On New Year's Eve 2021, Olympia Medical Center, an established hospital in Los Angeles, ANNOUNCED THE NOTICE OF CLOSURE.
But the closure sparked a backlash from the hospital's community. First, the members of the hospital's city council wrote a letter, and the medical staff signed the petition. In the following days, the hospital union held a series of protests. At the end of January 2021, the Los Angeles County Emergency Medical Services Agency (L.A. County Emergency Medical Services Agency also passed a resolution calling on the local government to allow the hospital to be open for at least another 6 months.
However, none of these efforts have had any effect. Eventually, the hospital was forced to close and sell to UCLA Medical Center.
Image source: Figureworm Creative
Founded in 1947 and having changed hands several times, Olympia Medical Center has been providing medical care to the Mid-Wilshire area of Los Angeles since its establishment.
It is reported that the hospital not only has an emergency room and 6 intensive care beds, but also provides other comprehensive medical services for local residents. Nearly 40 percent of the hospital's patients are black-American, 63 percent are over the age of 60, and 90 percent are Medicare and Medicaid covered. Many residents of the surrounding community have long relied on the hospital's basic medical services.
The importance of the hospital in the local area is evident. But the hospital's owner, Alexeo Healthcare Services, believes that the hospital's profitability has fallen sharply due to the COVID-19 pandemic and is not expected to be able to sustain itself.
According to a latest report from rating agency Moody's, the COVID-19 pandemic has severely compressed the profit margins of nonprofit hospitals in the United States, with the median operating margin of U.S. hospitals in 2020 being 0.5 percent, compared to 2.4 percent in 2019. Of the 130 hospitals surveyed by Moody's, 42 percent incurred operating losses.
Under the impact of the epidemic, the operation of for-profit hospitals has also encountered a crisis. So, despite the hospital's local needs, Alecto Healthcare Services decided to close all of the hospital's services on March 31 this year and sell the hospital to UCLA Health.
As we all know, the COVID-19 epidemic in the United States is still very serious, and the closure of a hospital means that the admission of local COVID-19 patients will be a problem. As a result, the closure and sale of the Olympia Medical Centre has also caused strong resentment among local residents, who see it as a betrayal of the public's much-needed resources.
Joanne Spetz, dean of the Philip R. Lee Institute for Health Policy Studies at the University of California, San Francisco, said, "For-profit hospitals can decide for themselves what to do next, whether to sell, and so on." No one can demand that they must remain open, which is the same as when a restaurant closes, no one has the right to demand that the restaurant must be open. ”
So, do American hospitals sell if they want to?
In fact, in most cases, U.S. hospitals are subject to official scrutiny before they decide to sell, but the subject of review is generally non-profit medical institutions. Since Olympia Medical Center is owned by a for-profit investor, its sale does not require official approval.
In February 2020, California amended its law to require the healthcare system, private equity groups, or hedge funds to provide written notice and written consent to the state attorney general before a change in control of a healthcare facility or an acquisition of a healthcare facility. Under the law, the state attorney general has the power to reject a change in control of a healthcare institution or an acquisition of a healthcare facility by any of the healthcare system, private equity groups, or hedge funds.
However, due to strong opposition from private equity groups and hospital associations, the implementation of the bill has so far reached an impasse. "We oppose the bill because the hospital industry is already heavily regulated." Jan Emerson-Shea, a spokeswoman for The California Hospital Assn., a trading group that represents more than 400 hospitals in the state, said.
He also said that most hospitals have small profits, and if the attorney general makes additional cumbersome requirements, hospitals will fall into a state of loss or even lead to the failure of acquisition transactions. "In today's environment, it's very difficult for hospitals to remain independent and not somehow affiliated with a larger medical institution under all the regulatory requirements that hospitals face."
Forced by all parties to oppose the closure of Olympia Medical Center, despite no official review, California authorities held an online hearing on the closure and sale of Olympia Medical Center attended by more than 200 people.
Sarrao, a representative of Alecto Healthcare Services and general counsel, said at the hearing that Olympia Medical Center had limited access and that the medical services provided were not enough to support the hospital's continued operations. "The number of patients in hospitals is declining, and so is the number of COVID-19 patients admitted. That's why we're looking for strategic partners and exploring a variety of different options, and selling a hospital is what we think is the best option. ”
In fact, over the past two years, Alecto Healthcare Services has come under scrutiny for closing two hospitals in West Virginia. After the closure of two hospitals, West Virginia Gov. Jim Justice had asked the state's attorney general, Patrick Morrisey, to investigate "misconduct" by Alecto Healthcare Services. But the company was ultimately not punished, "the West Virginia attorney general did not impose any fines or other penalties on the company." Sharo said.
Joanne Speights said that on the surface, the hospital's bottom line in operating profits seems to contradict the larger medical needs of the community, but this is actually how the U.S. health care system is designed. "Theoretically, market-driven healthcare." The system should be more efficient, produce better results, and be a better choice for patients, but the real-world data doesn't clearly prove this. ”
Deeply investigate the reasons behind it, in fact, this is inseparable from the us medical insurance.
Joanne Speights said Medicare and Medicaid insured patients typically cost hospitals money, and hospitals must rely on privately insured patients to "cross-subsidize" the care of such patients to make ends meet.
Data released by the American Hospital Association in 2015 showed that nearly two-thirds (63.9 percent) of hospitals lose money when admitted Medicare-insured patients. Medicare and Medicaid pay hospitals often less than actual hospitals do to care for these Medicare patients, with a gap of $57.8 billion per year.
Image source: Screenshot of the AHA report
The American Hospital Association said that while some hospitals in the United States are owned by local governments, not all hospitals can receive tax subsidies from state or local governments to offset the cost of treating the poor. As a result, some hospitals tend to prefer to admit patients covered by private health insurance.
According to the California government, only about 4 percent of Olympia Medical Center's patients have private health insurance, compared with a whopping 44 percent at Cedar Senai Medical Center, two miles away. "So if we ask, 'Who the hell is thinking about the residents of this community?' From an institutional point of view, the answer is that there is no one. Joanne Speights said.
Therefore, the pace of accelerated mergers and acquisitions in U.S. hospitals will not stop. Glenn Melnick, a professor of health economics at the University of Southern California's Saul School of Price and Public Policy, said that over the past few decades, "the healthcare industry has been constantly merging." Many large independent hospitals have been swallowed up by larger chains of medical institutions, while struggling hospitals have been acquired by for-profit hospitals. ”
The dominance of private hospitals in the U.S. healthcare market is becoming more prominent. According to The California's Office of Statewide Health Planning and Development, about 35 percent of the state's hospitals were owned by private investors in 2019, up from about 30 percent five years ago, with the rest being public hospitals, private nonprofit facilities and the university health system.
If this development continues, will the "gap between rich and poor" medical resources across the United States become wider and wider?
Resources:
1. Los Angeles Times: A beloved L.A. hospital is about to close. Why no one could save Olympia Medical Center
2. Los Angeles Times: As COVID-19 rages, an L.A. hospital plans to close its doors, sparking criticism and questions
3. Healthcare Dive: How hospital operators fared financially in 2020
4. California Legislative Information: SB-977 Health care system consolidation: Attorney General approval and enforcement
5. AHA: Hospital Billing Explained (2015)
6. Healthcare Dive: Hospital margins hit hard by pandemic, but CARES Act provided huge relief, Moody's finds