Kaweah Delta to form nonprofit arm to employ docs, receive higher reimbursement


By Reggie Ellis @Reggie_SGN

VISALIA—Health care has dramatically shifted its philosophical and financial focus from caring for those in poor health to caring for the healthy to prevent poor health. Since the Affordable Care Act was implemented in 2010, preventative medicine has been central to how hospitals and clinics care for low income residents who suffer from chronic illness and disease at a greater rate than the rest of the population.

“Health care across the country is rapidly changing and while this presents challenges, it also presents great opportunities,” said Gary Herbst, CEO of Kaweah Delta Medical Center. “Hospitals and physicians are no longer called to just care for people who are sick or injured; we are now asked to care for the health of an entire population.”

Kaweah Delta Health Care District, the public entity that operates the hospital, is now shifting some of its services into alignment with how doctors are paid and how the federal government reimburses health care facilities for the care they provide.

On April 3, the Kaweah Delta Health Care District board of directors decided to move forward with a plan to convert two of its clinics to federally qualified health centers (FQHC) under the umbrella of a new nonprofit health care entity. Under the plan, Kaweah Delta’s Family Medicine Clinic and its Urgent Care Center on Court Street will become Sequoia Health and Wellness Centers. As FQHCs, these facilities will have access to benefits that current Kaweah Delta clinics do not, such as the ability to employ physicians, sponsor visas for foreign graduates, offer federal loan forgiveness for physicians, receive federal and state grants and receive a higher rate of reimbursement for residents insured by Medi-Cal and Medicare. Kaweah Delta made the decision after a year of meeting with key health care providers in the community.

“We believe that under the FQHC model, we will be able to better attract and retain physicians and providers and further our efforts in creating a highly-coordinated and integrated healthcare system, with the ultimate goal of elevating the total wellness of Tulare County residents,” Herbst said in a released statement.

The new health centers would be operated by the Sequoia Health and Wellness Centers, a nonprofit arm of Kaweah Delta. The nonprofit will be run by an 11-member board comprised of six patients and five community members and overseen by a CEO. Kaweah Delta’s board appointed both at its April 3 meeting. The CEO of Sequoia Health and Wellness Centers will be Ryan Gates, a clinical pharmacist and director of population health for Kaweah Delta. Community board members include Brent Boyd, CEO of Key Medical Group, Mandeep Bagga, director of psychiatry for Kaweah Delta’s residency program, Teresa Ramos, community outreach director of Pro-Youth, Prabjot Kaur, VP of Union Bank in Visalia, and Carol Cairns, retired assistant city manager for the City of Visalia. Four of the patient board members have been patients at either the Family Medicine Center or Urgent Care. The other two are patients of the Chronic Disease Management Center.

All of the Centers’ services, which will include primary care, as well as specialized care for people with chronic illnesses—such as diabetes, arthritis, heart disease, asthma, etc.—will be open to the entire community, regardless of their ability to pay.

“The public won’t really notice the difference, except there will be a new name on the building,” Herbst said.

Kaweah Delta filed its application for its nonprofit on April 12 with the Health Resources and Services Administration (HRSA), an agency of the U.S. Department of Health and Human Services which oversees health care to medically underserved and vulnerable populations. If approved, Herbst estimates that the Sequoia Health and Wellness Centers would be operational by Jan. 1, 2020. Kaweah Delta has already received more than 40 letters of support for their application from community leaders and organizations, both public and private, including the majority of other FQHCs operating within Tulare County, with the exception of the largest.



Family HealthCare Network (FHCN) operates 32 health centers in three counties and had nearly 822,000 visits in 2018. In a March 19 letter FHCN CEO Kerry Hydash opposed Kaweah Delta’s application because the proposed sites are each less than a mile and a half from existing FQHC’s owned by FHCN and Omni Health Center locations. There are also seven FQHC’s already serving Tulare County, including Omni Health Center in Visalia, Altura Centers for Health in Tulare, Aria Community Health Center in Dinuba and Porterville, Avenal Community Health Center in Tulare, County of Tulare Health Centers in Visalia, Farmersville, Tulare and Dinuba, and Dinuba Community Health Center. Hydash stated there could be federal funding issues when health centers are located within a half mile of one another or if more than 75%of the low-income population is already receiving their health care from another health center. Combined, the eight FQHC organizations already serve two-thirds of the low income population. If there was a need for additional FQHCs, Hydash stated it would be in areas further from Visalia, such as Kaweah Delta’s Rural Health Clinics in Exeter, Lindsay and Woodlake.

“While we value Kaweah Delta Hospital as a community partner in care, our review of their proposed project suggested that it was not aligned with the intent of HRSA’s program or the specific goals outlined in HRSA’s current grant opportunity,” Hydash said in a released statement. “Ultimately, we want to ensure such grant dollars support care for vulnerable populations as intended by the program, rather than supplement existing services.”

Hydash went on to write that the reasons Kaweah Delta cited for applying for FQHC status could be handled through a partnership with FHCN or other FQHCs. “Family HealthCare Network has continued to voice a willingness to collaborate with you on such initiatives,” Hydash stated. “Family HealthCare Network believes KDDH can accomplish everything you are hoping to accomplish by partnering with FHCN and other robust FQHC systems in the area.”

Kaweah Delta disagrees based on the number of low income people served by its hospital every day. As part of the application, Kaweah Delta must also demonstrate an unmet need in the community.

FQHCs also receive a higher rate of reimbursement for MediCal patients. Fifty-six percent of Tulare County residents are covered by MediCal, the highest of any county in the state. Herbst said that 80% of the people admitted to the hospital are on MediCal which tend to be older residents on fixed incomes who are dealing with more health issues and more serious health challenges. Kaweah Delta handled more than half of all MediCal hospital visits in Tulare County and two-thirds of Medicare visits in Tulare County. About 70% of patients being seen at the Family Medicine Clinic and Urgent Care are covered by MediCal. Herbst said the Family Medicine Clinic lost $1 million last year because of the low rate of reimbursement for MediCal patients to non-FQHC clinics.

“We are being reimbursed $40 for a $60 visit,” Herbst said. “By turning these clinics over to a nonprofit we can still provide the service without losing money.”



By not losing money on nearly three-quarters of the patients coming to these two clinics, Herbst said the savings realized by the hospital could go toward seismic improvements needed to replace the Mineral King wing of the hospital with new construction that would bring the entire hospital into compliance with new earthquake standards by 2030. An analysis performed by the Rand Corporation found that California hospitals would need $34 billion to $143 billion statewide to meet 2030 California seismic safety standards. Kaweah Delta would also not be the first public hospital district to journey into FQHCs. In 2013, Hi-Desert Medical Center applied to create a nonprofit arm to operate federally funded clinics and was awarded FQHC status.

“The more we learn, the more it seems that we will have to replace the 221 inpatient beds because the structure in which they are located does not meet seismic compliance. Whenever feasible, we plan to adopt an incremental approach to building new facilities to lessen the financial impact to Kaweah Delta and the community that supports it,” Herbst said.

Herbst said Kaweah Delta has made great strides in recruiting physicians through its residency program, which allows doctors to complete their on-the-job training through its own clinics and through its partnership with Visalia Medical Clinic. The one thing Kaweah Delta can’t do is employ those physicians.

California is one of five states prohibiting hospitals from employing doctors. The ban against the corporate practice of medicine (CPM) dates back to the 1930s when there was a growing concern over hospital administrators overriding physician decisions about patient care based on cost. The idea was that keeping doctors independent of hospitals would result in better patient practices. The California Supreme Court in 1932 determined that it is impossible to separate the regulated practice of care from the business practice because “either one may extend into the domain of the other,” according to a report by Health and Human Services. The report also cites a 1938 decision that letting a corporation hire and control physicians would lead to “divided loyalty and impaired confidence” between the interests of the corporation and the primacy of the patient’s needs. The only exception to the rule in California are hospitals operated by the University of California, such as UCLA and UC San Francisco.

“Central to this new focus on population health is the need to make deep investments in improving primary and preventative care programs to keep people well and out of the hospital, particularly for the most vulnerable in our community,” Herbst stated. “We have worked to answer that call through the development of primary and specialty clinics in Tulare County and the launch of our physician and pharmacy residency programs, but we are always looking for ways to better meet our community’s healthcare needs.”

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