Children’s Hospital’s Uncertain Future

Three years ago, Children’s Hospital Oakland merged with UC San Francisco and received $50 million from Marc Benioff. Yet now it’s facing major budget cuts.


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(page 5 of 5)

Photo by D. Ross Cameron

The relationship between the two hospitals is confusing. Although they are integrating, they remain separate legally: Children’s Hospital & Research Center Oakland is still a private, not-for-profit hospital, while UCSF is a public institution.

Vichinsky also noted that, whereas most children’s hospitals have a chief of pediatrics who looks out for the interests of the medical faculty, there is no such position at Children’s. “There is no one representing the faculty,” he said, adding that each faculty group has to fight on its own. “Without having a voice, it has led to, among other problems, increasing loss of morale and apathy and anxiety.”

There’s also the fact that the UC Regents are the sole corporate member of the Oakland hospital. “From my standpoint, this is largely not an affiliation but a takeover,” he said.

Hastings said the fact that great doctors are leaving the Oakland hospital is “unbelievably painful.” “And a number of us have said we thought we’d be here forever.” 


Vichinsky doesn’t blame UCSF’s clinical leadership for the way things have been handled so far. Instead, he said business leaders are responsible. “I see this as an administrative issue,” Vichinsky said. “I don’t think it’s been done well. I don’t think there’s been due diligence.” Decisions are being made based on reimbursement rates, he said, not on the public health needs of the community.

In light of the current pressures in health care, however, tough decisions seem inevitable. “I am completely committed to maintaining and preserving the incredible legacy that is Oakland Children’s,” Anderson said, “but I’ve got to be honest, it’s going to look new in the future because we are a new entity.

“Change is always difficult,” he continued,  “... but in the middle of this storm, any children’s hospital is going to have to evolve. And Oakland would have had to evolve whether UCSF was here or not.”

Moving forward, Anderson said, the Oakland hospital will remain focused on its core programs, such as its trauma center and newborn intensive care, while looking at ways to partner and be “good fiscal stewards.”

But it’s not entirely clear just how imminent budget cuts are. Back in February, when Anderson first sent an email to the staff explaining the hospital’s financial situation, he wrote, “we are targeting a reduction in operating expenses of $40 million … over the next six to 12 months.” But in mid-May, Krigel said in an email to the magazine, “We are still working on attaining $40 million of improvements by the end of FY 2019.” A couple weeks later, Durand said the budget is an ongoing process. “Don’t get too hung up on 2019,” he cautioned. As for the decisions about the primary care clinic and the CHORI building, Anderson said those will be considered over the next few months.

Despite his concerns, Vichinsky said he remains optimistic about the UCSF integration. “In theory, it still has enormous strengths and potential for both programs,” he said. “There are a lot of good things that could happen.”

UCSF and Children’s Hospital share a common vision to “improve the lives of all children, regardless of disease, ethnicity, or reimbursement,” said Vichinsky, who is also the director of the internationally renowned Northern California Sickle Cell Center, which is part of the hematology oncology department. Sickle cell is a life-threatening complex illness that predominantly affects African Americans, and the patients at Children’s are disproportionately publicly insured. Vichinsky said when he was initially discussing the possibility of the hematology oncology division merging with Stanford, their leadership “made it clear that sickle cell disease patients were not part of their mission plan.” UCSF, on the other hand, has been “committed to these patients.”

Lackman said she’s also feeling more optimistic and is confident that the petition helped slow down the process of cuts. But she acknowledged the hospital’s huge financial challenges. “It’s a tough time in health care for everyone,” she said. “We just want to make sure that as we go forward we do it in a thoughtful and relevant way, and in a way that this will better serve our community.”

Hastings said she hopes the process will be more “honest, transparent and forward-thinking,” and that leadership will engage the physicians and community in the decision-making. Perhaps more than anything, she wants to preserve the culture at Children’s Hospital. Hastings lovingly described a culture of care, respect, and high standards. “All of us are fearful we’re going to lose this,” she said. “Because it’s not valued.”

Anderson said he understands the fears and concerns of the physicians, but he also believes their energies are being misdirected. Instead of being angry at hospital leaders, he said, they should be pressuring legislators to increase Medicaid reimbursements.

“We have to stop fighting internally,” he said. “We’ve got to organize internally and make Washington and Sacramento aware that children’s lives are at stake here.”

In the meantime, the hospital is banking on its future. One thing the affiliation did provide was the ability of the hospital to fund its expansion project and seismic upgrade after two parcel tax measures failed to get voters’ support in 2008. Construction of the hospital’s new outpatient clinic is now underway. It will include cardiology, neurology, endocrinology, rehabilitation, and urology, in what appears to be a bid to compete with Stanford’s Emeryville clinic—and most certainly more privately insured patients.

Vichinsky worries that the hospital is moving away from the safety-net programs that Children’s has traditionally provided and toward services with higher reimbursements. “Frankly, I think the community is at serious risk for loss of specialty needs,” he said. “There’s a real sense of Children’s converting to high-end programs and particularly high-end programs that are inpatient that bring in revenue.”

Children’s isn’t alone in this regard. Across the country, pediatric hospitals are trying to figure out how to negotiate declining inpatient demand with the fact that such services provide higher reimbursements. Children’s Hospital Oakland is expanding the number of its inpatient beds from 190 to 210, and building a new inpatient pavilion. Part of the second phase of its master plan, the work won’t begin until 2020, and who knows what the health care landscape will look like when it is completed.

Even if the hospital can resolve some of its inner turmoil, Anderson noted that a bigger storm is coming: The Trump administration and Republican leaders in Congress have proposed $800 billion in cuts to Medicaid, the federal program that finances Medi-Cal. If the current version of the American Health Care Act passes, Anderson said, “the trickle-down effect of that to the children of the East Bay can be devastating.”

“There will be … health care institutions that go out of business,” he said. “Let’s be completely honest. I’m going to fight tooth and nail that Benioff Children’s Hospitals remains relevant and thriving, because the kids of the Bay deserve that, but the rally cry has to be in Washington going, ‘Please think about what you’re doing here.’ This is really ... an unprecedented time.”

 

Published online on July 5, 2017 at 8:00 AM

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