By Tim Hunt
More changes coming to ValleyCareUploaded: Apr 22, 2014
Sitting down for the first time with new ValleyCare CEO Scott Gregerson why the board liked him become very clear.
Very intelligent; very high energy and clear vision for what the system needs to do to adapt and survive in the truly uncharted health care waters wrought by the Congressional Democrats and ObamaCare.
The future, beyond the next 12-18 months, is murky at best. The president's willingness to modify—arguably unconstitutionally and for little more than political leverage, the provisions of the law that his party passed and he signed—makes the future a guessing game at best.
That said, some realities need to be dealt with and changed.
ValleyCare has run at a about a $4 million deficit each year for the last five years—that must change. A related important point: the hospital system failed to meet a covenant for bond holders on an $86 million issue—that's a big deal-particularly considering that the system runs on about $300 million in revenue annually. Lenders demand that borrowers hit those numbers.
Board Chair John Sensiba updated the approximately 1,400 members of the system in an April 15 letter—interesting timing given that April 15 is the witching date for the IRS and John runs an accounting firm.
Sensiba's letter outlined a plan that will require budget reductions of $12 million (4 percent) to establish a balanced budget by June 30, 2015.
That required some additional cost cutting—the system laid off 24 people earlier this year, cut executive pay and has not replaced former CEO Marcy Feit as well as retiring executives Ken Jensen (the chief financial officer) Jessica Jordan (nursing chief). The latest cuts: Eliminating providing nurses to the Pleasanton school district (the district can afford them if trustees consider them important), cutting the innovative nurse training program with Chabot College (a long term loss) and closing the health clinic at Wal-Mart in Livermore (a cutting edge program that was ahead of its time and likely under-publicized). It provided convenient, cost-effective care that included prescriptions at modest cost—I know, my daughter utilized it.
The challenges facing ValleyCare as a stand-alone system are huge. In our discussion, Scott said that Medicare covers about 90 percent of the direct costs—50 percent of ValleyCare's business is in that government program.
Quick math: Every Medicare patient loses a dime requires every insurance-covered or privately-paid patient to cover $1.10. That's why I whined about the $6 diaper when my wife delivered our daughter at ValleyCare many years ago. There is a huge disconnect in health care between what providers charge and insurers/patients/the government actually pays.
Much more a problem: each MediCal (the state program) patient pays just 68 percent—a delta of 32 percent is very troublesome.
Because of the valley's demographics and the area's enviable payer-mix (lots of privately insured patients and relatively few poverty patients), the hospital system survives.
Long term—given the cost of medical equipment (million dollar scanners, etc.) –ValleyCare likely will need a partner with deep pockets. Finding the right partner will be a key challenge for Gregerson and the board moving forward.
In the short term, Gregerson, who took a pay cut as did his fellow executives and received no bump when he moved into the CEO role, is restructuring his executive team.
Cindy Noonan, the chief operating officer for the past few years, has resigned and will leave in May. Like Jordan, she has spent most of her career at ValleyCare (25 years).