Alameda Health System Changes the Landscape
Health-care contractions, expansions, and empire-building reconfigure the East Bay hospital scene.
Alameda Hospital is now part of the Alameda Health System family.
The hospital landscape in Alameda County looks very different these days.
Over the past year, Alameda Health System has taken over operations at hospitals in Alameda and San Leandro, in addition to maintaining its flagship facility, Highland Hospital in Oakland. Both moves signal that the smaller local health-care provider wants to go big, not just for the sake of size, but the added ability to lower costs.
Earlier this year UCSF’s Benioff Children’s Hospital came to the rescue of Children’s Hospital Oakland—not unlike Alameda Health System’s move to increase scale in partnering with struggling stand-alone facilities—to create a united hospital front of UCSF Benioff Children’s Hospital Oakland and UCSF Benioff Children’s Hospital San Francisco.
Some of the hospital changes can be attributed to greater implementation of the Affordable Care Act. At the same time, the health-care law, better known as Obamacare, also has been an impetus for some providers to join forces, because, as county health experts say, networking is crucial to making Obamacare work.
Alameda County health officials were far ahead of the curve when it came to preparing uninsured and underinsured residents to begin shopping on the state’s exchanges or receive subsidized coverage. The officials long expected the limited capacity at East Bay hospitals would strain their ability to accommodate the influx of newly covered patients in the early days of the health-care act. But they also anticipated stasis to return as hospitals reorganized to meet the increased demand and implemented health promotions among their new patients.
In the meantime, while the health-care giants of Northern California, Sutter Health and Kaiser Permanente, were gobbling up disparate hospital facilities and market share, Alameda Health System, a public health-care provider boosted at the same time by funds from county taxpayers, had an idea: Why can’t a smaller local player in the health-care arena enhance its standing in the East Bay while also tamping down costs through economies of scale?
The greater number of services and hospital beds give East Bay residents better access to health care than ever before, said Jerri Applegate Randrup, director of corporate communication and marketing at Alameda Health System. Plans are to add facility upgrades to the hospitals in Alameda and San Leandro, along with additional medical services, said Randrup, who added, “When the opportunity presented, AHS stepped in to communities that were going to be left behind and without health care.” However, it took years of political and economic upheaval, not to mention Obamacare variables, before the plan could be fully put in motion.
Alameda Healthy System was known as the Alameda County Medical Center. Many simply referred to it as Highland Hospital, but the health-care provider also operated, and still does, many smaller clinics around the East Bay, along with Fairmont Hospital and John George Psychiatric Hospital, both in San Leandro. But on the onset of Affordable Care Act passing Congress in 2010, along with the uncertainty over the law and health-care costs that continued to skyrocket, many hospitals struggled to survive. Alameda Health System, however, had the advantage of a massive and largely successful ballot measure first passed in 2004 that accounts for a vast majority the hospital’s operating capital.
The infusion of tax dollars is important for Alameda Health System since many of its patients receive government assistance for their care or possess no health-care coverage at all. Yet, despite help from taxpayers, it was still struggling to provide care amid the uncertainty and the poor economy of the Great Recession when an opportunity to expand was presented at San Leandro Hospital. The community hospital was run by Sutter Health, but the Sacramento-based nonprofit was pouring more than $300 million into rebuilding another of its facilities only miles away in Castro Valley. A deal in 2009 was proposed allowing Alameda Health System to take over San Leandro Hospital and reconfigure the facility as an acute rehabilitation center. Alameda Health System needed a new building, since the previous location for its rehab program—Fairmont Hospital—was deemed too costly for seismic retrofitting required by the state. However, San Leandro residents and the nurses’ union pushed back and pressured local officials to block the plans that would have closed the hospital’s emergency room, which serves more than 28,000 patients annually and mostly from neighboring Oakland.
A lawsuit filed by the Eden Township Healthcare District against Sutter Health effectively kept the hospital open for the next four years. But, Alameda Health System reemerged in early 2013 when Sutter Health, despite a host of significant legal victories against the health-care district, feared public backlash against the plan to close San Leandro Hospital.
As part of the settlement, Sutter agreed to hand over San Leandro Hospital to Alameda Health System, in addition to a sizable, but short-term $22 million operating subsidy to keep the emergency room open. The deal was a victory for the community, but also a coup for Alameda Health System in that it now had a full-service facility centrally located in Alameda County as well as another hospital to lessen the pressure on Highland Hospital.
Next came Alameda Hospital, another community hospital, like San Leandro, constantly struggling to stay afloat. The stand-alone hospital and its emergency room services were deemed so important to life on the Island that voters in 2002 approved an annual $297 parcel tax that contributes around $6 million per year in operating revenues, but it’s still not enough. As part of a partnership created last year, Alameda Health System agreed to take over operations of Alameda Hospital while also extending a $3 million line of credit. Alameda Health System also gained a seat on the elected Alameda Healthcare District Board of Directors. The gambit is taken straight from the playbook of its much-larger private sector competitors like Sutter Health and Kaiser Permanente. But, for a public entity like Alameda Health System, the strategy is a novel approach. During the courting of Alameda Hospital last year, Alameda Hospital System’s longtime CEO Wright Lassiter laid out the hospital provider’s idea for the future of health care in the East Bay. “There is a requirement for some level of scale for you to be able to spread your costs, and that is what this is about to some extent. Unless you can do something similar to Kaiser and Sutter, then it is very difficult to compete,” said Lassiter. “So this conundrum is, do you stay small and cover a local community like Alameda and San Leandro has tried to do, or do you try to become more regional?” Lassister added, “This is not about going big because big is better, necessarily. It’s about doing things to be sustainable.”