Mar. 31--Mercy American River Hospital, emerging as the latest casualty of an ever-tightening health care marketplace, will close its doors on June 30, officials with the hospital's financially troubled parent company said Thursday.
'Historically, (American River) has served an important role in its community, but we feel for a number of reasons that our best option is to close it,' said Michael Erne, chief executive of Mercy Healthcare Sacramento, which acquired American River in 1991.
American River Hospital has served patients in the Carmichael and north Sacramento area since 1962. Mercy operates the facility as a kind of adjunct facility to its Mercy San Juan Hospital, which is located less than five miles away. The two facilities are licensed jointly as a single hospital.
Operating two separate sites just doesn't make good financial sense, Erne said.
'These are two hospitals that in many ways already operate as one,' he said. 'We simply can no longer sustain both facilities and we believe we are better off consolidating.'
Mercy, the region's largest hospital system, anticipates the closure of the 95-bed American River will improve the system's operating performance by about $2 million annually.
The closure will cost some 300 Mercy employees their jobs, but the hospital system will offer each displaced worker a comparable position elsewhere at area Mercy hospitals or at its Rancho Cordova headquarters, spokeswoman Jill Dryer said. Mercy currently has 400 job openings to fill systemwide in the Sacramento area, she said.
Mercy, which had a systemwide operating loss of $28.4 million in fiscal year 1998-99, is deep into an effort that seeks to shave costs and increase efficiency across the board. That effort will continue as the system works to restore its financial health and cope with shrinking reimbursements from health insurers and the federal goverment's Medicare program, rising medical costs and the growing cost of providing care to those with no form of health insurance, Erne said.
Further hospital closures -- the system runs four other Sacramento facilities -- are not currently part of Mercy's turnaround strategy, he said.
Hospitals nationally have fallen on hard times as medical costs have spiraled out of control -- prescription drug costs alone have jumped by double digit percentages for the past several years -- even as reimbursements from both private and public health care payers have diminished.
The situation has been particular dire in recent years due to the Balanced Budget Act of 1997, which sought to slash $116 billion over five years from the reimbursement rates the federal Medicare program pays to providers. Some of that money -- about 10 percent -- has since been restored due to a 'refinement' bill passed last year.
Still, by 2002, the American Hospital Association projects that 60 percent of the nation's hospitals will be losing money on its Medicare business. Combined with other pressures, the result is that about 40 percent of the nation's hospitals are in 'serious financial trouble,' said Rick Wade, the Washington, D.C.-based group's senior vice president.
'The short term results are clear: hospitals are cutting back on services and some are having to close,' he said.
Some 38 general acute care hospitals closed in 1997, the most recent year for which that information is available, according to the federal Office of the Inspector General. About the same number of hospitals closed in each of the two prior years.
Conditions are no less dire in heavily managed-care penetrated California, where more than half of the state's hospitals were in the red in the 1998-99 budget year, according to the California Healthcare Association.
'Things are as bad as I've seen them,' said Barbara Jones, the Sacramento-based group's senior vice president for finance and economics. 'Hospitals are under extreme financial pressures. We've seen closures of hospitals and closures of emergency rooms and this is truly based on the fact that the economics are not sustainable.'
American River's closure is Sacramento's first hospital closure in a decade, although the city has had some close calls in recent years.
Sutter Health and Kaiser Permanente each announced plans to close area hospitals about five years ago, but later reversed their decisions.
The only Sacramento hospital casualty to date had been Sacramento Community Hospital, which closed in 1987, reopened shortly afterward, and then closed permanently in 1990.
The spectre of closure first arose at American River Hospital in 1993, when usage forecasts showed that Carmichael did not need two full-service hospitals. Mercy's leaders thoroughly explored closing the hospital at that time, but compromised instead by combining many of the hospital's acute care services with those provided at Mercy San Juan.
Since 1994, most of the hospital departments at American River and San Juan have been merged under single leadership and staff have floated between the two medical campuses. Following the medical staff consolidation, American River physicians began shifting their practices and offices to the San Juan campus.
The patients followed, according to Mercy.
American River, which once had patient volumes similar to Mercy San Juan, has declined to the point that it can no longer sustain itself economically, according to the hospital system.
But while American River declined, Mercy San Juan expanded in several areas.
The hospital opened a women's and children's unit in 1991 and a new cardiac surgery program the same year. In 1992, San Juan added a radiation oncology center.
Most recently, Mercy completed a 69,000 square foot expansion to the San Juan campus that included an expanded emergency deparment and new trauma center. The emergency department was designed to handle 63,000 patient visits a year -- more than the combined capacity of American River and the old San Juan emergency departments combined.
'We built for the future,' said Mercy's Dryer.
Mercy officials will hold several neighborhood meetings to explain its decision to close American River during the month of April.
What will become of the American River hospital campus is not yet clear. For the forseeable future, Mercy will maintain non-acute services, such as its cardiac care management program and its educational women's health programs, at that site.
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