Do or Die for Doctors Medical Center But It's Not for Lack of Trying

Doctors Medical Center in San Pablo has been struggling for more than a decade -- hemorrhaging millions of dollars in the face of extraordinary efforts to keep it afloat.

Despite emerging from bankruptcy and 10 years of million-dollar grants, loans and parcel taxes, the center recently downsized, cutting the number of inpatient beds from 140 to 50, closing the unit treating heart attack patients and diverting ambulance traffic to nearby hospitals.

Without additional and continuous funding, Doctors Medical Center will have to close its doors entirely or completely reconsider its model very soon.

In 2008, 2009 and 2010, the medical center saw a bit of a reprieve when outside funding -- a combined $17 million a year from Kaiser, John Muir and the state -- filled its financial gap. But when that funding dropped by 93 percent in 2011, DMC's chances of survival grew more dismal. It just can't survive on its own.

Doctors Medical Center became a stand-alone hospital in 2004, when Tenet Healthcare didn't renew its contract and the West Contra Costa County Healthcare District took over operations and assumed financial liability.

With changes to the national health care system and a shaky economic climate, it has been challenging for many stand-alone hospitals across the country. In 1990, there were 3,562 stand-alone hospitals. But by 2010, there were only 2,044, according to Lovelace Health System.

"Stand-alone hospitals have challenges," says Richard Gundling, vice president for the Healthcare Financial Management Association. "They have a lack of market share, geographic coverage and limited access to capital."

While the Affordable Care Act provided coverage to the uninsured, it compounded the challenges of stand-alone hospitals. Hospitals are reimbursed for each patient covered by Medi-Cal, but those reimbursements are only about 70 percent of what the hospital receives for patients covered by commercial insurance.

"With the Affordable Care Act, more people got coverage," says Gundling, "but more people got coverage that pays less than cost. It has accelerated a change to larger systems."

The payer mix at Doctors Medical Center is about 80 percent Medi-Cal and about 10 percent uninsured, leaving only about 10 percent that is commercial insurance -- which is not enough to cover the much larger number of Medi-Cal patients with a lower amount of reimbursement.

"The hospital has always had a payer mix that is not highly profitable," says John Gioia, West Contra Costa County supervisor, who has worked alongside the medical center to since 2004.

But that is the Catch-22 of DMC. That payer mix might be exactly why people like Gioia are desperately trying to keep the hospital above ground. It is one of two hospitals serving Richmond, a community with many residents living in poverty.

In 2013, DMC served 41,903 patients in the emergency room, with many in severe or critical condition. If DMC closes its doors, there will be only 15 emergency room beds to serve a population of about 250,000, according to the Contra Costa Emergency Medical Services Agency.

"It's a combination of a bad model and bad payer mix," Gioia says, "yet you have a very important emergency room."