help of new senior leadership and a major education process around finance, operations, and patient safety, Lassiter was able to turn the organization around. Under Lassiter’s leadership, AHS achieved eight years of positive operating margins, earned the Joint Commission Top Performer status, increased patient engagement from the bottom first percentile to the 80th, and was awarded the Press Ganey Spirit of Excellence Award for two consecutive years of employee engagement. He led an 18-month effort that reduced patient harm across the system by 50%. He also developed a master plan and secured the financing for a $682 million replacement hospital and campus, still underway in 2014.


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Mr. Lassiter was extremely successful in negotiating new revenue streams from public sector sources. Close to 60% of operating revenue in 2014 came from supplemental funds such as the county sales tax (Measure A), MediCal disproportionate share payments, and other federal, state, and local sources that represented public sector payments in excess of “market” payment rates for services provided. Nearly every senior manager in the organization in 2014 was recruited because they were inspired by Mr. Lassiter and by the opportunity, as the Chief of Strategy, CarlaDenise Edwards, put it:

“To go from provider of last resort to a provider of choice while retaining the safety net mission.”

In 2013 and 2014, Mr. Lassiter orchestrated the acquisition of two local community hospitals, San Leandro and Alameda, in order to build a small integrated delivery system that could compete with their two largest competitors, Kaiser and Sutter Health, for the East Bay. The long-term plan was to develop a Medicare Advantage plan for the area in partnership with other hospitals in the area in order to have enough providers in the system to leverage better managed care contract prices across all payers. However the departure of Mr. Lassiter to become CEO of the Henry Ford Health System in December 2014 took people by surprise. It also precipitated a period of reflection and review of the challenges facing AHS.

Challenges to Becoming Provider of Choice in Alameda County

Financial Shortfall David Cox, the new Chief Financial Officer of AHS, commented:

“AHS is a critical Safety Net Provider for the East Bay of San Francisco with the region’s only Trauma Program. We need to carefully control costs while we maximize the supplemental revenue sources that are available to Designated Public Hospitals. Regarding the impact of healthcare reform, AHS needs to position itself to participate in regional contracting networks as a means to have access to additional payer types at rates that reflect the cost of the critical services that we provide.”

Multiple operational challenges impeded the ability of AHS to sustain its financial health, including:

• Poor revenue cycle management (not billing at all, not collecting patient insurance information, physicians not documenting services accurately for billing purposes).

• Lack of access to specialists, so AHS patients were referred to competitors for specialty care.

• High FTE per adjusted occupied bed, roughly at 6.2 FTE compared to a target of 4.8.

• Variable performance in the types of metrics payers would be likely to use in performance-based contracts, such as Core Measure compliance for Acute Myocardial Infarction (AMI), Heart Failure, Immunization, and Pneumonia.


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• Lack of a Medicare Advantage plan, so that when AHS patients in MediCal managed care plans became eligible for Medicare, Kaiser4 was their only option.

• Weak managerial accountability for financial performance across the organization.

• Lack of contracts with many commercial insurers, or contracts that did not reflect the best interest of AHS.

AHS had a team working system-wide using the LEAN approach to address many of the operational challenges. Exhibit 2 presents an example of performance improvement with respect to reducing the number of patients waiting for specialty appointments. In addition, the new information system, Soarian, originally sold to AHS by Siemens, created management control problems because the various parts were not yet integrated—clinical data could not be connected to financial, scheduling, and registration data, and the inpatient system did not integrate with the ambulatory system. Also the two recently-acquired hospitals had different IT systems that were not compatible with Soarian. While the intent was to convert all hospitals to the new Siemens platform, that plan was put on hold when Siemens decided to sell their health IT business to Cerner. Thus, as the Chief Information Officer, Dave Gravender, explained:

“Everywhere you look, something doesn’t work.” Exhibit 3 provides the balance sheets and income statements of AHS for 2011–2013, and the historical expense and revenue per adjusted patient day.

Community Reputation Mark Fratzke, Chief Operating Officer of AHS, echoed comments from several senior managers when he noted that

“Support for the mission is tremendous, but people think that the care is better elsewhere, except for the trauma service, which is first rate. The quality of people here is high, applicants to jobs are top notch, the pay is competitive, and benefits are very good. But the organizational self-esteem could be better.”

Barry Simon, MD, Chief of Emergency Medicine, concurred.

“The quality of care has improved a lot in last 30 years, and especially in the last decade. The medical staff is unique, quality physicians whose head and hearts are in the right place. So the biggest challenge for AHS is becoming attractive to the ‘Regular Joe’ who views AHS as a ‘Knife and Gun Club.’ People are reluctant to come here because of the challenging neighborhood and poor access. Parking is difficult, patients often have to walk up steep hills, the signage is less than ideal, and it can be difficult to get information about the hospital once you walk through the doors.”

4 Kaiser is a combined health plan and owned hospital network that does not generally contract with non-Kaiser hospitals.


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One sign of the challenge of the Highland Hospital reputation was that almost a third of maternity patients using the prenatal clinics within AHS chose to deliver their babies elsewhere. Mini Swift, MD, Associate Chief Medical Officer, Highland Hospital, was commenting on how the first year of enrollment under the California health exchange (Covered California) gave her a new sense of urgency about improving the patient experience at AHS:

“This is not always convenient place for patients to access care. Long wait times in the ED and in ambulatory teaching clinics are not uncommon. Our providers have a strong commitment to our mission: Caring, Healing, Serving All. Despite this a lot of our patient population chose Kaiser (in the first round of signing up for subsidized insurance), so we need to understand that our patients take convenience and customer service into account when looking for quality health care.”

CarlaDenise Edwards, Chief of Strategy, explained that until recently,

“The media only mentioned AHS when something bad happened. We have tried to focus on positive hits on TV, Radio, Internet advertising—we are now up to 44 positive medical stories a month. This is helping to turn our image around.”

Exhibit 4 shows a poster designed to enhance the image of AHS for a broader array of services than just the trauma center.

Key Health Plan Relationships

“The race has started but AHS has had to wait.” Wright Lassiter, former CEO

AHS had MediCal5 managed care contracts with two insurers, Alameda Alliance for Health (AAHP), the largest source of MediCal revenue for AHS, and Anthem Blue Cross of California. Both of them were prepared to offer private commercial insurance for the low-income “subsidized” population created by the Affordable Care Act of 2010 (ACA). The population most likely to be eligible for subsidized coverage was in the “uninsured” as well as the MediCal and County Indigent populations traditionally served by AHS.6 However, in November 2013, during the first open enrollment period under the ACA, AAHP was removed from the list of eligible insurers offering health plans through Covered California, the state insurance exchange established under the ACA. The state Department of Managed Health Care said AAHP failed to meet a minimum financial solvency requirement to sell commercial insurance coverage. This left AHS with only one contracting insurer (Anthem) offering subsidized private insurance to a large subset of its traditional service population, and it was the highest priced of the three plans on offer. The other two plans, offered by Kaiser and by Blue Shield of California, did better than Anthem in attracting Alameda County enrollees: Kaiser got 41.6% of the 55,000 Alameda

5 MediCal is California’s Medicaid program for low-income populations. 6 Low-income people are likely to “churn” in and out of MediCal as their income eligibility fluctuates; under the Affordable Care Act of 2010, when these people become ineligible for MediCal, the new subsidized private insurance plans were expected to pick them up (and vice versa when their income dropped).


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County residents signing up for subsidized private health insurance; and Blue Shield came in second, with 29.4%. While Anthem Blue Cross came in very close behind, with 29% of the enrollees, the loss of so many previously uninsured residents—many of whom had formerly been “county indigent”—to Kaiser put a noticeable dent in AHS discharge volume in 2014 (see Exhibits 5 and 6). It also cost AHS close to $30 million in revenues in 2014. AHS also did not have a contract with any Medicare Advantage plan as of 2014. AAHP had offered a dual-eligible plan (low-income older patients eligible for both Medicare and Medicaid), but it lost too much money on the dual plan and had to withdraw it from the market. Exhibit 7 shows the 2013 payer mix and Exhibit 8 shows the payment to cost ratios by payer of the three hospitals in the original Alameda County Medical Center. It also describes the 2013 payer mix of the two newly acquired community hospitals, Alameda Hospital and San Leandro.

Patient Access to Care “We provide great care, but people need to be able to get in the door.”

Joe Walker, MD, Chief of Medical Staff A major issue for AHS was patient access to physicians and specialists, as well as to inpatient care through the emergency room, from which over three-quarters of system admissions originated. In the Highland Hospital emergency room, until very recently, patients waited 18–20 hours for a bed, because the inpatient discharge process was inefficient and the system lacked adequate sub-acute beds.7 Recently, Care Management, which had been largely performed by medical residents, was reorganized with nurse case managers and social services reporting to the Chief Medical Officer, which moved patients through the system much more efficiently. Discharge planning was begun when the patient was admitted, and a community nurse was hired to work with frequent, often homeless, users of the emergency room to keep them in the community and out of the emergency room and hospital. These changes reduced wait time in the emergency room for an inpatient bed to 9–10 hours, still well above a desirable standard of care. Exhibit 9 shows the progress in access metrics for the Highland Campus ED in 2013–2014 as a result of these interventions. Wait times for a new patient seeking non-urgent primary care in the wellness centers were also very high—133 days versus a target of 45 days, and a best practice metric of 14 days. Specialists also had long wait times, often well over 100 days. Part of the challenge in the wellness centers was a 25–30% no-show rate for scheduled visits. Many appointments were routinely made three months in advance and people just forgot or needed to reschedule. But patients also had trouble calling in to the wellness centers to make or cancel appointments. The call center was centralized at the system level. As one primary care physician put it,

7 A documentary called “The Waiting Room” was made about the patients and staff of the Highland Emergency Service; it is available on Netflix.


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“The call center is not working. Patients get put on hold for 20 minutes. There is no direct line, even for staff. The inconvenience trumps a good physician-patient relationship.”

Another issue affecting the “no-show” rate included the lack of parking, which was particularly severe at the Highland Campus. While the physicians often cited system inadequacies as the root of the access problem, administrators often expressed concern about physician productivity. The physicians scheduled their own time, and their productivity, measured as patient visits per unit of time, was cited by several administrators as being in “the 10th percentile.” The primary care doctors were unionized and paid salary without performance adjustments or bonuses.

Relationship between Physicians and Administration

“Physicians here are very mission driven; but because the patients often didn’t have much choice and resources were often rather limited, accountability was also often difficult to attain. It is hard to achieve our quality and access goals when there is little structure for accountability.”

Bill Peruzzi, MD, Chief Medical Officer An underlying theme for many physicians and administrators was a lack of mutual trust. While the “docs believed in the docs,” they had very low loyalty or trust in the administration. Part of the lack of trust came from the high turnover of senior positions over many years. Even under Mr. Lassiter, who led the organization for nine years, there was high turnover of his senior management team. Dr. Mini Swift, who became involved in physician leadership in 2004, commented,

“I have reported to six different Chief Medical Officers, and worked with many different executive team leaders in the past 10 years: three different Chief Financial Officers, four different Chief Nursing Officers. This makes it hard to get basic processes to stick.”

The Chief of Gastroenterology and Hepatology, Taft Bhuket, MD, commented on what he learned during his recently completed tenure as Chief of Staff:

“Despite good intentions on both sides, the physician-administration relationship is not yet grounded in trust. Many physicians here don’t feel considered or empowered as leaders in our organization. And I believe that many in our administration question the ability of physicians to lead. This disconnect has resulted in a strange sense of learned helplessness with the physicians who wonder whether they can affect change here. One of my physician colleagues palliates others by saying, ‘Don’t worry. Administrators will come and go and we will still be here serving the mission.’ Obviously this situation is less than ideal. There is a real need for dialogue and to find the common ground with our administrative colleagues.”

Mark Fratze summarized,


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“We have a handful of physician leaders here but not much bench strength. There is a lot of distrust between doctors and administrators, which grew partly out of there being so much turnover in senior administration below the CEO. The doctors have great ideas but they need support to implement them. My experiences at Mayo Clinic convince me that physician engagement is possible and critical to success.”

Mr. Gravender, Chief Information Officer, who arrived in 2013, noticed that only three people in his 38 person IT application support department had been at AHS for more than five years. Half of those positions were full-time consultants. He noted that:

“People leave because they get frustrated in getting things accomplished. Things don’t happen fast.”

Dr. Joe Walker described what he believed to be the biggest challenge ahead for AHS:

“There is a compelling need for collaboration between the Medical Staff and the Administration.”

Looking Ahead

The board (see Exhibit 11 for current trustee background) was working with an executive search firm to find a new chief executive officer for AHS. A big question for the board in this regard was whether to recruit an externally focused CEO or one with greater focus on the internal operations of the organization. At the same time, the competitive pressure was mounting. In June 2014, Kaiser opened a hospital in San Leandro that was enhancing Kaiser’s market share. Also, Fitch Ratings, which recently changed the outlook on Alameda County’s AA rated bonds (which financed the new buildings at AHS) from “Stable” to “Positive,” noted that the rating could be further upgraded if Alameda Health System demonstrated an orderly transition to the new federal funding environment in a way that did not increase the County’s financial risk. The senior leadership team needed to come up with a set of priorities to tackle in the coming months, even before the new leader could arrive. A lot had been accomplished but much more needed to be done to be able to realize the goal of becoming “Provider of Choice” while retaining the safety net mission.


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Exhibit 1: Map of Alameda County Showing Areas of High Poverty


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Exhibit 2: Sample of Operational Improvement Projects: Reducing Number Waiting for Specialty Appointments

* Incremental improvement due to: • Redistributed work to staff to even out workload • Revised work procedures based on time studies • Worked closely with providers to increase productivity


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Exhibit 3: Audited Financial Statements of Alameda Health System

2013 2012 2011

Balance sheet Assets:

Cash 49816 44846 52218 Patient accounts receivable 63580 38143 30272 Due from third party payers 42613 41126 45118 Contributions, grants receivable 792 674 810 Due from Alameda County 7144 11419 6587 Due from California 145514 93133 66460 Supplies 4107 4033 4093 Other 2316 2839 2308 Total current assets 315882 236213 207866 Board Designated for Capital 23250 23284 24399 Gross Property, Plant, Equipment 169275 144338 123958 Accumulated Depreciation 102063 95181 86780 Net Property, Plant and Equipment 67212 49157 37178 Total Assets 406344 308654 269443

Liabilities and Net Assets: Accounts payable and accrued expenses 94331 66700 51998

Due to third party payers 76421 22218 25026 Due to Alameda County 1780 2145 3284 Current portion, long-term debt 923 885 848 Other current liabilities 5840 14525 13913 Total current liabilities 179295 106473 95069 Loan from Alameda County8 145042 151005 144383 Pension and other post-employment liability 49655 39927 33901 Self-Insurance liability 20352 17751 16371 Mortgage payable 3011 3934 4819 Other long-term liabilities 8339 7764 7201 Unrestricted net assets 650 -18200 -32312 Total liabilities and net assets 406344 308654 269432

8 In 2011, the County amended the debt agreement on its long-term working capital loan, and placed a limit on the maximum net working capital loan available at the end of fiscal year 2018 that would not exceed $30 million, net the Board designated funds for capital.


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Exhibit 3, continued

Income Statement 2013 2012 2011

Gross Patient Service Revenue 1229767 1063050 1066687 Contractual Adjustments -931292 -822320 -793704 Disproportionate Share Funds 137876 118730 109530 Provision for Bad Debt -66428 -44085 -63795 Net Patient Service Revenue 369923 315375 318718 Other Operating Revenue:

Measure A Sales Tax Levy 90100 85100 77700 Other Operating Revenue:

DSRIP 28100 27000 27300 Seniors and Disabled 18400

Quality Assurance Fee

3300 31500 Other 110274 123315 101123 Total Other Operating Revenue 246874 238715 237623 Total Operating Revenue 616797 554090 556341 Operating expenses:

Salaries, wages, and benefits 401190 358005 327262 Physician contract services 52783 49380 48205 Supplies 48060 44706 41886 Purchased Services 47216 36292 31511 Depreciation 6882 8401 9348 Interest 661 1146 1206 All other expenses 41605 42570 32069 Total operating expenses 598397 540500 491487 Operating Income 18400 13590 64854 Investment income 449 417 578 Surplus/Deficit 18849 14007 65432 Capital Contribution 2 105 2573 Net Assets, beginning of year -18200 -32312 -100317 Net Assets, end of year 651 -18200 -32312


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Exhibit 3, continued


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Exhibit 4: Poster to Enhance AHS Community Image


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Exhibit 5: Covered California, Region 6—Alameda County Individuals Enrolled from October 2, 2013, through March 31, 2014, by Subsidy Status and Plan Subsidy - Eligible Unsubsidized Grand Total Total

Individuals % Total Total

Individuals % Total Total

Individuals % Total

Anthem Blue Cross of California

15,991 29% 3,303 33.5% 19,294 29.7%

Blue Shield of California

16,217 29.4% 2,679 27.2% 19,896 29%

Kaiser Permanente

22,982 41.6% 3,875 39.3% 26,857 41.3%

Total 55,190 100% 9,857 100% 65.047 100% Source: California Department of Health Care Services, www.dhcs.ca.gov


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Exhibit 6: Utilization Statistics

Alameda County Medical Center Discharges over Time (excludes Alameda and San Leandro Hospitals)

Medicare

Traditional

Medicare Managed

Care

Medi-Cal Traditional9

Medi-Cal Managed

Care10

County Indigent Commercial Other

Indigent Other Total

2010 2,241 98 5,752 1,276 2,113 418 881 1,037 13,816 2011 2,078 118 6,207 1,257 2,203 431 857 794 13,945 2012 2,100 136 4,806 2,768 2,727 408 804 1,090 14,839 2013 2,141 140 3,898 3,376 3,209 525 172 1,144 14,605 2014 2,396 151 4,543 3,900 2,028 873 424 14,315

The “County Indigent,” “Other,” and “Other Indigent” payer categories include some residents who were able to obtain privately subsidized coverage in 2014 through plans offered on the California Covered exchange. Source: California Office of Statewide Planning and Development, Annual Hospital Financial Disclosure Reports

Outpatient Visits 2013 2012 2011 Clinics/Wellness Centers: Highland 169,608 160,937 152478 Eastmont 75,219 70,742 71,563 Winton* 26,842 29,011 28,980 Newark 26,902 25,699 23,053 Fairmont 12,759 11,500 11,589 Total Clinic Visits 311,330 297,889 287,663 Emergency Visits: Highland ER and Trauma 84,355 82,060 78,506 John George Psych ER 10,400 11,420 10,553 Total Emergency Visits 94,755 93,480 89,059

*Winton had recently moved to a new, completely renovated site Source: Alameda County Medical Center audited financial statements 2013

9 Nearly 60% of the patient days of the “traditional” MediCal patients were in Long Term Care beds. Over 70% of the patient days of the MediCal Managed Care patients were in Psychiatric beds. 10 See footnote 9


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Exhibit 7: Payer Mix as Percentage of Gross and Net Patient Service Revenue (PSR), Alameda County Medical Center (ACMC) 2013*, Alameda and San Leandro Hospitals 2013

Hospital: ACMC ACMC Alameda Alameda San

Leandro San Leandro

Payer: Gross PSR

% Net PSR

% Gross PSR

% Net PSR

% Gross PSR

% Net PSR

Traditional Medicare 14% 12% 42% 39% 46% 49% Managed Medicare

1% Lt 1% 5% 5% 7% 7%

Traditional MediCal

24% 40% 17% 30% 7% 6%

Managed MediCal 19% 19% 9% 11% 18% 12% County Indigent 29% 20% Commercial Traditional

5% 6% 5% 3% 4% 6%

Commercial Managed

16% 8% 10% 21%

Other Payers 8% 12% 5% 4% 4% Lt 1% Other Indigent 1% -8% LT1% LT1% 3% Lt 1% *Alameda County Medical Center includes Highland, Fairmont, and John George Psychiatric Source: California Office of Statewide Planning and Development, Annual Hospital Financial Disclosure Reports

Payer Mix, 2013–2014, System Wide % Gross Patient Service Revenue Payer 2013 2014 MediCal 43% 48% Medicare 14% 19% County Indigent 29% 19% Commercial 5% 10% Other 12% 4%

Source: AHS internal documents


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Exhibit 8: Payment to Direct Cost Ratios**, Alameda County Medical Center Only

Payer Inpatient Payment to Cost Outpatient Payment to Cost Traditional Medicare .54 .96 Managed Medicare 1.10 1.38 Traditional MediCal 2.73 3.17 Managed MediCal .83 1.05 County Indigent 1.23 1.46 Commercial Traditional 1.95 2.25 Other Payers*** .09 .51

** Payment to Cost ratios are the relationship between net patient service revenue to direct cost; the average ratio of full cost to direct cost is 1.88, so the payment to direct cost ratio needed to cover average full cost is 1.88 or higher. *** Many of the “Other Payers” are uninsured and ineligible for public assistance due to income or undocumented citizenship status. Source: California Office of Statewide Planning and Development, Annual Hospital Financial Disclosure Reports


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Exhibit 9: AHS DSRIP Measure 2.4: Emergency Department Patient Flow


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Exhibit 10: Inpatient Market Share Trends, Alameda County

March 6, 2015 Network: Alameda Health System Market Share

Provider share of inpatient discharges1 in Alameda County, Percent

9%11% 11% 12%

15% 14% 13%

27%26%

24%

27% 26% 27%29%

33%31%

36%

29% 29%28% 28%

9% 10% 9% 9% 10% 11%10%

21% 22%

20%

22%21% 20%

5%

10%

15%

20%

25%

30%

35%

40%

1Q FY14 2Q FY14 3Q FY14 Apr May Jun 2Q FY15

AHS Kaiser Sutter* Washington All other1

Source: Hospital Council of Northern & Central CA, Census Report, 2013 Fourth Quarter , 2014 First/Second Quarter; Contact: Brenda Taylor * San Leandro is in Sutter’s total through end of Oct 2013and in AHS’s total thereafter ; AHD is other through April 2014 and in AHS thereafter. 1. Based on location of discharge NOT patient origin; includes all providers in Alameda County2. All other includes: Stanford Benioff Children’s, Kindred, St. Rose, ValleyCare

10/31/14 SLH Sutter to AHS 5/2/14

AHD to AHS

6/3/14 Kaiser Opens San Leandro site


23

Exhibit 11: Board of Trustees, Alameda Health System, 2014

Kirk E. Miller, President

Mr. Miller is an attorney, was chief counsel to the California Redistricting Commission, and has worked for Kaiser Foundation Health Plan, and Kaiser Foundation Hospitals. Mr. Miller was appointed to the Board in 2006, was elected Vice President in 2012, and President in 2013.

Valerie D. Lewis, Esq., Vice President

Ms. Lewis is an Assistant Vice President and Assistant Secretary for Safeway, Inc., and previously served as a Trustee of Alta Bates Medical Center and past Chair of the Bay Area Urban League. She was appointed to the Board in 2006, and elected Vice President in 2013.

Michele Lawrence Ms. Lawrence served as Superintendent of the Berkeley Unified School District after a long career in public education. She was appointed to the Board in 2012.

Anthony B. Varni Mr. Varni is an attorney with expertise in real estate, and has represented numerous cities, public agencies, authorities and special districts.

Kinkini Banerjee Ms. Banerjee is a Principle at Sage Transformations, a public health consulting firm. She was appointed to the Board in 2014.

Joe DeVries Mr. DeVries serves in the Oakland City Administrator’s Office coordinating multi-agency response teams on Public Safety and Public Works. He was appointed to the Board in 2014.

James Lugannani Mr. Lugannani is a Vice President at UBS Financial Services, and was previously a VP and Chief Planning Officer at Kaiser Permanente Health Plans and Hospitals.

Dr. Barry Zorthian Dr. Zorthian serves as the Board’s Medical Staff Representative. She is an internist in AHS’s Department of Medicine and on the clinical faculty at UC San Francisco.

Maria G. Hernández, PhD

Ms. Hernández is president of Impact4Health, and is also a practice leader for the global consulting services of InclusionINC.

Patricia Scates Ms. Scates, formerly a senior vice president at Wells Fargo, is currently a member of the Oakland Metropolitan Chamber of Commerce.

James Potter Mr. Potter was most recently the senior vice president, general counsel and secretary at Del Monte Corporation, advising the board on audit, government developments and policy.

Tracy Jensen, City of Alameda Health Care District

Ms. Jensen is a Director with the City of Alameda Health Care District Board and is co-chair of the District Board’s Community Relations and Outreach Committee.

PH5-020 2015 Alameda Health System - Case-Based …caseresources.hsph.harvard.edu/files/case/files/alameda.pdf · This case was written by Nancy M. Kane, ... PH5-020 2015 Alameda

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