New Study Finds CPMC Profits Not Matched by Charity Care

by Jonathan Nathan on December 9, 2011

Members of the Community Economic Development Clinic of the University of Hastings College of the Law released a study on the profitability and charitable care efforts of San Francisco’s nonprofit private hospitals on Thursday in a press conference, with representatives of various community organizations on hand to discuss the implications of the study and, specifically, the potential impacts of the proposed rebuild of Sutter Health’s California Pacific Medical Center (CPMC).

The study detailed the financial capacity and performance of the major nonprofit hospitals in San Francisco, as well as their various levels of compliance with municipal guidelines on charitable care, based on a review of data gathered by the Department of Public Health, the Office of Statewide Health Planning and Development, the IRS, and publicly available documents.

The study concluded that CPMC, comprised of four campuses around San Francisco, has a significantly greater financial capacity than any of the other private nonprofit hospitals in the city, but spends a disproportionately lower amount on charitable care, Medi-Cal patient care, and Healthy San Francisco patient care. Medi-Cal and Healthy San Francisco are, respectively, the statewide and citywide programs for low- and middle-income consumers in the city. The St. Luke’s campus, for example, is Sutter Health’s most profitable hospital in California, and has accounted for over a quarter of Sutter’s total profits over the last five years. St. Luke’s had a net income of $743.9 million between 2006 and 2010 for an average annual profit of $149 million, roughly 12 times the average of all other area nonprofit hospitals combined. Yet the ratio of charitable care to net patient revenue at St. Luke’s was lower than that at St. Francis, a hospital which had a net profit in the negatives over the past five years, and CPMC as a whole performed worse as a charitable institution than any other in the city, nearly five percentage points lower than the 6% guideline laid out by the Board of Supervisors.

Further, the study presents evidence that the chasm between CPMC’s charitable performance and that of other area nonprofit hospitals would only worsen if CPMC’s current rebuild plan were put into action, as the rebuild proposes cutting the number of beds at the St. Luke’s campus, in the Mission, from over 200 beds to 80. As the St. Luke’s campus is by far the best-performing of CPMC’s hospital locations in terms of charitable care, the implications for CPMC’s ability to fulfill its obligations to the community, as set forth by the Board of Supervisors, are dire. While CPMC spent nearly 4% of its revenue on charitable care, the other three campuses in the system spent less than 1%. With CPMC, the city’s largest provider of Medi-Cal health care by far, currently slated to cut its capacity by more than two thirds, there is a clear threat to publicly funded health care for low- and middle-income consumers, and several of the assembled speakers at the press conference warned that the move would cause overcrowding at all of San Francisco’s hospitals, particularly San Francisco General.

Emily Jie-Ming Lee, Lead Organizer for the Chinese Progressive Association, discussed the CPMC situation by framing it in terms of the Occupy movement, and called attention to the fact that health care is now the prime barrier to a middle-class lifestyle. She briefly spoke of one woman who had to remortgage her home to pay for cancer treatments, and eventually had to default and lost her home. Lee noted that City residents rely on public insurance in greater numbers than the national average, a trend which only increase as federal health care reform measures take hold in the coming years. Lee called on CPMC to increase its share of charitable care in the City, and to equalize the burden among its campuses. With St. Luke’s seeing four times more charitable care cases than the other three campuses combined, “it does not speak well to equal access to care,” Lee said.

Paul Kumar, a spokesperson for the National Union of Healthcare Workers, called out CPMC for double-charging San Francisco taxpayers, in the sense that the system reaps the benefits of municipal tax relief while forcing customers to pay more out-of-pocket for services. Kumar made it clear, in no uncertain terms, that CPMC’s refusal “to do anything like its appropriate share of charity care” has the same effect on everyday taxpayer’s pocketbooks as would an actual tax increase, due to the stress it places on City finances. Given that CPMC is part of one of the most profitable health care systems in the state, Kumar argued, “claims of financial incapacity are laughable. If other hospitals, making far less money than CPMC, are able to do their share of charity care, why is it so unsustainable for CPMC?”

The various speakers made it clear that they were not against CPMC’s rebuild proposals in principle, but that they wanted to make sure that whatever steps were taken would keep workforce development, local communities, low-income consumers, affordable housing, and charitable care as priorities. Said Lee, “We want to see this project built and we want a good project.”

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