Is Stanford Trying to Put Children's Hospital Oakland Out of Business?
The new Lucile Packard Children's Hospital in Emeryville could siphon off wealthier patients and thus make it harder for Children's Hospital Oakland to serve low-income residents.
Children's Hospital Oakland has, for many years, operated as a "safety net" institution that sees primarily low-income patients and does not turn away the uninsured. And unlike the majority of children's hospitals across the country, it is freestanding a private, nonprofit hospital that is not part of a larger system. That means that the income Children's receives from the small percentage of patients who are privately insured is especially critical to the hospital's sustained financial health and continued efforts to serve all in need regardless of their immigration status or ability to pay.
So when word spread recently that Lucile Packard Children's Hospital, part of Stanford Medicine, was expanding its presence in the East Bay, some Children's Hospital Oakland and Alameda County officials questioned Stanford's motives and expressed concerns about how a new clinic, now open in Emeryville, could hurt the existing system.
"They are another great institution," Bert Lubin, president and CEO of Children's Hospital Oakland, said of Lucile Packard. "In this particular case, though, I still question, why did this need to happen? I feel that we provide the services that they are offering there, and if our goals as children's hospitals are for the health of children, was this really for the health of children or was this really to capture a part of the market?"
Alameda County health officials echoed this same fear: Is Stanford looking to siphon off privately insured families from Children's Hospital Oakland, which already has a uncommonly high rate of government-sponsored patients?
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At Children's Hospital Oakland, about 90 percent of primary care patients are government sponsored, primarily through Medi-Cal, the state's medical welfare program, and in 2012, nearly 70 percent of emergency department cases involved government-sponsored patients. Children's Hospital Oakland, in a 2012 community benefit report, estimated the value of its charity care, meaning free care to uninsured and underinsured patients, to be $10.8 million (and $146 million in government-sponsored healthcare). The high rate of Medi-Cal patients translates directly to financial losses. The hospital's profitability report cited a net loss (after operating costs and reimbursements) of $15 million in fiscal year 2013 and $17 million in fiscal year 2012 for its Alameda County patients.
By contrast, Lucile Packard's finances are much more stable because the majority of the hospital's patients are privately insured. Only 45 percent of primary care patients are in Medi-Cal at Lucile Packard about half as much as at Children's Hospital Oakland.
"I welcome Packard's interest in East Bay children and I'm deeply respectful of their skill and talent and sophistication," said Alex Briscoe, director of the Alameda County Health Care Services Agency. "I am concerned that any service focused on commercial pay in Emeryville and Berkeley and more privileged parts of Alameda County could have the unintended consequence of destabilizing our critical safety net at Children's [Hospital Oakland]."