Hospital CEO: Why we need to close Obstetrics

Posted on January 15, 2014 by Sonoma Valley Sun

Sonoma Valley Hospital CEO Kelly Mather has recommended to the Sonoma Valley Health Care District Board the closure of the Hospital’s Obstetrics service in 2014. Following are excerpts from her report presented to the board last week.

Sonoma Valley Hospital must continually and conscientiously address the challenges of a rapidly changing health care environment in order to create a financially stronger and more sustainable Hospital. The cost of running a full-service inpatient, acute care hospital continues to increase and SVH has responded by reducing expenses significantly over the past four years.

Due to lower than expected volumes and a changing payer mix forecast for 2014, SVH is again reviewing and reducing costs of hospital operations. The result will reduce expenses in the following areas: Surgery, Med/Surg, Ancillary Services, Environmental Services, Dietary, Physicians and Information Technology. Reductions in these areas do not result in layoffs.

In the past year, after months of careful assessment of our future, we adopted a new strategic plan. This plan determined that SVH has 11 major service units. One unit, Emergency, has a very high community demand and it has been agreed that providing Emergency Care is our first priority. This unit is very costly for a small hospital and it is supported by the annual parcel tax. Five of the eleven of our service units currently have a positive margin. They are: Surgery, Home Care, Skilled Nursing, Outpatient Services and Rehabilitation.

There are four service units that are close to break even, but provide a return on the investment by providing important foundational services. They are: Inpatient (ICU/Med/Surg), Occupational Health, Wellness and Special Procedures.

The last service unit, Obstetrics, has had questionable viability for many years. Obstetrics currently loses approximately $86,000 per month and has very low demand from our community. Due to the necessity for future financial health and after exhausting all possible avenues to increase the volumes to make this service viable, we recommend Obstetrics be closed. This component of the plan requires board action.

Using OSHPD obstetrics data for SVH’s combined service area, the volumes are as follows:
• In 2013, SVH had 154 births, or an average of 12 per month.
• In 2012, SVH had 156 births, or an average of 13 per month.
• In 2011, out of a total of 379 births in the market, SVH had 181, or an average of 15.1 per month.

A viable Obstetrics program typically has 50 births per month.

Some have asked, “Why can’t we market the program and save it?”

For over five years, SVH attempted to recruit a female OB to increase the volumes. Each candidate declined due to the fact that there is simply not enough demand (or births) in the Sonoma Valley area for a sustainable practice. Kaiser Permanente has 20 percent of the market share, which is unlikely to change much. Finally, many patients choose female or out of area Ob/Gyn’s which accounts for even lower volumes.

SVH has maintained a quality OB program, but at a very high cost. The Hospital’s ability to adjust its services to reflect decreasing demand is restricted by existing regulations. Title 22 regulations for the State of California require two OB-competent RNs to staff the department when patients are present. Conservatively measured, 15 days a month two RNs are needed each shift and the annual salary and benefit cost to keep this service unit open for 13 patients a month is over $1.43 million per year.

Additionally, competency training and maintaining best practices for all of the OB RN’s is very costly.

Further, an Obstetrics Department with an average monthly census of 13 has a difficult time attracting and retaining nurses. The regulatory requirements for maintaining an Obstetrics department in an acute care hospital do not allow for flexibility or reducing nursing labor expenses.

For the past few years, the hospital has elected to show the OB program as financially supported by the Medicare Disproportionate Share (DSH) payment. Even with the DSH payment, Obstetrics department still does not have a positive financial contribution. We need approximately 23 births per month to break even.

The Medical Executive Committee and the Chief Medical Officer support closure of the department based only on current financial impact and lack of patient demand. The physicians clearly state that SVH does not have any quality concerns, but are aware of Obstetrics not having enough patients for sustainability. The physicians are also aware that many hospitals, especially small ones with local Ob options, do not offer Obstetrics due to the regulations and costs.

The discussion of the possible closure of this service was discussed at length by the Medical Executive Committee. While the physician leadership does not want to close a service that is important to their colleagues, the Medical Executive Committee said they believe that the hospital’s future financial viability is of more importance than keeping a service with very low patient demand and voted to support this recommendation.

Currently there are 14 staff members designated specifically to the OB unit. Should the decision be made to close the OB unit we would offer a retention bonus and the usual severance. The SVH staff members are aware of this recommendation and the response has generally been one of understanding. There are differing opinions about what we could have done to “save OB” but almost every suggestion has been tried.

The move to close the service would take between three and four months, based on what other hospitals have experienced. This allows time to communicate the decision to the community and allow prenatal women the time to find alternate delivery options, which are currently available within the area.

New policies will be developed regarding protocols when women in active labor or women with obstetrical emergencies arrive in our emergency room. Nurses and physicians both will need to be trained in neonatal resuscitation, and nurses would attend deliveries at a high-volume hospital to gain additional training. In addition, if the service is closed, we will need to take plan this to the Sonoma County Board of Supervisors.

The community has been informed that this recommendation is being presented in early 2014. We have spoken candidly with many stakeholders and laid the facts out for input and discussion with organizations and community members, such as the Health Center, throughout the month of December. Everyone thinks it is an unfortunate situation, but most seem to understand that the hospital must provide services that are in demand and cannot sustain this program to the detriment of the vital services that are highly utilized.

Alternatives to closing the Hospital’s Obstetrics Department include: Keep OB open and cut other services; and/or obtain a philanthropic donation of at least $4 million to maintain the Obstetrics service at Sonoma Valley Hospital for the next five years.

This has been part of an ongoing conversation the Hospital is having with the community. The education of the community about the hard choices that must be made to maintain a hospital in a small town has been going on for years and will continue as we adapt to the rapidly changing health care environment.

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