Health Care—Palomar hospital district plans to boost bond rating

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Used for Health Care

Moody’s Investors Service, a New York-based bond rating service, downgraded Palomar Pomerado Health Systems’ bond rating one notch after it reported a $28.2 million operating loss for the fiscal year ended June 30.

Norm Gruber, CEO of North County’s two-hospital system, said while the downgrading from A2 to A3 is troublesome, it’s still an A-rating. He said a multi-step plan to boost the negative rating is already in place.

Moody’s rates organizations’ credit worthiness by an 11-range scale, from Aaa to “below investment rate,” according to a published report.

Palomar Pomerado encompasses the 333-bed Palomar Medical Center in Escondido and the 199-bed Pomerado Hospital in Poway.

The total staff is 3,500.

Gruber said, according to his plan, Palomar Pomerado should break even by the end of fiscal 2001.

To achieve this:

- Palomar Pomerado is renegotiating all managed care contracts, including Blue Cross, Aetna and Secure Horizons, to obtain higher reimbursement rates for health care services rendered.

- It also is reworking its contract with Kaiser Permanente. The relatively new contract under which the district takes care of Kaiser patients contributed to its “sizeable loss” this fiscal year, Moody’s reported in its rating statement.

Gruber said he anticipates the contracts will be signed by January.

- The district will either charge for or no longer provide management services for Graybill Medical Group, an affiliated group of primary care physicians, Gruber said.

He added these services were “financially problematic,” costing Palomar Pomerado about $12 million in the last fiscal year, he said.

Moody’s reported the primary doctor may affiliate with Sharp Medical Group, but Gruber couldn’t confirm this.

- A plan to trim supply spending and labor costs is also in place, Gruber said. He noted these cost-savings do not equal layoffs or pay cuts for staff.

“We need to try to get our financial statement in a positive direction,” he said.

He said Palomar Pomerado , like all California hospital districts , is suffering from disproportionately low reimbursements from insurance carriers compared to the rising health care costs.

He said the downgraded rating will not affect the outstanding $114 million debt, because these bonds are insured.

Still, it’s essential to boost the rating, because the lower the rating, the more costly it is to borrow more money, Gruber explained.

The district will have to borrow a “substantial amount of money” to comply with Senate Bill 1953, requiring all California acute care hospitals to retrofit their facilities for earthquake safety.

He declined to give an estimated dollar figure, adding the exact amount won’t be known until mid-2001. He also said the project will be more complicated than originally estimated.

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Tobacco Money Toward Health: Dr. Robert Hertzka said he’s pleased, but won’t be happy until tobacco money is put toward improving San Diego’s health care climate.

The former president of the San Diego County Medical Society headed a recent rally with a coalition of advocates to persuade the next San Diego City Council to put San Diego’s tobacco settlement money into health care projects and not towards the proposed Downtown library project.

The meeting took place at Children’s Hospital