Newsmaker of the Week" is presented by the SCV Press Club and Comcast, and hosted by Signal Multimedia Editor Leon Worden. The program premieres every Wednesday at 9:30 p.m. on SCVTV Channel 20, repeating Sundays at 8:30 a.m.
This week's newsmaker is Roger E. Seaver, president and CEO of Henry Mayo Newhall Memorial Hospital. The interview was conducted Sept. 15. Questions are paraphrased and some answers may be abbreviated for length.
Signal: There's a statewide hospital crisis. What is going on?
Seaver: That's true, we are having a hospital crisis, and Los Angeles County is the center point of this crisis. What's going on is the culmination of a long-term mismatch of health-care policy and health-care finance. It's bearing out in the lack of access for unfunded patients, indigent care, people without insurance, and the overload on hospital emergency rooms. You see it playing out primarily in center-city type hospitals.
Signal: How are the closures affecting Newhall Memorial?
Seaver: We have to remember, health care, almost all health care, and particularly in the community hospital, is local. It's very much like real estate; location means a lot. We're fortunate, we're part of the Santa Clarita Valley, so it has had a very little impact in the short run for health care access here in the Santa Clarita Valley.
Signal: There are a few health-care measures on the Nov. 2 ballot; one is a referendum on SB2, requiring employers to provide health coverage for virtually all employees. Do you have a position on that?
Seaver: We do have a position on that, as an industry, and as an individual I can certainly state my position. As a community hospital we do not take any strong positions one way or the other on most ballot measures. On this particular one, the industry is actually neutral on this bill.
In general we support increased access, or increased funding, of health care. We believe there is an unfair playing field currently in health-care financing, even on the employers' side. But having said that, the employers pay the bulk and extra for health care as it is. The bill, we also feel, is poorly drafted, because to do it well, you really have to deal with the benefit package and have a fairness approach to the employer, so that it's not unfairly penalizing small employers. So the official position is neutral; conceptually, our industry feels that financing has to be broadened, and we have to deal with the high number of uninsured. This bill would do some of that, but not in a very fair manner.
Signal: What do you mean when you say "community" hospital? Who runs it?
Seaver: Our hospital is owned and held in trust for the community, and as a result there is no private ownership. So the business side of the health care is not for the benefit of any individual; it's held as a nonprofit, tax-exempt, charitable institution. With that, of course we have requirements to provide access to the community, but the owners are really represented by a voluntary board of trustees. We have a 15-member board, which is made up of community leaders, leaders of the medical staff, and those interested in serving their community on a voluntary basis as a trustee for the community.
Signal: There are a few different boards
Seaver: There are two boards here at Henry Mayo two organizations, really. One is the operation of the hospital; the separate is a charitable organization called the Henry Mayo Newhall Memorial Health Foundation, which is an entity with a large board of community volunteers whose sole purpose is to work on behalf of the hospital and develop philanthropic support.
Per se, there is no medical board, but in the organization of hospitals in the state of California and in most states, we are required to have an organized medical staff that has delegated duties from the board for oversight of health-care quality and for establishing the rules and regulations associated with the medical staff. We call that the Medical Executive Committee, which is an organization underneath the board of the hospital.
Signal: Local doctors serve on it?
Seaver: Right. It's people that join the medical staff. They have their own rules and regulations that govern that. And that's true in all hospitals.
Signal: As the chief executive of the hospital, do you supervise all of the doctors and nurses?
Seaver: No. California has a rather unique law in this day and age that has been continued for many, many years, which is called the "corporate practice of medicine." No corporation in the state of California, other than a medical corporation, which is a special designation and must be owned and operated by doctors, can direct doctors. So there is, built into the law of the state physicians are independent of the corporate ownership, whether it be a nonprofit hospital, for-profit hospital or anything else.
So the relationship is very delicate in some ways. They are customers of the hospital; they choose to come to the hospital; they work at the hospitals that meet their needs; they work in the communities that they like to work in. Then, if they do so, they're also part of their self-governance on how they organize the medical staff subject to the board's approval, but they do not work for me. On the other hand, we have very well-established working relationships, policies and so on, and that's true in all hospitals, as well.
Signal: Tell us about Roger Seaver. You came from Northridge Hospital
Seaver: My previous experience was with really two large, non-profit, multi-hospital systems, one that merged into (the other), Catholic Healthcare West. My last assignment there was at the Northridge hospitals in the San Fernando Valley, before I came to the Santa Clarita Valley.
Signal: When you arrived in 2001, Newhall Memorial was on shaky financial ground. You took the hospital into bankruptcy, and last year you brought the hospital out of bankruptcy. What's the financial condition of the hospital today?
Seaver: The bankruptcy, or the reorganization of the hospital affairs, was really what would be known in business terms (as) a credit crunch, or a period in the life of the hospital where the ability to pay all of the current bills was compromised due to the unusual expenditures related to the seismic upgrades.
That is a great example of what has been applied to this industry in unfunded mandates. Henry Mayo was one of the first hospitals to actually go through and complete the upgrades, and to a great extent, the crisis in the industry is yet to come for most hospitals, related to that.
Having said all of that, the '90s was also a very difficult time for the industry, primarily in Southern California, as the negotiation of private contracts with the health plans produced income less than the operating costs of the hospitals. Henry Mayo was certainly subjected to that, and generated quite a bit of operating losses. Timing is everything. In some cases the lack of further access; the ability to negotiate stronger contracts; the ability to maybe correct in retrospect some of the business arrangements that the hospital had entered, was a big part of our turnaround.
The financial turnaround was rather quick as it relates to hospitals. It has been very solid. We have developed continuous operating income that places us, really, in the top 25 percent of all hospitals in Southern California at this point, on a current basis. However, we don't have the reserves that we'd like to have to reinvest. That is a big issue for us that we're still addressing.
Signal: The Santa Clarita Valley is undergoing another big growth period. Your emergency room was built in 1975 to accommodate 18,000 visits a year, and for the nine months from October to June you had over 28,000 visits. What is the plan to expand the emergency room?
Seaver: Before I arrived here at Henry Mayo there were already some plans to expand the emergency room and some work had been underway. However, in looking at that, along with others, I recognized the growth of this valley, and the tremendous need, as part of the safety net of this valley, is to have an adequate emergency room since we're the only one currently serving the valley (so) we re-looked at that and went back to the drawing board and decided we needed to expand for the next decade.
We established the plans and specifications and submitted them to the state, and I'm very pleased to say that about three weeks ago, after a very long, state-controlled process, they have now approved those plans so we can move toward construction. We will be contracting shortly and hopefully breaking ground right after the first of the year on an emergency room designed to move the capacity to at least 55,000 visits a year, which we estimate will be the need throughout the early part of the next decade.
Signal: Tripling the capacity
Seaver: Right. As far as size goes, we've added some rooms we actually added eight, what we call fast-track rooms, which aren't really full rooms, but areas to see patients with the support of donors, even while we were in business reorganization. So we have 21 treatment areas within the emergency room today; at the conclusion of this project we'll have 33 or 34 treatment areas. So it's over a 50-percent increase in physical capacity, but probably equally important, it will be designed for the flow of patients, and our current emergency room, which was under-designed for the capacity, of course, logistically is also very difficult.
Signal: If you start in January, when will it be completed?
Seaver: The total project is actually 18 months, to get to full capacity. We'll build new space in about a year from the groundbreaking, and we'll have the ability to use that probably within 15 months.
Signal: Will the current emergency room stay open during construction?
Seaver: The emergency room will be open through all of this. There will be some transitional problems in the sense of where the entry will be and how we access the room, but it will be in the same location, same staff, same capabilities untouched until we've built new space. Then we'll move to the new space, which is equal to the current space but better organized, and then renovate the existing space to complete the project.
Signal: How does the current wait time compare to other hospitals?
Seaver: That's something we've focused on tremendously. Our interim step of adding eight more treatment areas, in what we call fast-track, has really helped us a lot. On the other hand, we still get overwhelmed. It's not atypical, on a weekend in particular, when we're just not able to keep people moving through on a consistent basis.
We measure our start-to-discharge time. The national average for emergency rooms is about 3.5 hours from entering the emergency room, registering, diagnosis, treatment or release.
Signal: Out the door in 3.5 hours?
Seaver: Right. That's an average. But in Southern California, I would submit that most emergency rooms are probably not hitting that. We are hitting it on a consistent basis. We have a goal to do much better than that, and we're struggling to meet the higher target in our current configuration. We're just not quite able to do that.
Signal: Are you able to work out deals with other hospitals or medical centers to accommodate the overflow?
Seaver: Los Angeles County has actually had a very organized emergency medical system. Ambulance traffic is all directed from one central point, and if we're overwhelmed, or any other hospital is overwhelmed, they would defer the ambulance to another hospital. But we're all open to the walk-in, the drive-in the more common way to come to the emergency room is by yourself or with your family or friends, and so that, you do not defer. You're open 24 hours, 7 days a week. Depending on the condition of the patient, of course, sometimes they choose, if the wait's going to be too long and their condition doesn't require immediate attention, a few of those choose to leave. But almost all people choose to seek emergency care in their own community.
Signal: Don't you have one of the biggest service areas in California?
Seaver: Well, we do in the trauma system, where we're covering a very large geographic area, but within the system, within Los Angeles County, we're still a fairly small part of the private system. We have to take care of a large geographic but not a large number of patients for trauma only. And that's, again, part of the emergency medical system.
Signal: With growth projections showing we can expect another 1 million people in northern Los Angeles County in the next 20 to 30 years, do you foresee a need for a second hospital in the SCV?
Seaver: Well, the area is certainly attractive at some point to another hospital. However, it's going to depend a lot on how well we respond, I think, to the growth.
It's very difficult to establish a new hospital financially, in most markets. This market might be able to do that easier than others, because relatively speaking, this is a stronger market. But the big investors, the large management companies that operate with publicly held companies, by and large are not investing in California at all because (of) the regulatory environment, the costs in California, and the return on investment is much to small. So it's not that it won't happen; it will happen if needed, and it will happen sooner if we're not able to respond to some of the growth.
A key thing that is lost in the growth area, though, as it relates to health care, is: Health care is very age-dependent hospitals, that is, within the health-care system the highest use, obviously, is by the oldest part of the population. In that respect, the Santa Clarita Valley has a very young population, so the need for a hospital is below average in our valley compared to the state or the nation. And that won't catch up for many, many more years.
Signal: There's evidence that our population is aging in place, and you're looking to raise $3 million for a cardiac lab. Is that one way you're anticipating different needs?
Seaver: Well, that need is already here, and it's also fostered by the fact that within the last two to three years, it's been statistically demonstrated that people who are in the process of having an active heart attack a certain, designated type of heart attack should go directly to a cath lab. So the community needs a cath lab for emergency purposes; and for final diagnosis of coronary artery disease, the cardiac cath lab is an absolute necessity.
While a few years ago there probably was inadequate volume from residents here, that is no longer the case. We need that; we need that as soon as we can bring it online. And that is part of our capital campaign that the foundation is focused on.
Signal: What are some of the other changing needs that aren't being met in our valley?
Seaver: Our biggest growth is, of course, and use of the hospital, is in the 50-plus (age group) my colleagues, I guess, at this point and it's not atypical that we seek out elective surgery for orthopedic problems. Of course, you're starting to have, in some cases, coronary artery disease that requires more intensive care than we have, as far as diagnostic or therapeutic work. But by and large, we have everything except the cardiac, for that age population.
There may be a question at some point on size of facilities, but there is a balance. So much of the work today is done on an outpatient basis. Over half of the surgical interventions today are done on an outpatient basis. That doesn't require hospital beds; it does require capacity in ambulatory care settings and outpatient settings and physician offices and so on.
Signal: In terms of serving the SCV's younger population, there was a big call, prior to your arrival, for full-blown neonatal services. How do you gauge that need?
Seaver: The needs there are relative to other communities in this respect: It would be desirable to have neonatal intensive care from the practitioner's standpoint and from kind of the ultimate in hospital delivery, and certainly metropolitan areas typically have neonatal intensive care units in the major hospitals that have high-volume deliveries.
From an economic standpoint, and more importantly from a skills and training standpoint, it's very hard to keep the specialists in an environment that doesn't have enough activity for either their skills to be used economically, or just to keep up their skill set.
We're on sort of the border, and believe it or not, the birth rate of residents in this valley really has not been a major growth factor, even though the growth of the valley has been significant. However, that appears to be starting to change. There appears to be a new growth of births of residents here in the valley, and we're watching that very closely. We have not plans in process, but certainly we have anticipated the need to build a neonatal intensive care unit as that population increases.
Signal: We've seen a lot of specialized medical centers crop up in the SCV in recent years. Are they relieving any of the pressure?
Seaver: Actually, what you see primarily in the Santa Clarita Valley is what I would call opportunistic investment. In other words, most of the added health-care facilities, from an institutional standpoint, whether they be surgical centers, radiology centers, imaging centers or physical therapy centers, is because those areas are reasonably well reimbursed; the market is adequate to develop and economic return; and they require much less investment than a hospital has.
It's not unusual that a community hospital, from a business standpoint, is attacked wherever the revenue streams are the best. So in a way, it makes it harder for the hospital, because you have a lot of competition in areas that can generate a business profit, and you have no competition in the areas where you can't develop a profit. That's a major issue nationally, and markets like the Santa Clarita Valley typically get overrun with competitive, theoretically highly profitable (enterprises) but the profits leave the hospital and go into the private centers. So it's a troubling aspect, but it's a part of the free enterprise system, as well.
Signal: As a hospital, you're required by law to serve anybody.
Seaver: That's correct.
Signal: You don't turn anybody away for financial reasons.
Seaver: We cannot turn anybody away for financial reasons.
Signal: The cost of administering services to illegal immigrants has been cited as one factor in the current hospital crisis. Does that impact you?
Seaver: It impacts every hospital more or less, depending on where those people actually seek heath care. They typically seek it, like everybody else, closest to home, or easiest to access, so the center-city hospitals typically are impacted much greater than we are. We do have people without the means to pay, accessing health care through our emergency room.
We're more like the dream, in the sense that as long as it doesn't overwhelm the system, it's a good part of the American health-care system. We can take care of everybody, as long as the vast majority have funding. That's our case, and it's not the case in many other communities.
Signal: With our scary population projections, are the foundation's fund-raisers going to be sufficient for you to keep pace?
Seaver: We're going to be able to keep pace somewhat dependent on the success of the foundation, and definitely dependent on our ability to operate the hospital in a good business manner. We don't have the reserves today that we would like, and that's a problem in the short run.
Running the business appropriately, I believe, this hospital can generate excess funds and again, it's held in trust for the community, so all the excess funds get reinvested in either replacement or upgrading of the hospital itself.
In our current three-year envelope, we're reinvesting over $25 million in the hospital, and we're looking to the foundation for $12 million of support. We see that as a very good balance in the short run. On a longer-term basis we would look to or, the ability of the hospital, actually to fund a much higher percentage.
But it is true that the great hospitals of this country, and certainly of this state, and certainly of Southern California, are well supported with philanthropic funds. You can look at Santa Barbara, you can look at Whittier, you can look at the Methodist hospital in Arcadia, you can look across the land Cedars (Sinai), of course, is the great example in Los Angeles and the hospitals that develop great health care for their community are always well supported philanthropically. That's a great sign for the Santa Clarita Valley, because we already have developed great philanthropic support for a small community hospital. We just need to keep pace as we move forward.
See this interview in its entirety today at 8:30 a.m., and watch for another "Newsmaker of the Week" on Wednesday at 9:30 p.m. on SCVTV Channel 20, available to Comcast and Time Warner Cable subscribers throughout the Santa Clarita Valley.