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Hospitals Feel “94 Quake Aftershocks Differently

Hospitals Feel ’94 Quake Aftershocks Differently 2001 was a painful year for most of the Valley’s licensed hospitals. Many face another year of budget constraints as they continue to grapple with the escalating cost of health care, all the while still trying to meet mandates to repair damage from the 1994 Northridge earthquake. Other factors take their toll as well: A growing shortage of trained nurses and health care workers is forcing some facilities to pay higher salaries in order to retain staff, impacting their bottom lines. And, although a recent proposal by Gov. Gray Davis to cut roughly $10 million in funding from Los Angeles County trauma centers has been shelved, the threat of cuts for all of the state’s roughly 400 licensed hospitals remains a real one, officials say. But the picture changes from facility to facility. Two very different hospitals in the same area experience pressures in very different ways. Despite Chapt.11 Filing, Henry Mayo May Be Ahead of Game By JACQUELINE FOX Staff Reporter The buzzword floating through the corridors of Henry Mayo Newhall Memorial Hospital in Valencia this year undoubtedly has to be “renewal.” It makes perfect sense for a facility coming off a year of layoffs, program closures and a November bankruptcy filing needed to clear a debt load of $10 million. Dwindling reimbursements from provider groups, coupled with a mandate to complete a $20 million seismic upgrade program by 2008, forced the hospital to go through one of the most painful years since it opened nearly a quarter century ago. “We’ve stripped down so far we can’t cut anymore,” said Andi Bogdan, Henry Mayo’s director of planning. But officials at Henry Mayo say the facility has been stripped down to its core services, is operating on a leaner budget and has even managed to secure $1.2 million from its foundation to cover the initial phase of a planned $6 million expansion of its 14-bed emergency room. Bogdan said the hospital’s foundation has also come up with modest funding to pay for eight new rooms in the urgent care unit, which are scheduled for completion in April. The ER expansion program should be completed by late 2003 and more fundraising efforts are planned for that project, sorely needed due to escalating demand. “Our ER is only built to service 15,000 visits a year, but we had 30,000 last year,” Bogdan said, “so it’s really important we resolve that right away.” Henry Mayo is also studying the financial viability of reintroducing an outpatient physical rehabilitation center, a pediatric urgent care unit and neonatal and cardiology services. Hard to imagine that, after slashing 100 jobs and failing to buy off creditors at 22 cents on the dollar before filing Chapter 11, Henry Mayo would begin so quickly thinking about expansion or new programs. But according to Jim Lott, executive vice president of the Health Care Association of Southern California, the hospital’s decision to complete earthquake repairs early on (it’s the first area hospital touched by the Northridge earthquake to do so) put it ahead of the game. Those hospitals that still have upgrades ahead of them could experience similar financial troubles not too far down the road. “No one would have guessed that, given the demographics, for example, that the Henry Mayo Hospital would have found itself in such serious financial trouble as a result of the upgrades,” Lott said. “But Henry Mayo was actually smart to complete those repairs early on. This is going to be a rather bleak year for hospitals across the state, and at least they have that behind them now.” Lott also said hospitals are having to find ways to pay higher salaries for nurses and other trained medical workers due to a recession-proof labor shortage in the health care field. Bogdan acknowledged the shortage, but said the hospital was able to find ways to beef up its salary structure despite the losses in 2001 and is now recruiting nurses in the area. “The nursing shortage is actually a global shortage, and it’s certainly a concern here,” said Bogdan. “But we have 2,300 nurses that live in the seven zip codes around our hospital and we are trying to encourage them to work with us in this turnaround. If you factor in the travel time and gas, along with our salary structure, we are very competitive.” 120-Bed Mission Hospital Could Be in Debt for Decades to Come By JACQUELINE FOX Staff Reporter Tremors from the 1994 Northridge earthquake are still being felt at many Valley hospitals today as they struggle to secure financing for state-mandated seismic upgrades or attempt to kick-start cash flow after paying to get the repairs over with early on. Although the Federal Emergency Management Association provided some assistance initially, the grants were nowhere near enough to cover upgrades for some facilities, such as Mission Community Hospital, which is essentially rebuilding its Panorama City campus from scratch. To complete the $65 million project, the hospital issued $35.5 million worth of tax-free bonds in December, secured through the California Statewide Development Authority and the state-run Cal-Mortgage program. The 25-year bonds may have put the hospital in debt status, but officials say it was the only way to come up with the money to construct the 120-bed facility, scheduled for completion in October. “We received a $17 million grant in 1998 from FEMA, but FEMA money is never enough,” said Mission Chief Operating Officer William Daniel. “We needed to raise the money right now to get this completed and, yes, bonds are difficult if you are a stand-alone hospital, but it was the only way to pull the financing together.” According to Chris Tokas, manager for the hospital seismic retrofit program for the Office of Statewide Health Planning and Development in Sacramento, many hospitals have issued bonds to generate funding and, because Mission Hospital was in relatively good financial shape when it applied for the program, it should be comfortable in 25 years when it’s time to pay them off. “In general, bonds are not really all that uncommon of a source of money for hospitals across the state, but they will have to come back and pay those bonds off later, so they would have had to have shown they had a solid fiscal plan in place when they applied,” Tokas said. But according to Jim Lott, executive vice president for the Health Care Association of Southern California, Mission’s decision to borrow to pay for retrofits could put it at risk, considering the rising costs of care and the other health care challenges not likely to go away soon. “Health plans and government payment sources are not changing or increasing what they give to hospitals or physicians. In fact, government sources are cutting payments to them, so that won’t bode well for us this year,” said Lott. “And if a hospital is having to borrow funding to cover expenditures for operations, that puts them at risk down the line.” Daniel insists his hospital is financially strong and will continue to keep costs low enough to compensate for the increases without compromising quality of care. “Yes, we are concerned about the challenges going forward, but we had to demonstrate financial strength in order to get the bonds in the first place,” said Daniel. “We have been performing at a good level on the business side, tying to watch our costs, and have plans in place to generate more funding, and we will have 25 years to prepare for repayment.”

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