The Great Gray Hope

Alameda Hospital cannot pay its bills.  The budget presented to the Board in June was essentially a fantasy with only small chance of succeeding.  The majority of the Board and management refuse to plan for the future.

Although Krugman's quote below explains a lot about the delusion, deception, and disconnect from reality that Hospital supporters engage in, there is another element in play.  They think they do not have to worry about the  problems because the acquisition of more sub-acute and SNF beds will save the day.  I am a skeptic, but I will lay out the context so that others can judge.  As you may or may not know, the District already operates a SNF at South Shore.  One advantage to a hospital operating SNF beds is that these beds are considered "distinct part nursing facilities".  The names come from the fact that they are part of an acute care hospital or hospital system, but operate as a "distinct part".  In some rural hospitals, these may not be so distinct and may be "swing beds" going from one use to another based on the patient in the bed.  The upshot is that these DP/NF beds are reimbursed by Medicaid (and I believe Medicare) at a rate higher than they would pay a non-affiliated facility.  I can only speculate as to the policy reasons that this decision was made, but clearly it provides an incentive for hospitals who may have less choice over their patient population and may serve higher acuity patient than other SNF's.  For example, if a placement from acute care cannot be found, the Hospital can discharge the patient to a DP/NF bed without suffering financially (or at least not too much).  Also, this does provide a subsidy for multiple facilities who would not be able to survive without this increased reimbursement (Laguna Honda in SF or some rural hospitals).

The District proposes to take advantage of this rate element by leasing beds from existing SNF's within Alameda and then operating them as DP/NF beds.  This is win-win.  For the facility, they gain guaranteed income from the sublease, and, for the District, they gain contribution from the additional dollars from the DP/NF reimbursement rates.  This is somewhat a gaming of the system, but as long as the various agencies approve it is legal.

Some problems with this strategy for me:

1.  I'm not really ok from a policy position with the way that this strategy extracts additional tax dollars without adding any net beds. 
2.  The additional contribution does not cover the parcel tax so Alamedans are still on the hook.
3.  What's worse, is that this strategy locks the District into operation of an acute care hospital for which there is no evidence (despite my repeated requests)  that Alamedans benefit in terms of medical outcomes and is subject to closure as soon as OSHPD decides to actually enforce black and white regulations on its books.
4.  If the acute care hospital closes for any reason then the District is likely to be on the hook for the sublease amount even though the DP/NF dollars will be gone.
5.  Finally, the DP/NF dollars could easily be cut by a state and federal government looking for places to trim the budget.  Management does not think this is likely because of global effects across the state and the nation, but I can envision various models that would cut Alameda out, but leave larger more politically sensitive entities whole.  Three right off the top of my head include:  1.  Cap the number of DP/NF bed seligible for increased reimbursement  at the license number as of 1/1/2011 or an average that reimbursement was received for the 2011 fiscal year.  2.  Require a minimum percentage of all beds in the facility to be Medi-Cal occupied.  (I don't know what the number is that preserves Alameda County's reimbursement or Laguna Honda's while cutting Alameda District, but there is one and I'm sure the state budget people, and politicians, know what it is.)  3.  Require the beds to be co-located with the acute care beds or require the beds to be in a seismically retrofitted location (same difference).

Finally, why is this opportunity all of a sudden available now?  Warren Buffet writes (I think he is quoting someone) "When you look around the poker table, and you can't tell who the patsy is, that's when you should stop playing."  Perhaps the SNF operators know when the getting is good and see a patsy?