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At a time when Obamacare is being blamed for a range of economic woes, local heath care executives say the new law is part of a powerful mix of forces revolutionizing their industry and constricting budgets.

Some executives attribute recent layoffs at several North Coast hospitals to the Affordable Care Act's cuts in Medicare reimbursements, along with cutthroat competition and advances in medical technology.

Employment at U.S. hospitals peaked in April at 4.84 million. But hospitals have been cutting jobs this summer and fall, shedding 9,000 jobs in May and an additional 4,400 jobs in July, according to the U.S. Bureau of Labor Statistics.

The layoffs started on the North Coast in July, when St. Joseph Health in Sonoma County, which runs both Santa Rosa Memorial Hospital and Petaluma Valley Hospital, said it would eliminate 26 jobs at Memorial and 11 in Petaluma.

In August, Ukiah Valley Medical Center notified employees that 18 positions would be eliminated or left unfilled, though five of the affected employees were to be switched to different positions. Another five employees had their hours reduced, according to an internal hospital memo detailing the cuts.

A little more than a week ago, Healdsburg District Hospital announced that it would cut its workforce by 8 percent, letting go of 30 employees.

The next ax is expected to fall in Sebastopol, where Palm Drive Hospital executives are embarking on a painful effort to "right-size" the hospital from 37 inpatient beds to 14 beds.

The hospital currently is exploring which positions, and how many, will be affected. Officials are focusing on jobs associated with inpatient care, which covers a large swath of positions at any hospital, said Palm Drive CEO Tom Harlan.

"The uncertainty having to do with Obamacare is a factor" driving the hospital's assessment, Harlan said.

In addition, hospitals are keeping fewer patients overnight as advances in technology and medicine continue to transform the industry, leaving them with an increasing number of empty beds.

"What we're taking out is the people who are really in reserve to staff all these empty beds," Harlan said. "We're calling it 'right-sizing.'"

At Healdsburg District Hospital, patient visits declined 10 percent during the first 10 months of this year, to 7,061.

Meanwhile, like most hospitals in the country, the Healdsburg hospital is anticipating a big hit from future cuts to Medicare, which is used by 52 percent of its patients to pay for their care. Another 18 percent of the hospital's patients are covered by Medi-Cal, the federal Medicaid program in California.

State hospital advocates say the federal government's reimbursements for those programs are a fraction of the actual cost of care, and that percentage is poised to get smaller.

"If revenue is going to come in at what the government is paying, we have to keep our expenses in line," said Nancy Schmid, CEO at Healdsburg District Hospital. "Inpatient volumes are going down, and they have been going down since 2008. ... Volumes went down, the staffing didn't go down. Staffing went up."

Add to that a hospital industry that is becoming increasingly competitive and troublesome for smaller district hospitals, as larger health care systems like Kaiser Permanente and Sutter Health continue to dominate the market.

That has smaller district hospitals more aggressively shifting their focus away from traditional inpatient services to whatever it is they do best, such as wound care services at Healdsburg District Hospital or stroke services at Palm Drive Hospital. A focus on certain outpatient services is becoming critical.

"I think hospitals have to prepare for getting all the outpatient volume they can get. Everything is moving away from the inpatient setting," said Schmid. "Hospitals used to survive on inpatient revenues because people stayed a long time in hospitals."

District hospitals also have been forming alliances with other health care providers to bolster their patient referrals. Sonoma Valley Hospital and Palm Drive in Sebastopol have affiliated with Marin General Hospital. Healdsburg has affiliated with Santa Rosa Memorial.

But, large or small, hospitals are going to have to adapt to a new era of smaller revenues as government begins to rein in health care costs.

In 2009, the American Hospital Association and other hospital groups agreed to $155 billion in Medicare cuts over 10 years to help pay for the cost of Obamacare. The concession was made with the understanding that millions more Americans would be covered by insurance, which would reduce hospitals' costs in treating uninsured patients.

But widely reported problems with HealthCare.gov and low enrollment figures for health insurance marketplaces across the country have some hospital groups worried.

When the hospital groups agreed to those cuts, they were told that roughly 97 to 98 percent of uninsured Americans would be getting coverage, said Jan Emerson-Shea, vice president of external affairs at the California Hospital Association.

"When the final law was passed, that was reduced to 92 to 93 percent," she said. With all the problems Obamacare is going through, it's unclear how many people will be covered and, more importantly, how soon they will be covered, she said.

Harlan, for example, said he expects the swelling ranks of insured patients to bring in additional money, potentially $600,000 a year. But it's unclear when that change will happen, and exactly to what extent the revenue will offset what is being lost in Medicare reimbursements.

Of the $155 billion in Medicare reductions over 10 years, $17 billion will be cut from hospitals in California, Emerson-Shea said. On top of that, she said, there have been additional cuts made to Medicare because of the recent debt-ceiling negotiations and sequestration, bring the statewide figure up to $22 million.

Union officials, however, say the hospital industry is using Obamacare as a scapegoat for their efforts to maximize net revenues.

John Borsos, secretary treasurer for the National Union of Healthcare Workers, said health care providers like Kaiser and Sutter are making significant revenues, in some cases reporting record highs.

"The single biggest cost that a health care organization has is labor. The more they can reduce labor costs, the more money they make," Borsos said.

Todd Salnas, president of St. Joseph Health in Sonoma County, said local St. Joseph operations are expecting a reduction in government payments of $76 million over five years.

"We're seeing reductions in revenue and reimbursement from outside payers — which are primarily driven by Affordable Care Act changes," Salnas said.

"St. Joseph Health supports access to care being provided to the current uninsured populations, but it's important to understand that there's a price that we all pay to allow that to happen," he said.

Back in July, when St. Joseph announced it would lay off 37 employees at Memorial and Petaluma Valley, the hospital said the cuts would result in an annual savings of $3 million. Two of the employees were given jobs elsewhere in the health care system.

Salnas said there were no immediate plans for further reductions.

"At the present time, we're not planning for any widespread reductions as we continue to transform our medical models," he said. "We'll likely experience changes in roles and responsibilities as we evolve. But we do not have any plans in additional broad reductions in workforce."

Kaiser Permanente last saw layoffs in Sonoma County in 2009, when 50 people were let go as part of a 2 percent statewide staff reduction. The reductions were driven by recession-era job losses that left many without health insurance.

In the first half of that year, Kaiser lost 36,000 subscribers across the state, and the year before it lost 30,000. At the time, Kaiser had 172,000 patients in Sonoma County.

Kaiser Permanente — with its unique, integrated mix of health plans, hospital and medical facilities and physicians — said it has aggressively sought advances in clinical quality, prevention and safety that keep people healthier.

"As a result of this transformation of care, we are seeing shorter and less-frequent hospital stays, and fewer patients in our hospitals," said Judy Coffey, senior vice president/area manager of Kaiser Permanente Marin-Sonoma.

Coffey said Kaiser also is trying alternative health care delivery settings, including services based at home, over the phone and even online. The changes are part of the national trend "in which hospital admissions and length of stay have declined and are continuing to go down," Coffey said.

"We are addressing these changes in many ways, including greater flexibility in managing schedules and staffing, so members get the care where and when they prefer," she said. "Position eliminations would be used only as a last resort."

Like Kaiser, Sutter and St. Joseph also cut their local staffs during the recession, eliminating 130 and 180 jobs respectively in 2008 and 2009.

Sutter Medical Center, which is scheduled to open its new hospital in north Santa Rosa in late 2014, does not anticipate having to cut its current workforce of 800 to 850 employees, said Mike Purvis, chief administrative officer.

"Our staffing at the new hospital will be very similar to what we have now," he said.

In keeping with the shift toward more outpatient care, Sutter's new hospital features a centrally located outpatient unit.

"For us, it's a matter of being attentive, staying as efficient as we can possibly stay," Purvis said.

Another area of concern for smaller hospitals is the loss of inpatient revenue from residents who live in their area but have doctors at physician groups affiliated with Kaiser or Sutter.

In some cases, a Kaiser patient can be treated at Palm Drive or Healdsburg emergency rooms, but if an inpatient admission is required, Kaiser must approve it.

Schmid, Healdsburg District Hospital's CEO, said it's hard to compete with larger hospitals that have the ability to affiliate with large physician groups that can funnel more patients into the hospital. She blasted a state law that prohibits hospitals from hiring their own doctors, requiring them to contract with physician groups. Critics believe direct hiring of doctors could increase patient volumes at smaller hospitals.

Harlan, Palm Drive Hospital's CEO, said one measure the hospital is taking to increase revenue is getting some hospital employees to switch their health coverage from Kaiser to Western Health Advantage. Currently, half of hospital employees are covered by Kaiser. The move would allow the hospital's own employees to use Palm Drive services.

Harlan said he also expects to boost revenues by increasing certain procedures, such as MRIs, wound care, 3-D mammography and new spine procedures. He also expects Obamacare to increase annual revenues by $600,000 once currently uninsured patients get health coverage. But he said there's a lot of uncertainty about the degree to which that is going to happen.

"The uncertainty is what's causing people to blame the Affordable Care Act," Harlan said. "There are Medicare cuts, and that's not good if the revenue from newly insured patients never becomes a reality."

(News Researcher Janet Balicki contributed to this story. You can reach Staff Writer Martin Espinoza at 521-5213 or martin.espinoza@pressdemocrat.com.)

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