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California has received nearly $47 millionin federal stimulus funds this year topromote health information technology useamong physicians. However, Orange

County will not share in any of the largesse at least for now.

CalOptima, Orange Countys Medi-Calmanaged care plan, was not among therecipients of a second round of $267million in funding announced by the U.S.Department of Health and Human Serviceson Wednesday.

CalOptima officials were notimmediately available for comment, but astatement issued by Chief Executive OfficerRichard Chambers said he was seekingfurther information from the agency andwould appeal the decision. CalOptima's

application...was widely supported by thecommunity, and we continue to believe weare the most qualified organization todeliver those services for Orange Countyphysicians, Chambers said.

An official with the California RegionalExtension Center (Cal-REC), which willpromote HIT particularly electronicmedical record adoption in 56 Californiacounties, said that Cal-Optima had hadissues with its grant application to HHS.Cal-REC is a consortium that includes theCalifornia Medical Association, theCalifornia Primary Care Association and

the California Association of PublicHospitals & Health Systems.

Cal-Optima has had a harder road,said Sean South, a spokesman for the

California Primary Care Association. Idont know what is going to happen inOrange County.

Cal-REC received $31.2 million infunding from HHS in February, when theagency awarded $375 million in grants.

The lack of funding is a blow toOrange County, whose 3 millionresidents make it the states second-mostpopulous. It has hundreds of smallmedical practices and clinics that wouldlikely benefit from adopting EMRs andother HIT.

HHS officials were not immediately

available for comment. About $20 billionin stimulus funds has been madeavailable for various facets of healthcareIT, including $640 million for promotionof EMRs and other physician support.That money has been distributed to 60agencies nationwide.

It is unclear whether CalOptimawould qualify for future grants. Theinitial HHS grants are for two years, andare intended to cover 90% of the startupand operating costs for the regional

O.C. Blanked On HIT Stimulus FundsOnly Calif. County Excluded; L.A. Care Wins $15.6M

California Edition

8(2/9-*4/(!:++-;/(

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Payers & Providers

extension centers. Future HHS grants areintended to cover only 10% of operatingcosts.

The regional extension centers areexpected to develop a self-sustainingbusiness model over time, said ElaineBatchlor, M.D., chief medical officer ofL.A. Care Health Plan and a member ofthe Payers & Providers Editorial Board.

L.A. Care won $15.6 million onWednesday to promote HIT adoption inLos Angeles County. The plan, whichcovers more than 700,000 Medi-Cal,Healthy Families and dual-eligibleMedicare recipients countywide, has alarge network of safety net providers. Ithas been actively promoting EMR

adoption among its physicians.

Page 2

Plans were sketchy for how Cal-RECand L.A. Care would initially spend thefunds. Were still in the process of

finalizing our operating plans, Batchlorsaid.

However, both South and Batchlorindicated that the organizations wouldlikely enter into joint purchasingagreements with EMR system vendors onbehalf of providers, particularly smallpractices and clinics providing care tosafety net populations.

It costs tens of thousands of dollars foa system, and we need to be able to helpproviders obtain them, South said. Headded that Cal-REC was also working on alow-interest or interest-free loan program

for providers to purchase EMR systems.

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In Brief

HHS Names RegionalDirector For California

A former senior advisor to Gov.Arnold Schwarzenegger and thestates economic recovery czar has

been named a regional director bythe U.S. Department of Health andHuman Services. Herb K. Schultz, 47, wasappointed earlier this week, one offive regional directors announcedby HHS Secretary KathleenSebelius.

They will play a vital role inour departments effort toeffectively implement thePatient Protection and AffordableCare Act. I look forward to workingwith them in the months and yearsahead to achieve HHSs mission toprotect the health of all Americansand provide essential human

services, Sebelius said.Schultz will oversee Region IX,

which includes California, Arizona,Hawaii, Nevada, Guam andAmerican Samoa.

Schultz, who was educated atAmerican University andGeorgetown University inWashington, D.C., headed theCalifornia Recovery Task Force,which oversaw federal stimulusfunds flowing into the state. Healso served as interim director ofthe California EmploymentDevelopment Department. Prior toentering public service, Schultz wasvice president of government

relations for McKesson HealthSolutions.

Kaiser, Union OpenNegotiations on

Contentious Note

Kaiser Permanente and the ServiceEmployees International Union-

OC (Continued from Page One)

The volume of Cesarean sections performedin California rose 56% between 1996 and2007, raising concerns that the boom in theprocedure may be leading to moreobstetrical complications and obscuring

patient choice.The data, supplied by the National

Cener for Health Statistics, an afliate of theCenters for Disease Control and Prevention,concluded that the percentage of deliveries

using C-section increased in California from20.6% in 1996 to 32.1% in 2007. Thatsslightly above the nationwide average of31.8%, which increased from 20.7% in 1996 an overall rise of 54%.

Observers say there are a number offactors contributing to the rise, includingdefensive medicine being practiced byphysicians who use the procedure to

decrease the likelihood of malpracticelitigation, or added convenience to motherswho want to be able to more preciselyschedule their deliveries.

If you have a physician reluctant tohave a malpractice claim, and they tell thepatient about bad outcomes...the patient iskind of biased to side with their physicians,said Dylan Roby, a research scientist withthe UCLA Center of Health Policy Research.Mothers are more likely to deal with thediscomfort of potentially having a post-op

infection for the sake of the babys health. Hadded that the use of C-sections leads to amultiplier effect, requiring subsequent births occur in this fashion if the mother opts for thprocedure for her rst child.

Other observers questioned the use of Csections, noting that they can lead to increasobstetrical complications. There are no datashow that increased rates of Cesarean sectionhave improved either maternal or newbornoutcomes and some data showing thatmaternal outcomes have worsened over thissame time period, said Debra Bingham,executive director of the California MaternalQuality Care Collaborative at StanfordUniversity. Bingham added that C-sections clead to birth mothers suffering complicationssuch as pulmonary embolus and deep veinthrombosis.

Binghams organization has helped theCalifornia Department of Public Healthcompile a yet-to-be-released study suggestingthe states infant mortality rate has tripled ovethe past decade, although Bingham noted aconnection to the mortality rate and c-sectionhas not yet been established.

Continued on Page 3

NEWS

Continued on Next Page

States C-Sections Rise Nearly 60%Procedures Usage May Override Patient Choice

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Most of Californias health plans receivedbelow-average scores in an annual surveyfrom consumer evaluator J.D. Power &Associates, although Oakland-based KaiserFoundation Health Plan scored signicantly

higher than its competitors in most categories.Californias

health plans scoredan average of 702points out of 1,000on the Power survey,just above thenationwide averagescore of 701 points.However, Kaisersscore of 749 skewedthe rest of the survey.Only Cigna, with ascore of 704, wasabove the Californiaand nationalaverages.

Plans weregraded in eight categories, including overallconsumer experience, plan communicationwith members, depth of provider networksand overall coverage and benets.

Nationwide, the scores of health plans aredown signicantly in 2010 compared to thelast years average of 712, according to thePower survey, although Californias scores didnot drop quite as much.

Ofcials with the Westlake Village-basedPower suggest that the overall dissatisfactionwith health plans means consumers may notbe accessing their plans or benets correctly.

Understanding (benets) alone does no

explain member satisfaction, although it mayhelp to mitigate otherproblems with themember experience.While satisfaction withmany plans hasdeclined this year,satisfaction decreasesare less severe for thosplans able tosubstantially increasememberunderstanding, saidJim Dougherty, directoof Powers healthcarepractice.

Kaiser receivedhigh scores primarily

because of its ability to integrate care andcoverage, according to David Stefan, theexecutive director of Powers healthcarepractice.

Theyre doing a great job ofincorporating their members into the entirecare process, and their captive network turnsout to be a huge source of strength for them,Stefan said, adding that the plan also has donwell on preventative care.

Page 3Payers & Providers

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NEWS

In Brief

United Healthcare West begannegotiations on a new contractthis week with the unioncharging that Kaiser is trying totake away hard-earned benefits.

According to union officials,Kaisers opening-day presentationon Tuesday made it sound like the

health system wanted to makemajor changes to the current laborcontract, which expires in October.

The union represents 48,000employees throughout the Kaisersystem, including allied healthprofessionals such as nurses andtechnical staff.

We've heard lots ofdiscussion about numbers andpriorities but we know whatKaiser's really saying to itshealthcare workforce: 'we wantyour stuff.' Our message back is anemphatic 'keep your hands off it,said Dave Regan, a SEIU-UHWtrustee.

According to SEIU-UHWspokeswoman Adriana Surfas, theunion fears that healthcare costsKaiser recently passed onto itsmanagers may also be inflicted onrank-and-file workers. Wereputting our position out there, shesaid.

Kaiser officials did notdirectly address the unions charge ,but did not deny them either.

In our opening presentation,we described the unprecedentedchanges continuing to take placein the healthcare marketplace andthe broader economy, and thechallenges and opportunities thesechanges p resent us, said Kaiserspokesman John F. Nelson. Allthose factors create anunprecedented, challenging healthcare environment, and we havesaid consistently that unless wecontinue to make progress inaddressing these challenges, ourcost structure will beunsustainable.

Anthony Wright, executive director ofHealth Access, a Sacramento-basedconsumer advocacy group, suggested thatexpectant mothers opting for C-sections maynot be fully informed of the risks involved.

The data Ive seen suggests that when

patients are brought into the decision-makingprocess, they normally choose the leastinvasive procedure, he said. They dont wanto be in the hospital any longer than they haveto.

C-Sections (Continued from Page Two)

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Plans Fare Poorly In J.D. Power StudyOnly Kaiser Scores Well Above National Average

California Average Score 702

Kaiser Foundation Health Plan 749

Cigna 704

PacifiCare 688

Health Net 684

UnitedHealthCare 678

Anthem Blue Cross of California 676

Aetna 672

Blue Shield of California 660Source: J.D. Power & Associates

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Payers & Providers Page

Faced with a difficult economy, reducedaccess to capital, loss of investmentreserves, and impending healthcarereform, hospitals are finding themselves ina difficult position. These and many otherfactors are leading hospital executives andboard members to question if they cancontinue to remain independent or if theyneed a partner. Its a tough question toask, but avoiding doing so can courtdisaster. Consider the following:

Limited Access to Capital

Although the credit market isfinally loosening, borrowers arefacing increased scrutiny.!Lenders are demanding moreinformation to determine creditworthiness, with a particularfocus on cash and liquidity todebt metrics.!With volumessoft, and revenue underpressure from the government,hospitals need to demonstratestrong performance.

Consolidation of Physicians

Economic pressures and lifestylechoices are leading to a new wave ofphysician medical group and IPAconsolidations. Conversely, hospitalsare reliant on engaging such physiciansto shore-up loyalists and maintaincritical mass (volume).

Soft VolumesMany hospitals have yet to see a return

of elective procedure volume.! While theAmerican Recovery and Reinvestment Actof 2009 was recently amended to extendpremium support for health benefits

(COBRA), many people will not likelyextend coverage when their benefits runout.

Deteriorating Payer MixHigh unemployment rates and financial

stress have led to a deterioration of payermix at many hospitals, with more self-paypatients and an increase in bad debt.!Even without healthcare reform, hospitalscan expect reimbursement challenges atthe federal and state levels.

Continued Decline in Per Capita URates

Trends in per capita utilization ofinpatient services continue to decline.!Physicians are driving care to the outpatiesetting, and length-of-stay continues todecline as hospitals focus on managing thcost of care for capitated and case-ratepatients.! Some markets are over-bedded,there will be provider consolidations/hosclosures to lower overhead costs and

maintain margins.! As volumand payment declines,throughput and occupancy mincrease.

Healthcare ReformRegardless of whetherhealthcare reform is enactedyear or not, healthcare is moin a clear direction.!Spendingmust be slowed down andreduced. Incentives on how is reimbursed will need tochange to bend the cost curv

as President Obama and others have

suggested. In time, reimbursement wshift from volume-based to value-baHospitals and physicians will beincented to work together and delivhigher quality, more cost effective cNow is the time for evaluate a hosp

needs and select an approach for fillingidentified gaps in clinical competencies,resources, capital and IT. If needed, consipartnering with another organization.! Taaction now ensures that discussions areapproached from a position of strength,organizations of best fit are identified, anthe needs of the community are met now

in the future.

OPINION

Hospitals Cant Always Go It AloneThe Economic Climate May Dictate Finding Partner

By

MichaelJ.

Randall

Michael J. Randall is a Manager with The

Camden Group, an El Segundo-based

healthcare consulting firm.

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Op-ed submissions of up to 600 words a

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