8 April 2010
California Edition
Calendar
April 9-11
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E-Mail
info@payersandproviders.com with
the details of your event, or call
(877) 248-2360, ext. 3. It will be
published in the Calendar section,
space permitting.
O.C. Blanked On HIT Stimulus Funds
Only Calif. County Excluded; L.A. Care Wins $15.6M
California has received nearly $47 million
in federal stimulus funds this year to
promote health information technology use
among physicians. However, Orange
County will not share in any of the largesse
– at least for now.
CalOptima, Orange County’s Medi-Cal
managed care plan, was not among the
recipients of a second round of $267
million in funding announced by the U.S.
Department of Health and Human Services
on Wednesday.
CalOptima officials were not
immediately available for comment, but a
statement issued by Chief Executive Officer
Richard Chambers said he was seeking
further information from the agency and
would appeal the decision. “CalOptima's
application...was widely supported by the
community, and we continue to believe we
are the most qualified organization to
deliver those services for Orange County
physicians,” Chambers said.
An official with the California Regional
Extension Center (Cal-REC), which will
promote HIT – particularly electronic
medical record adoption – in 56 California
counties, said that Cal-Optima had had
issues with its grant application to HHS.
Cal-REC is a consortium that includes the
California Medical Association, the
California Primary Care Association and
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the California Association of Public
Hospitals & Health Systems.
“Cal-Optima has had a harder road,”
said Sean South, a spokesman for the
California Primary Care Association. “I
don’t know what is going to happen in
Orange County.”
Cal-REC received $31.2 million in
funding from HHS in February, when the
agency awarded $375 million in grants.
The lack of funding is a blow to
Orange County, whose 3 million
residents make it the state’s second-most
populous. It has hundreds of small
medical practices and clinics that would
likely benefit from adopting EMRs and
other HIT.
HHS officials were not immediately
available for comment. About $20 billion
in stimulus funds has been made
available for various facets of healthcare
IT, including $640 million for promotion
of EMRs and other physician support.
That money has been distributed to 60
agencies nationwide.
It is unclear whether CalOptima
would qualify for future grants. The
initial HHS grants are for two years, and
are intended to cover 90% of the startup
and operating costs for the regional
Continued on Next Page
 Payers & Providers
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In Brief
HHS Names Regional
Director For California
A former senior advisor to Gov.
Arnold Schwarzenegger and the
state’s economic recovery czar has
been named a regional director by
the U.S. Department of Health and
Human Services.
Herb K. Schultz, 47, was
appointed earlier this week, one of
five regional directors announced
by HHS Secretary Kathleen
Sebelius.
“They will play a vital role in
our department’s effort to
effectively implement the
Patient Protection and Affordable
Care Act. I look forward to working
with them in the months and years
ahead to achieve HHS’s mission to
protect the health of all Americans
and provide essential human
services,” Sebelius said.
Schultz will oversee Region IX,
which includes California, Arizona,
Hawaii, Nevada, Guam and
American Samoa.
Schultz, who was educated at
American University and
Georgetown University in
Washington, D.C., headed the
California Recovery Task Force,
which oversaw federal stimulus
funds flowing into the state. He
also served as interim director of
the California Employment
Development Department. Prior to
entering public service, Schultz was
vice president of government
relations for McKesson Health
Solutions.
Kaiser, Union Open
Negotiations on
Contentious Note
Kaiser Permanente and the Service
Employees International Union-
Continued on Page 3
NEWS
OC (Continued from Page One)
extension centers. Future HHS grants are
intended to cover only 10% of operating
costs.
“The regional extension centers are
expected to develop a self-sustaining
business model over time,” said Elaine
Batchlor, M.D., chief medical officer of
L.A. Care Health Plan and a member of
the Payers & Providers Editorial Board.
L.A. Care won $15.6 million on
Wednesday to promote HIT adoption in
Los Angeles County. The plan, which
covers more than 700,000 Medi-Cal,
Healthy Families and dual-eligible
Medicare recipients countywide, has a
large network of safety net providers. It
has been actively promoting EMR
adoption among its physicians.
State’s C-Sections Rise Nearly 60%
Procedure’s Usage May Override Patient Choice
The volume of Cesarean sections performed
in California rose 56% between 1996 and
2007, raising concerns that the boom in the
procedure may be leading to more
obstetrical complications and obscuring
patient choice.
The data, supplied by the National
Cener for Health Statistics, an afliate of the
Centers for Disease Control and Prevention,
concluded that the percentage of deliveries
using C-section increased in California from
20.6% in 1996 to 32.1% in 2007. That’s
slightly above the nationwide average of
31.8%, which increased from 20.7% in 1996
– an overall rise of 54%.
Observers say there are a number of
factors contributing to the rise, including
defensive medicine being practiced by
physicians who use the procedure to
decrease the likelihood of malpractice
litigation, or added convenience to mothers
who want to be able to more precisely
schedule their deliveries.
“If you have a physician reluctant to
have a malpractice claim, and they tell the
patient about bad outcomes...the patient is
kind of biased to side with their physicians,”
said Dylan Roby, a research scientist with
the UCLA Center of Health Policy Research.
“Mothers are more likely to deal with the
discomfort of potentially having a post-op
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Page 2
Plans were sketchy for how Cal-REC
and L.A. Care would initially spend the
funds. “We’re still in the process of
finalizing our operating plans,” Batchlor
said.
However, both South and Batchlor
indicated that the organizations would
likely enter into joint purchasing
agreements with EMR system vendors on
behalf of providers, particularly small
practices and clinics providing care to
safety net populations.
“It costs tens of thousands of dollars for
a system, and we need to be able to help
providers obtain them,” South said. He
added that Cal-REC was also working on a
low-interest or interest-free loan program
for providers to purchase EMR systems.
infection for the sake of the baby’s health.” He
added that the use of C-sections leads to a
multiplier effect, requiring subsequent births to
occur in this fashion if the mother opts for the
procedure for her rst child.
Other observers questioned the use of C-
sections, noting that they can lead to increased
obstetrical complications. “There are no data to
show that increased rates of Cesarean sections
have improved either maternal or newborn
outcomes and some data showing that
maternal outcomes have worsened over this
same time period,” said Debra Bingham,
executive director of the California Maternal
Quality Care Collaborative at Stanford
University. Bingham added that C-sections can
lead to birth mothers suffering complications
such as pulmonary embolus and deep vein
thrombosis.
Bingham’s organization has helped the
California Department of Public Health
compile a yet-to-be-released study suggesting
the state’s infant mortality rate has tripled over
the past decade, although Bingham noted a
connection to the mortality rate and c-sections
has not yet been established.
Continued on Next Page
Payers & Providers NEWS Page 3

Longer ALOS!* C-Sections (Continued from Page Two)

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*For our ads, not your hospital
Anthony Wright, executive director of
Health Access, a Sacramento-based
consumer advocacy group, suggested that
expectant mothers opting for C-sections may
not be fully informed of the risks involved.
“The data I’ve seen suggests that when
patients are brought into the decision-making
process, they normally choose the least
invasive procedure,” he said. “They don’t want
to be in the hospital any longer than they have
to.”

In Brief Plans Fare Poorly In J.D. Power Study

United Healthcare West began
negotiations on a new contract
this week with the union
charging that Kaiser is trying to
take away hard-earned benefits.
According to union officials,
Kaiser’s opening-day presentation
on Tuesday made it sound like the
health system wanted to make
major changes to the current labor
contract, which expires in October.
The union represents 48,000
employees throughout the Kaiser
system, including allied health
professionals such as nurses and
technical staff.
“We've heard lots of
discussion about numbers and
priorities but we know what
Kaiser's really saying to its
healthcare workforce: 'we want
your stuff.' Our message back is an
emphatic 'keep your hands off it,”
said Dave Regan, a SEIU-UHW
trustee.
According to SEIU-UHW
spokeswoman Adriana Surfas, the
union fears that healthcare costs
Kaiser recently passed onto its
managers may also be inflicted on
rank-and-file workers. “We’re
putting our position out there,” she
said.
Kaiser officials did not
directly address the union’s chargeZ,
but did not deny them either.
“In our opening presentation,
we described the unprecedented
changes continuing to take place
in the healthcare marketplace and
the broader economy, and the
challenges and opportunities these
changes p resent us,” said Kaiser
spokesman John F. Nelson. “All
those factors create an
unprecedented, challenging health
care environment, and we have
said consistently that unless we
continue to make progress in
addressing these challenges, our
cost structure will be
unsustainable.”
Only Kaiser Scores Well Above National Average
Most of California’s health plans received Ofcials with the Westlake Village-based
below-average scores in an annual survey Power suggest that the overall dissatisfaction
from consumer evaluator J.D. Power & with health plans means consumers may not
Associates, although Oakland-based Kaiser be accessing their plans or benets correctly.
Foundation Health Plan scored signicantly “Understanding (benets) alone does not
higher than its competitors in most categories. explain member satisfaction, although it may
California’s help to mitigate other
health plans scored problems with the
an average of 702 member experience.
points out of 1,000 California Average Score 702 While satisfaction with
on the Power survey, many plans has
just above the Kaiser Foundation Health Plan 749 declined this year,
nationwide average Cigna 704 satisfaction decreases
score of 701 points. PacifiCare 688 are less severe for those
However, Kaiser’s plans able to
Health Net 684
score of 749 skewed substantially increase
UnitedHealthCare 678
the rest of the survey. member
Anthem Blue Cross of California 676
Only Cigna, with a understanding,” said
Aetna 672
score of 704, was Jim Dougherty, director
above the California Blue Shield of California 660 of Power’s healthcare
Source: J.D. Power & Associates
and national practice.
averages. Kaiser received
Plans were high scores primarily
graded in eight categories, including overall because of its ability to integrate care and
consumer experience, plan communication coverage, according to David Stefan, the
with members, depth of provider networks executive director of Power’s healthcare
and overall coverage and benets. practice.
Nationwide, the scores of health plans are “They’re doing a great job of
down signicantly in 2010 compared to the incorporating their members into the entire
last year’s average of 712, according to the care process, and their captive network turns
Power survey, although California’s scores did out to be a huge source of strength for them,”
not drop quite as much. Stefan said, adding that the plan also has done
well on preventative care.
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Payers & Providers
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OPINION
Hospitals Can’t Always Go It Alone
The Economic Climate May Dictate Finding Partners
Faced with a difficult economy, reduced
access to capital, loss of investment
reserves, and impending healthcare
reform, hospitals are finding themselves in
a difficult position. These and many other
factors are leading hospital executives and
board members to question if they can
continue to remain independent or if they
need a partner. It’s a tough question to
ask, but avoiding doing so can court
disaster. Consider the following:
• Limited Access to Capital
Although the credit market is
finally loosening, borrowers are
facing increased scrutiny.!
Lenders are demanding more
information to determine credit
worthiness, with a particular
focus on cash and liquidity to
debt metrics.!With volumes
soft, and revenue under
pressure from the government,
hospitals need to demonstrate
strong performance.
• Consolidation of Physicians
Economic pressures and lifestyle
Michael suggested. In time, reimbursement will
choices are leading to a new wave of
physician medical group and IPA
consolidations. Conversely, hospitals Randall incented to work together and deliver
are reliant on engaging such physicians
to shore-up loyalists and maintain
critical mass (volume).
• Soft Volumes
Many hospitals have yet to see a return
of elective procedure volume.! While the
American Recovery and Reinvestment Act
of 2009 was recently amended to extend
premium support for health benefits
(COBRA), many people will not likely
extend coverage when their benefits run
out.
• Deteriorating Payer Mix
High unemployment rates and financial
stress have led to a deterioration of payer
mix at many hospitals, with more self-pay
patients and an increase in bad debt.!
Even without healthcare reform, hospitals
can expect reimbursement challenges at
the federal and state levels.
!!!"#$#!%&!'(&)*+!,!'*-./0)*+!'1%2/+3/456!778
Page 4
• Continued Decline in Per Capita Use
Rates
Trends in per capita utilization of
inpatient services continue to decline.!
Physicians are driving care to the outpatient
setting, and length-of-stay continues to
decline as hospitals focus on managing the
cost of care for capitated and case-rate
patients.! Some markets are over-bedded, and
there will be provider consolidations/hospital
closures to lower overhead costs and
maintain margins.! As volume
and payment declines,
throughput and occupancy must
increase.
•Healthcare Reform
Regardless of whether
healthcare reform is enacted this
year or not, healthcare is moving
in a clear direction.!Spending
must be slowed down and
reduced. Incentives on how care
is reimbursed will need to
change to bend the cost curve,
By as President Obama and others have
shift from volume-based to value-based.!
J. Hospitals and physicians will be
higher quality, more cost effective care.!
Now is the time for evaluate a hospital’s
needs and select an approach for filling
identified gaps in clinical competencies,
resources, capital and IT. If needed, consider
partnering with another organization.! Taking
action now ensures that discussions are
approached from a position of strength,
organizations of best fit are identified, and
the needs of the community are met now and
in the future.
Michael J. Randall is a Manager with The
Camden Group, an El Segundo-based
healthcare consulting firm.
Op-ed submissions of up to 600 words are
welcomed. Please e-mail proposals to
editor@payersandproviders.com, or call
(877) 248-2360, ext. 3.
Payers & Providers MARKETPLACE/EMPLOYMENT Page 6

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