HOSPITAL URGED TO DIG IN CONSULTANT: MAKE CONTRACTS LIKE BLUE CROSS.

Byline: Karen Maeshiro Staff Writer

LANCASTER - Antelope Valley Hospital should terminate its contract with High Desert Medical Group if the group does not agree to pay the hospital more money to take care of its patients, a consultant said.

The Camden Group, hired to help the hospital stem financial losses, recommended the hospital renegotiate its contracts with High Desert Medical Group and Kaiser Permanente to match the more favorable rates it has with Blue Cross.

``The Blue Cross contract rate structure should be used as a guide for all other providers,'' the consultant said in a report. ``The foundation of the AVH turnaround plan is successful renegotiation of the HDMG and Kaiser contracts. The potential net revenue increase during the first year if successful is $8.6 million to $11.5 million.''

``Aggressive contracting'' by health plans has led to underfunded insurance contracts with Kaiser and High Desert Medical Group, and the consultant urged the hospital to take a strong stance in negotiations with other groups, the report said.

``With regard to other (health maintenance organization and preferred provider organization) contracts, should payers not agree to increase to Blue Cross rates, AVH can take the strong position of terminating those agreements,'' the report said.

The Camden report said rate reductions were made in contracts with Kaiser in 1999 and 2000, and with High Desert Medical Group in 2000 and twice in 2002, although that is disputed by a former top administrator.

Hospital officials said those reductions resulted in a loss of $12.7 million, but former Chief Executive Officer Mathew Abraham, who headed the hospital in those years, denied such changes were made.

``That is absolutely, unconditionally false. When you negotiate, you may reduce that service by two dollars and increase another by four. Overall, there was absolutely no reductions,'' Abraham said. ``I'm willing to stake my reputation that those numbers are wrong. They are incorrect.''

Abraham said there were at least four rate increases with Kaiser and that the hospital between September and December 2001 went four months without a contract with High Desert Medical Group because officials there would not agree to an increase.

Hospital spokesman Ed Callahan said the hospital has been in negotiations with High Desert Medical Group and Kaiser and said from all indications, ``everything is moving well.''

Callahan said the hospital is using the Blue Cross contract as its benchmark. High Desert Medical Group's contract expires May 1, Kaiser's July 1.

``The hospital can't operate a managed care contract knowing it is a losing contract,'' Callahan said. ``We are mutually attached. We need to make sure it's good. We need to cover our expenses, they need to cover the lives of their patients and insured people.''

High Desert Medical Group, where hospital director Dr. Don Parazo works, serves more than 100,000 people in the Antelope Valley, said Rafael Gonzalez, the group's vice president of operations.

``We would not be in a position to provide immediate quality care to our members if (the hospital) did not keep our patients best interest in mind. (The hospital) is sensitive to the communities needs and would never force our members to seek care outside the AV area,'' Gonzalez said in an e-mail statement. ``That is why for over 20 years HDMG and (the hospital) have relied on a `win win' approach to contractual relationships. With regards to rates, we actually reimburse (the hospital) more than some of the tertiary centers in Los Angeles.''

Kaiser has about 78,000 members in the Antelope Valley. Kaiser officials declined to comment on its contract with Antelope Valley Hospital or the status of negotiations.

The Camden report compared Blue Cross, High Desert Medical Group and Kaiser in terms of average net revenue per patient day over the past five years and found that Blue Cross revenues have increased while the other two are lagging.

Out of the hospital's 50 or so managed care contracts, the majority of net revenue comes from Blue Cross, High Desert Medical Group and Kaiser, along with Medicare and Medi-Cal, the report said.

They accounted for $47.8 million, or 71 percent, of the hospital's total net revenue during the period of July to November 2003, the report said.

Between June and November 2003, the average reimbursement per patient from Medicare was $9,146; Medi-Cal, $4,819; Blue Cross, $5,794; Kaiser, $4,477; and High Desert Medical Group, $3,828, the report said.

``High Desert Medical Group and Kaiser must be the immediate focus of board and management,'' the report said.

Karen Maeshiro, [phone]

karen.maeshiro(at)dailynews.com