CEO Scott Gregerson, speaking to the Pleasanton Men’s Club this week, outlined the significant turn-around for ValleyCare that has continued since Stanford took over the former community hospital. That arrangement has been a win for both the community and the hospital system with business up about 10 percent this year.
ValleyCare had been hemorrhaging money before the board, led by Chairman John Sensiba, decided that it was time to change leadership and relieved long-time CEO Marcy Feit and promoted Gregerson. The hospital had been losing money so it had nothing to invest in necessary capital improvements (Stanford is putting $50 million into capital improvements) and the cash on hand was way too low.
Gregerson said that the hospital managed to breakeven in its first year after it was on track to lose $14 million. About two-thirds of the money came from improved revenues as leadership re-negotiated reimbursement rates with insurers. The remainder came from cost-cutting as it shed innovative, but expensive ventures such as the Wal-Mart clinic, the nursing school mobile health van and turned over the executive staff at significantly lower salaries than the previous leadership.
For the current year, Gregerson believes the hospital will be $14 million or more in the black, a $28 million turn-around in two years. While the finances are good, he is very pleased with how the hospital ranks in a variety of measures of quality of care. It is in the top 3 percent nationally based on outcomes for Medicare patients.
An interesting change he has seen since Obamacare kicked in—more patients have high deductible insurance plans and now are actively shopping for price. And, of course, the government is squeezing hospitals and physicians alike on costs. He explained vast disparity between the “list cost,” a number based on a contract with a single insurer (likely an outlier) and what is actually collected. He said the hospital collects 16 percent of its gross billings.
He believes the future is likely a single-payer system because the current national health care approach is both way too expensive (nearing 20 percent of the gross domestic product) and producing poor outcomes in terms of life expectancy. He suggested googling health care outcomes and comparing costs versus outcomes by countries.
Gregerson also is very troubled by the trends of students who go into medicine. The best and brightest are more likely to go into financial services or technology than into medicine. More than 50 percent of physicians surveyed reported they are burned out and would not choose medicine as a career if they had to do it over again.
Given the expense ($200,000 or more) to get through medical school, the starting salaries (about $140,000 for a pediatrician) and the expense of housing, recruiting physicians will continue to be a major issue as well where his staff lives. He told of one young general surgeon at Stanford who is looking to come to ValleyCare because she, and her husband who also is a doc, are tired of living in a small apartment.
Scott’s solution—free medical education for students who will agree to work in the United States. That would alleviate the huge debt burden (most physicians do not get out of debt until after they turn 50) and presumably help attract smart and talented students. One of the biggest challenges in Obamacare in California is finding physicians who will accept patients covered by MediCal, which reimburses physicians at very low rates.