Strange what you can get away with in the name of business, even if that business is the health care of an entire city. The strangest part is that no one seemed to notice last May when the Alta Bates Corporation closed Herrick Hospital. Here was Alta Bates, Herrick's traditional health care rival, finally shutting down its only competition, and nobody said a word. Of course, Alta Bates didn't put it quite so starkly--they called removing the emergency room, intensive care unit, coronary care unit, surgical floor and medical floor a "bilateral reallocation of services." The effect, however, was a unilateral gutting of an eighty-year old community hospital.
"As soon as they closed up those facilities here, this ceased to be a hospital," says James Criss, a burly x-ray technician and shop steward at Herrick--and implacable foe of the Alta Bates Corporation. "This is a rehab center. You have psych upstairs, a rehab center for stroke patient, and you have drug rehabilitation. And that's it."
The public outcry over the closure of Herrick did not come until about six months after the fact. It came not from the poor, minority and Medi-Cal patients Herrick had traditionally served, but from the ever-vigilant members of the Bateman Neighborhood Association--not a sparrow falls without their notice--who were concerned about the increased traffic heading for Alta Bates's emergency room.
In attempting to adjudicate this trivial dispute over parking and traffic, city officials came upon two powerful, if blunt instruments to work their will on the $380 million corporation. The first baseball bat is the possible revocation of the use permits for hospital buildings, the remnants resulting from the hospital's past struggles with the Bateman Neighborhood. (After losing thirty-four houses to the hospital's seemingly-relentless expansion, the neighborhood fought back in a series of bruising land-use brawls, finally winning an agreement in 1983 limiting the hospital's future growth.)
The second weapon is a doomsday device. In 1985, the city floated Alta Bates Corporation a $25 million bond to finance improvements at Herrick (among other projects). A condition of the bond (according to the city's reading) is that an acute care hospital must be maintained at the Herrick site. Since this is manifestly no longer the case, the city has it in its power to bankrupt the Alta Bates Corporation by calling the bond. Such a move would, of course, leave the city without any hospital, but the threat has been useful in getting Alta Bates' attention.
The citizenry thus empowered, things escalated very rapidly. Two raucous and well attended public hearings followed, in November and then again this January. This week, a city taskforce demanded that Alta Bates Corporation restore acute care services at Herrick. Left unsaid--at least for the moment--is the "or else."
For most of this century, Berkeley has been served by two vigorous, competing hospitals. Herrick (originally Roosevelt) Hospital was founded in 1904; Alta Bates, just up Dwight Way at the time, the next year. Although they offered similar services, the two hospitals had vastly different community images.
"It was always the perception that Alta Bates dealt with the carriage trade, the well to do," says Dr. John Norton, a black urologist who was once president of the medical staff at Herrick and now serves on the Alta Bates/Herrick board of trustees. "Herrick was the hospital of the poor. I've heard Herrick referred to as 'Highland North.'"
Herrick was the first hospital in the East Bay to welcome black physicians on its staff (although it did continue to practice segregation within the hospital for some time). Working class blacks who flocked to the East Bay to work in the shipyards during WWII chose Herrick over Highland, the county hospital, further establishing its reputation. Herrick was also dependent, to a much greater extent than Alta Bates, on Medicare and Medi-Cal. In 1982, for example, the two government programs accounted for 59 percent of Alta Bates's business, and 77 percent of Herrick's.
Alta Bates, on the other hand, had a lily-white, upper-class image, specializing in expensive "tertiary care" services, such as its high-risk obstetrics program. Alta Bates was the Cadillac of local hospitals, Herrick the dependable old Buick.
Competition between the two hospitals was intense. "Whenever Herrick would do something and it would seem to be successful," says Dr. Norton, "Alta Bates would try to get that very same thing." Herrick, for example, established a radiation decontamination center, an expensive facility with limited demand; Alta Bates followed suit with a similar unit. Herrick started a successful dialysis unit; so did Alta Bates. Herrick was well known for its rehabilitation department; in 1979, Alta Bates bought the bankrupt Albany Hospital and set up a competing rehab center there, squeezing Herrick's program. Alta Bates eventually closed the Albany rehab program, leaving what Berkeley city councilmember Ann Chandler calls "a lot of residual bad feeling." After Alta Bates merged with Herrick, the Albany hospital building was sold to the city for use as a library.
In some areas, however, the rivals established spheres of influence. According to a 1981 report on Alta Bates's expansion by Dr. Alan Steinbach and other Bateman activists, Alta Bates claimed obstetrics while Herrick got emergency services:
"In exchange for closing their maternity services, among other concessions, Herrick was formally promised by Alta Bates Hospital that no competing full-scale emergency service would be developed by Alta Bates. A small emergency back-up service for physicians was all Alta Bates would retain. In the mid-1970s, Alta Bates opened a full-scale emergency room, in total disregard of their documented 10 year-old promise to Herrick."
(There follows a comment that turned out to be prescient: "Some health planners and physicians think Herrick Hospital may not survive five more years if Alta Bates is allowed to continue expansions of the most expensive facilities that already exist in our community.")
Ellie Claus, president and CEO of Alta Bates/Herrick Hospital, says that she has never seen anything in writing detailing such an arrangement, "but there certainly is sort of an understanding that there was some kind of arrangement that had been discussed."
The question of the duplication of services is pertinent in that it now forms the principle justification for Alta Bates' actions at Herrick. "To maintain duplicative services," testified Claus at the January 17 public hearing, "we feel...will hurt community health. Thus our strategy has been to try to consolidate, so we can at least provide a viable, full service hospital to meet the needs of Berkeley."
Many people are now wondering, in the light of subsequent events, just how long Alta Bates has had this consolidation policy. As a corporation, albeit a non-profit one, Alta Bates has been extraordinarily aggressive in its expansion. In this, its non-profit status has been rather helpful.
"The term 'non-profit hospital' is a misnomer," wrote the New England Journal of Medicine in 1981. "The non-profit hospital makes as much profit as does any other hospital. It uses its profit to pay for administration and other expenses of operation, and the rest goes back to the hospital for added services and expansion, or whatever the trustees elect to do with the money. The non-profit hospital has one great advantage: it pays no taxes."
"There is a sort of missionary zeal with Alta Bates," says Dr. Steinbach, who works at Highland Hospital, in various other emergency rooms and in private practice, and who lives "within the shadow of Alta Bates" in the Bateman neighborhood. "They really feel that they're a superior hospital, that they can plan better and do better administration. There's no question in my mind that Alta Bates, if they had their druthers, would have been running all the hospitals in the Bay Area."
The question of whether Alta Bates intended to take over Herrick--or to drive it out of business--is obscured by the chaos brought upon the health industry by the Reagan era. Under Reagan, the federal government made several crucial changes in the way it reimbursed hospitals. Medicare, the program covering elderly and disabled social security recipients (which accounts for about 40 percent of all hospital revenues nationally), had previously paid hospitals for the actual amount of hospitalization each patient required. Under Reagan, reimbursement shifted out of the real world to a Platonic system: an idealized, nationally averaged price for treatment of a specific affliction, called a "diagnosis related grouping," or DRG. The DRG theory is painfully straightforward. Medicare declares that a bout of, say, hypertension, should not require more than 2.3 days in the hospital, for which they will pay $1300. If the hospital can hurry the patient out of the hospital in 1.8 days, they can make money. But if the recalcitrant patient takes 3 days to recover, the hospital eats the difference.
Medi-Cal also changed dramatically. Medi-Cal is California's version of the federal Medicaid program; while it was once available to virtually all the poor, Medi-Cal is now limited largely to women and children on AFDC. To take care of the rest, Medi-Cal now provides a lump sum of money to the counties to cover what are known as "MIAs"--the missing-in-action poor known as Medically Indigent Adults. "It comes once a year," says Steinbach, "and when it's gone, it's gone." In Alameda County, the MIA fund goes largely to support Highland Hospital.
Medi-Cal adopted a free market approach to stretch its general funds. Starting in 1982, hospitals were forced to bid against each other for Medi-Cal contracts; only one hospital in each region could serve Medi-Cal patients. Herrick lost, Alta Bates won.
"Herrick's bid was really based on the costs, and theirs was a realistic bid," says Dr. Norton, "because they had traditionally serviced a lot of Medi-Cal patients." Alta Bates, on the other hand, submitted a lower bid, winning the contract and cutting Herrick out of the Medi-Cal action. Although the bids were officially secret, many believe the Alta Bates bid to have been below cost.
"Alta Bates, like a lot of people, was playing market economics," says Dr. Steinbach. "They realized that filling their beds was more important than getting the exact amount of money...A hospital is like a cruise ship: if you have a cruise ship sitting in harbor, it's loosing money at a certain fixed rate. An average cruise ship carrying 500 passengers looses money at something between $20,000 and $50,000 a day sitting in port. Hospitals are like that. If they're not doing what they're supposed to be doing, taking care of sick people, they loose money at a frightening rate."
"As far as I can recall, it has never been for public information what the bidding process was," says Alta Bates CEO Ellie Claus with an air of disapproval. "I guess the theory is, better to have a patient in the bed than to have no one in the bed." A severe-looking woman from New Jersey, Claus acknowledges a reputation as a "ball-crusher." Her spacious, glass-enclosed office is hung with extravagant examples of African beaded jewelry, which one could never imagine Claus wearing.
The loss of a quarter of its patients was a serious blow to Herrick. "The cruel reality of the world that we're in is that you've got to have a mix of patients," says Claus. "If you have all government pay, you have a major problem." At the time, Herrick had 82 percent government pay, and had a very major problem indeed.
"What the motivation was for bidding on the Medi-Cal contract and eliminating Herrick as a hospital that can take care of the poor, I don't know," former Herrick doctor Kenneth Matsumura said last month to the city council. "I don't know. That's what caused the decline of Herrick."
James Criss, with the security provided by being a shop steward, can be more blunt. "It seems what Alta Bates was doing was taking over the completion," he says. "The only competition in Dodge."
Herrick, full of health and vitality in the seventies, suddenly sickens and slides. The exact diagnosis is difficult: whether the loss of the Medi-Cal contract was the blow is difficult to determine, as Herrick had other difficulties in the new decade, particularly in their billing procedures and in attracting new staff. Soon, however, Herrick was knocking at the door at Alta Bates, seeking union with its stronger neighbor. In February 1984 the two hospitals affiliated, with formal merger following last year.
(Criss suggests that the marriage between Alta Bates and Herrick may have been over hasty: "They took away the Medi-Cal contract from Herrick; that's the way everybody perceives it. But is that indeed what occurred? Or were Alta Bates and Herrick literally already sleeping together, and it just wasn't signed in formal documents and agreements yet? Then we're talking an anti-trust violation, because they were both bidding on that contract as separate entities, and very shortly thereafter signed agreements to merge. I have some big questions about that. The time frame of things doesn't seem right to me." A February '84 Tribune article on the affiliation notes that the hospitals "had been discussing some sort of affiliation for almost two years.")
Carl Smith, an Alta Bates Corporation vice president, has denied that Alta Bates was trying to undermine Herrick; they had merely made a corporate decision, he said, to bid on all contracts at the time.
"Mr. Smith misses the point," argued Berkeley physician Mark Safir at the city council hearing. "It doesn't matter whether Alta Bates was conspiring against Herrick: the point is that Alta Bates bid on this contract as on all contracts, in order to grow in the same way that they bought Childrens Hospital in San Francisco as part of their effort to consolidate in the health care industry, with very little concern about the interests of the people of Berkeley."
Dr. Alan Steinbach has been fighting Alta Bates for a long time; the spare crannies in his Berkeley brownshingle are stuffed with boxes and boxes of documents, memos, the paper trail of the persistent community activist. Steinbach, a bony, intense guy who looks like he works too much, is looking at his struggle with the corporation next door in historical context.
"There is no health planning on a coherent basis in the United States at this moment. We have no national health plan, we have no national health insurance, we have no national health system, we have nothing. South Africa and us--that's it, worldwide."
Instead of coherent planning, we have the free market--which has its own famous kind of logic. According to Steinbach, in taking over Herrick ("we can talk about a merger, but as everyone knows it's really a takeover"), Alta Bates was seeking the power to make a coherent plan in a chaotic environment.
"I think they wanted control," he says. "But that's because what American industry is about is control. Out of control comes the possibility to plan...They wanted to ensure that their own turf was protected, and the takeover of Alta Bates ensured that there'd be no alternative planning going on from Brookside to Pill Hill."
Alta Bates's goal, although unstated, appears to be to rival the mighty Kaiser Permanente empire, which serves 35 percent of all Bay Area residents. Kaiser might well be envied by a hospital in Alta Bates' position, with its centrally administered network of non-competing hospitals covering a wide geographical area, and its own universe of members, for whom it sets the monthly rates. Ellie Claus says that the Alta Bates Corporation is aiming at a "managed care plan," a comprehensive system that could become a sort of counter-Kaiser.
Alta Bates' merger with Herrick can be seen as a step towards this end, as can its 1986 affiliation with the 250-bed American River Hospital in the Delta town of Carmichael, last year's affiliation with Children's and Marshall Hale Hospitals in San Francisco, and Alta Bates's sporadic attempts at merger with other local hospitals, especially Merritt/Peralta. The latter merger did not go through, among other reasons, because of anti-trust concerns. The affiliation with Childrens SF has yet to be consummated, as it were, while a wary Childrens waits to see if Alta Bates' corporate finances, strained by expansion and declining revenues, manage to improve. (For Childrens, it's just as easy to fall in love with a wealthy hospital.) Alta Bates also manages the 145-bed Alameda Hospital.
Alta Bates is a hospital on the make. "I would doubt there was any significant health care institution or hospital within the area that Alta Bates hasn't approached within the last five years," says Steinbach.
But a chain of hospitals is only one element of Alta Bates' ambition. To obtain a facsimile of Kaiser's health care plan, Alta Bates started HEALS (the acronym is derived from HErrick/ALta BateS) on this side of the Bay, and bought into the Bay Pacific Health Plan on the other. Childrens S.F. has its own health plan, the fourth largest in the Bay Area. Alta Bates Corporation president Bob Montgomery (who failed to respond to a request for an interview in connection with this article) is presently seeking to merge all the various health plans so that, in Claus' words, "we would be in a better position to be able to go out and contract, and also be competitive with Kaiser."
Another part of the Alta Bates package is its chain of 42 nursing homes, owned by its subsidiary Eskaton. Among these is the Claremont House on Gilbert St. in Oakland (which was purchased with part of the $25 million bond Berkeley floated for the Corporation). Besides providing beds for patients who would otherwise have to be hospitalized, the nursing homes have--in the past, at least--served as cash cows for the Corporation. There was a bit of a flap back in 1982 when United Neighbors in Action (UNA), a nursing home patients advocacy group, charged Alta Bates with siphoning a million dollars in 1979 and 1980 from its nursing homes to subsidize the hospital. The nursing homes, run by Alta Bates' Guardian subsidiary, were also charged with discriminating against Medi-Cal patients, limiting the number of governmentally-insured patients the homes would accept and actually evicting patients after their private funds were depleted. Bob Montgomery maintained that by limiting the number of Medi-Cal patients at the nursing homes, the Corporation could subsidize Medi-Cal and Medicare patients at the hospital.
Recently, says Claus, the nursing homes have not been performing as expected. "We have been looking at the portfolio," she says. "I think [Eskaton] is looking at which ones are strategically the best to keep."
This strategic decision could have unfortunate consequences for the current residents of the nursing homes. "If Alta Bates decides that nursing homes are not a paying investment right now," says Steinbach, "they'll get out of it. When you get out of nursing homes at a time when they're not an attractive investment, that means real hardships for old people."
The Alta Bates Corporation also embraces a raft of other services, including home health care, a couple pharmacies, a hospice, the East Bay AIDS Clinic, the Alta Breast Center, and the Pathology Institute, the state's largest locally owned clinical laboratory. There are Sportcare clinics in Berkeley and Pleasanton, and MRI (magnetic resonance imaging) facilities in Oakland and Pinole. Many of these services are not wholly owned by Alta Bates, but in partnership with other hospitals and physicians.
X-ray tech James Criss charges that the rise of the partnerships is one of the reasons for Alta Bates' financial decline, as much profitable work that used to be done in-house is performed at a clinic in which the hospital has perhaps a 10 percent share. "That is an extremely harsh financial reality for the hospital to face: that's a lot of money that they no longer make, money that is diverted into the doctors' partnerships." Traditionally, he says, x-rays and lab work are the two largest money makers for hospital; between 1982 and 1988, Alta Bates/Herrick lost about 130,000 x-ray examinations to the outside clinics.
The cross dealings in the partnerships are extremely complex, with limited and general partners trading places. "You find that the cardiologists are limited partners in the radiologists MRI and the radiologists are limited partners in the cardiologists cath lab..It creates such a quagmire that it's very difficult to get through and figure out what the hell is going on in any of it, except for one thing: they aren't getting nearly the return they would be getting if they were operated solely by the hospital, or on a more major basis by the hospital."
(Criss has a definite bone to pick with the non-union MRI facility in Oakland: Alta Bates is trading in the CT scanner he works on at Herrick for a new model, which will go not to Herrick but to MRI. This will leave Berkeley with one CT scanner, and Oakland with six.)
If Alta Bates acquired Herrick for the purpose of control, with the aim of making a coherent health care plan for Berkeley, its efforts have yet to bear fruit. For Herrick, merger has meant a continued slide from bad to worse, ending with the recent loss of all acute care services. At the time, there was all the usual affiliation talk about the wonderful cost savings to be had from joint purchasing of napkins and the like, but if Herrick had any illusions about maintaining its autonomy, it was soon disabused of them. Alta Bates was definitely the primus inter pares. An indication can be seen in the number of former Herrick administrators now working for Alta Bates/Herrick: none.
.
"Herrick was a very anemic, wanting partner," says Dr. Kenneth Matsumura, the director of research at the Alin Foundation Clinic just a block up the street from Herrick. On the wall of his cluttered study is a large photograph of the artificial liver he developed; he is also working on an artificial pancreas. "[Herrick] had to accept more or less what we got. At the time of the merger, we were told this would be an equal merger: there would be two hospitals in Berkeley, and the medical staff from each hospital would have an equal say...But every six months or less, we were told we had to take further cutbacks, because we were not making enough money."
Alta Bates/Herrick Hospital trustee John Norton, while understanding the economic pressures for a merger, says he "didn't trust Alta Bates...I certainly didn't figure that the merger would be a fair one, and that it would result in the equitable distribution of services." According to Norton, the Alta Bates medical staff proved to be "the major stumbling block to a more sensible distribution of services between the two hospitals...Every time people would talk about moving a currently established service from Alta Bates to Herrick, that particular service or those people who were responsible for it said they wouldn't move to Herrick. That's why you have so much over at Alta Bates and so little at Herrick."
Doctors from Alta Bates were particularly unwilling to help cover Herrick's emergency room. Each hospital had three neurosurgeons, and all were expected to cover both emergency rooms. The three doctors from Alta Bates resigned rather than work at Herrick. Herrick's two orthopedists were unable to cover the load at their emergency room, but none of Alta Bates's fifteen orthopedists would cover for them--on the grounds that the five-minute drive across town was too inconvenient.
The dislike worked both ways. Many doctors from Herrick, particularly black doctors, felt distinctly uncomfortable working at Alta Bates. "There's this sense of disdain," says Norton, "this sense that we've been away in the jungle for the past thirty or forty years, practicing some form of primitive medicine which wasn't quite up to the standard in the Big House...You just don't feel comfortable." Many black physicians from Herrick have taken their practice elsewhere, most of them to Brookside or Pill Hill.
While Alta Bates was widely viewed as the dominant partner, financial reports from the Health Services Administration indicates that with the Medi-Cal burden shared, Herrick may have been the sounder of the two. In 1985, for example, even though Alta Bates brought in twice as much revenue and had a 30 percent higher occupancy rate, Herrick's pre-tax earnings jumped 35 percent while Alta Bates' shrank 16 percent. Herrick's total liabilities increased 17 percent compared to Alta Bates' 53 percent, and its profit/equity and debt/equity rates were better. Herrick was still a thriving hospital.
In May, 1988, Alta Bates/Herrick Hospital moved to consolidate the two hospitals emergency rooms; i.e., to close Herrick's, which was, as Claus says, "their biggest business." With the emergency room went the medical, surgical and intensive care services that must attend an emergency room; Herrick as a hospital ceased to exist.
The move came as a surprise to many, like Dr. Floyd Huen, director of Highland Hospital's pitifully overburdened emergency room. "I didn't hear one word of the closing of the Herrick emergency room until I read about it in the newspaper," he told a surprised Berkeley city council. "Now you'd think that one of the busiest emergency rooms in the area would be consulted regarding the possible impact on our emergency room before it happens...I might remind Ms. Claus that last fall, when the Highland emergency room closed its doors for the first time in a long time, only for about eight hours, she was among the first that were on the phone Monday to us right away, telling us, 'How can you close you emergency room, it had a tremendous impact on us.' We appreciate that impact. I'm just saying, you also need to appreciate the impact of the closure of an entire emergency room on our emergency room."
Since the Herrick emergency room closed, the Alta Bates emergency room has picked up an extra thirty to forty patients a day. Dr. Carmen Nevarez, Berkeley's health officer, estimates that Alta Bates now sees 25 percent fewer emergency room patients than the two hospitals did together.
"That 25 percent must be reflected in Highland's volume," says Dr. Huen. Some of it has gone to Merritt, some of it probably hasn't gone anywhere; it might have resulted in a patient coming into the emergency room dead. It's impossible to track that."
Ellie Claus denies that there has been any dropoff in emergency room visits; in fact, she says, more patients now come to the one emergency room than came to two previously. Originally, it had been envisioned that many (number?) of the patients who came to Herrick for emergency services would find them in the new urgent care clinic which replaced Herrick's emergency room; only about 20 percent of those coming to emergency rooms are true emergencies, anyway, the others being earaches in the night or uninsured poor people with a long-delayed need for acute care. The Alta Bates emergency room has its own little urgent care clinic, where conscious, non-bleeding patients are treated after a wait of three to four hours--still a great improvement on the eight to twelve one can wait on a busy weekend at Highland.
"All the setup at any private hospital, or for that matter any county hospital, is designed to embarrass and scare away people who are seeking care who don't have any form of compensation," says Steinbach. "Access has been gradually drawn back, until right now it sits at a special desk at the Alta Bates entrance to the emergency department. The ambulance people come right through, but you have to go sideways and get interviewed in a little cubicle, the kind you'd expect from a tax collector. The purpose of the interview is to establish whether you have emergency needs, or whether you fall into the 80 percent of people who come to an emergency room who don't really need to be in an emergency room and could perfectly well be handled at any doctor's office. Either the time of day is wrong or there's no doctor who's open or they don't know of any doctor or they can't find a doctor who's willing to see them. They're there because it's accessible."
At the January council meeting, however, Claus unexpectedly announced that Alta Bates was shutting that down the Herrick urgent care clinic too. It fell to Dr. David Greenly, director of emergency services at Alta Bates, to explain why fewer services were better than more. "When I hear the audience in this community clap that the urgent care stay open or that another emergency room stay open, I am dismayed," he said, to boos from that same audience. "The poor do not need urgent care services. They're too sick...I am committed personally to closing the urgent care center."
Frankly, it may be hard to tell the difference when the clinic shuts: many visitors have assumed by its dim lighting and lack of traffic that it was already closed. Its only staff is one doctor, one nurse, and a receptionist. Greenly is right--it's not for the poor. A friend with a sore throat recently stopped by to get some penicillin, and some weeks late received a bill for $90 for her three minute visit.
Despite the name, the urgent care clinic is unprepared to give any very urgent care; it couldn't even do sutures, and would send anything serious on to Alta Bates. In fact, even non-emergency cases are sent to the Alta Bates emergency room for follow-up care. Since the hospital has never really advertised the clinic, and refused even to put up outdoor signs advertising its existence, many concluded that it was simply a rearguard action meant to obfuscate the closing of the emergency room.
The manoeuver upset councilmember Don Jelinek. "Four months ago we were being told that an urgent care center was an important community asset," he scolded Alta Bates officials at the January 17 council meeting. "Tonight we are told that it's of no value, especially for the poor, and that it's going to be abandoned anyhow. We learn more and more that we have no control of what's going on."
.
The debate over the urgent care clinic was really the debate over the Herrick emergency room that never happened last May. Berkeley suddenly faced up to the prospect of having no acute services at Herrick at all. Among the effects of such a prospect is the necessity to scrap all of the city's disaster plans, all of which had counted on the availability of two emergency rooms, especially centrally located Herrick. At present, says retired Berkeley fire captain Rex Deidrick, even a relatively minor disaster--an Amtrak train wreck, for example--would totally overload all of the northern Alameda County emergency facilities. "All the disaster planning depends on Herrick acute care and emergency," he says. "So taking it out--it's as big an institutional blow as if they took the University right out of the center of Berkeley. The loss of Herrick Hospital in my view is just as damaging."
Another difficulty is geographical location. Herrick is located in the center of Berkeley, with access from four directions. Alta Bates is on the southern edge of the city, on a city street that has been designated, and is popularly used as, a state highway. "I still know a lot of firemen and ambulance drivers," says Diedrick. "They tell me it takes about two to three extra minutes to get to Alta Bates from downtown. At rush hour, just throw away the clock; if you have to go up Ashby Ave. during gridlock, you're dead."
The debate also raised painful incidents from the past involving alleged cases of patient dumping at Alta Bates' emergency room. One celebrated case in 1985 involved a Gaylen Willis, who lay sat unattended at Alta Bates for seventeen hours with shotgun pellets in his spine before being transferred to Highland. Dr. Greenly told the city council that indigent patients at Alta Bates "get the same level of care as anybody else would get when they're admitted to the hospital," which prompted an angry reply from councilmember Nancy Skinner, who said that she herself was patient dumped at Alta Bates: "I was unconscious when I was brought to your emergency room, and not treated, and it was not until Ms. Claus described your emergency room's procedures that I learned I had been patient dumped." Skinner says that she was refused treatment because she had Rockridge insurance, and their emergency room gatekeeper told her companions that she would have to be taken to Merritt.
Since the closure of emergency services at Herrick, Alta Bates has regularly engaged in a practice that, if not patient dumping, is at least a wildly inappropriate referral. Starting last September, says West Berkeley Health Center director Peggy Woodruff, her community clinic has been deluged by patients referred there by the Alta Bates emergency room, now totalling about fifty a month. "It happened half an hour ago," she told me. "A person who had a wound, who had some sutures, needed to have a bandage changed; they told him to come here to get it done. We are not a drop-in center. We don't have the facilities for that kind of patient. We have to refer them on to Highland Hospital." Other referrals from Alta Bates have been people with broken ribs, broken arms, and penetrating knife wounds. The staff at Alta Bates obviously had no idea what the Health Center was equipped to handle, and didn't want to know.
The resources of Alta Bates have been strained to deal with the acute care needs of an entire city. The emergency room was expanded by 65 percent, squeezing other hospital programs. The hospital has had to expand the number of acute care beds available, in some cases jamming two into rooms designed as singles. In December, the hospital was so full that they had to refer patients to other institutions. "I was there visiting somebody in the emergency room in December," says Dr. Matsumura. "It looked like the triage scene from MASH."
Yet Alta Bates officials are adamant in their refusal to consider reopening the emergency room at Herrick. Claus outlined for the council many of the fine specialty services Alta Bates offers: the East Bay AIDS Center; the burn center, which treated victims of the Sun Valley Mall fire; high-risk obstetrics; a sickle cell anemia clinic. Then she took them hostage. "Insisting that we need to do more by providing more services," she warned, "given our truly serious financial status, will cause many of these programs I have mentioned to suffer...We cannot reopen the Herrick emergency room."
In the last three years, Alta Bates/Herrick Hospital has lost $4.8 million dollars. At the same time, Alta Bates Corporation has lost an additional $7.7 million. There are many reasons for the losses. That most frequently cited is the change in reimbursement for Medi-Cal and Medicare. The rise in HMOs--like the HEALS plan which Alta Bates owns a fourth of--has also cost the hospital dearly. Apparently HEALS was able to gain a very favorable contract with the hospital, only paying them about half of full cost. Only 12 percent of Alta Bates patients pay full cost anymore, the old Blue Cross customers who have not yet shifted over to Blue Cross' Prudent Buyer Plan, which pays the hospital $500 less per day.
Other factors raising hospital costs are increases in the cost of malpractice coverage and a shortage of medical personnel, which has meant rapidly rising salaries. (After a nine-day strike at both hospitals in 1987, Alta Bates and Herrick nurses won a 10 percent pay increase and concessions on minimum staffing levels.) Then there is the rise in the number of uninsured sick people, for whom the hospital provided $9 million in charity care in 1988.
Numerous ironies are evident in Alta Bates' explanation of its losses, especially on its Medi-Cal contract. "If that's the reason they're losing money," says Criss, "then Alta Bates is to blame for it, because they're the ones who told us they went after contracts they knew they'd lose money on just so other hospitals wouldn't get them." Having won the Medi-Cal contract, Alta Bates now desires nothing more than a lower mix of Medi-Cal patients. Claus was quoted in the San Francisco Business Times recently as coveting the position of the private John Muir Hospital "that has a payer mix of only 5 percent Medi-Cal, and I've got 20 to 25 percent Medi-Cal. I'm envious that they can generate more potential cash." According to several sources, the Alta Bates board of trustees has discussed the possibility of getting out of Medi-Cal altogether, a move that would prove political dynamite in Berkeley.
When the Herrick emergency room was closed, Alta Bates estimated the move would save $1 million a year. Even so, the hospital still anticipates losing money in 1989. According to Claus, the Corporation's credit rating is plummeting; they have been refused loans by eight banks thus far. One way they are trying to gain a cash infusion, however, is leading to more controversy. Under questioning from councilmember Jelinek, Claus admitted that the Corporation is seeking to sell two buildings at the Herrick site, which currently house doctors serving the West Berkeley community. One of them is pediatrician Stella Ling, the only pediatrician in Berkeley serving Medi-Cal patients. "We were not asked whether we wanted the building sold," she testified. "We were told it was going to be sold and, if it was sold, that we could bid for it, and that our bid would be considered along with any others. Most of the physicians in that building do not want to relocate; they do not want to buy a building. They want their leases renewed, and they want to continue to serve the families in that area."
The city is now seeking more detailed information on the losses suffered by the Alta Bates Corporation, and how those losses effect the hospital. Available public information is rather sketchy: Claus says that the nursing homes have lost money, and the laboratories are only breaking even, but beyond that not much is known. Some suspect the Corporation of making the hospitals' finances out to be more desperate than they actually are. James Criss, for example, claims to have documents showing that in 1986, when Alta Bates/Herrick claims to have lost $1.76 million dollars, both hospitals actually made money.
Another vexed question is that of administrative costs. The Health Access Coalition, a California lobbying group, estimates that "non-profit" hospitals routinely skim between 20 and 25 percent for administrative costs. A Health Services Administration report shows that hospital administrative costs for Alta Bates jumped from $360,000 in 1984 to $11,900,000 in 1985--a thirty-fold increase. Where did it go? Much of it likely went to Acute Care Affiliates, a holding company Alta Bates Corporation established to oversee management of its hospital empire, and closed down again when the IRS let the corporation keep its non-profit status and for-profit enterprises. The going was sweet while it lasted. Execs David Seeley and Ken Sargent got $45,000 BMWs, with ACA president Seeley pulling down a salary of $250,000 a year.
Experience has also shown certain irregularities in Alta Bates' accounting procedures. Last year, Alta Bates refunded $98,786 to patients after it was discovered that the hospital had kept some $1.1 million in overpayments from insurance companies and individuals, using the money to cancel out bad debts. An internal memo, written by the hospital's former business manager, stated that at least three top officials participated in the scheme "in the belief that if an insurance company overpaid the hospital, they intended us to keep the money."
Criss claims that Alta Bates Corporation is not dealing with the city in good faith. "They tell the city they lost money. They did lose money. But they didn't lose it because of Medi-Cal or Medicare, taking care of the poor; they lost it because of their own lousy business ventures...I started getting pissed off when these guys with three piece business suits getting paid $300 grand a year, getting $45,000 BMWs like they're working for a Fortune 500 company started making decisions that were effecting the entire health of this region, and nobody was holding them accountable. Well, somebody has to hold them accountable for those decisions."
"The city of Berkeley has a legitimate financial interest in what's going on at Alta Bates Hospital for a lot of reasons," says Dr. Steinbach. "We don't want it to fail. It's the only hospital we've got now. So I think it's really time to get into the question of what the finances of Alta Bates are. If it's in bad shape, how come it's in bad shape? Were incorrect decisions made? Was Alta Bates simply too greedy? Did they take on too much, both as a hospital and as a corporation? And if they took on too much, what are they doing about retrenchment? What's being done to avoid hurting people as they retrench? What they're doing is saying, 'We just don't have the money.' I don't think it's going to be real credible any more to say that."
The final conflict is fast approaching. A city taskforce has recommended that the city press for restoration of acute services at Herrick, a move Alta Bates/Herrick swears it cannot afford and will not do. Almost everyone on both sides of the question agrees that, given the present economic climate, restoration of a full acute care hospital at Herrick is highly unlikely. Nevertheless, the city could press its point by either calling its $25 million bond, reviewing the Alta Bates use permits, or both. A careless move could destroy the last hospital in Berkeley.
"Cities are always faced with blunt instruments," says Steinbach, a man more used to the finer tools of the operating table. "It's because you've always got this curious paradox where American health planning is conducted on land use issues rather than on health use issues. That's because of this stupid non-existing health policy situation that we have...It's true; if the city of Berkeley were able to call back the bond, it could quite conceivably force Alta Bates into some form of receivership, or at the very least to a major financial reshuffle. But what purpose would that achieve? I don't think that someone can come in and do a better job of running Alta Bates Hospital.
"That's why I see some sort of reasonable accommodation coming out of this, where Alta Bates and the city form something new. It's not that it hasn't been tried throughout the world: we are not reinventing the wheel. We are talking about something that is considered normal for every other country in the world. It would be normal to have a significant relationship between your local government and the running of a hospital. Everywhere else in the world, it would be normally activity to plan economically and in terms of need. It's just here in the United States that it seems like such an anomaly."
Article first published in the Express on February 24, 1989.
Permission to share this article on the neighborhood website granted by the author.