The constraints of running a public hospital became painfully clear to Russell Judd soon after he took over five years ago at Kern Medical Center.
With no ophthalmologist on staff to screen the retinas of babies who had been born prematurely, he ordered a $17,000 camera for taking images that could be forwarded electronically to an expert at UCLA. He figured this would help avoid the expense of hiring additional personnel.
Unfortunately, the camera didn't arrive for three months because of red tape surrounding KMC's equipment-purchasing procedures. In the meantime, the hospital spent $1.2 million sending a dozen young patients to UCLA for retina screenings.
Those kinds of limitations, not just on purchasing but also on hiring, were lifted on July 1, 2016, when KMC switched from being operated as a department of county government to being run by the Kern County Hospital Authority. The semi-autonomous organization was created in 2016 under legislation authored by state Assemblyman Rudy Salas, D-Bakersfield, and signed by Gov. Jerry Brown in September 2014.
That and other changes since Judd came aboard have yielded dramatic results. KMC posted net income of more than $11 million in the 2016-17 fiscal year after reporting a loss of $54,420 five years before. The hospital has, at the same time, expanded its services in the areas of oncology, orthopedics, cardiology and urology.
The turnaround isn't just good for the hospital and its patients. It's also good for county government, whose general fund was left to cover KMC's financial shortcomings.
COMBINATION OF STRATEGIES
Judd, who left the private sector to become CEO of KMC in December 2013, credits several strategies for his success at the helm. He said KMC has prospered under his watch because of a sharper focus on staffing levels, billing processes, purchasing efficiencies and renegotiation of contracts with medical insurers.
A key, he said, has been knowing when and where to add staff. He noted KMC has added the equivalent of 200 full-time employees, including 60 new physicians, during the last five years.
"We've had growth," he said, "but that growth has been in appropriate places."
Stephen Pelz, a member of the hospital authority's governing board, lauded Judd's efforts to put KMC on firm financial footing. In his view, the CEO has pursued the right revenue sources without losing focus on KMC's role as Kern County's safety-net health care provider.
"I think (Judd and his staff) have done a really good job at identifying revenue sources that the hospital could be pursuing — and aggressively pursuing — and tracking them," Pelz said. He asserted that the hospital's efforts to bring in medical experts as a way of improving its reputation for quality has, by itself, strengthened KMC's bottom line.
NEW PAYER MIX
State records show that, under Judd's leadership, KMC's financial performance has shifted in many respects, not the least of which is that revenue from patient care is up 31 percent during the last five years. Also, salaries and wages as a share of total expenses have declined by six points to 37 percent.
The hospital's expansion of services during the last five years is partly evident in its mix of public and private payers.
Inpatient revenues from managed care Medicare have doubled, while revenues from managed care Medi-Cal have jumped 155 percent. KMC's revenue from the more traditional models of both forms of government-funded care are also up, but not nearly as much.
Similar trends have played out in KMC's off-campus clinics. Outpatient revenue increases are highest in managed care Medicare, up 485 percent, and managed care Medi-Cal, up 516 percent.
Dr. Amir Berjis, a thoracic surgeon at KMC who also serves on the hospital authority’s board of governors, attributed much of the hospital’s turnaround to wise decisions about what services to expand.
“It’s understanding the numbers, understanding what we can offer and not offer ... and slowly building beyond that,” he said.
Berjis also credited the hospital's move toward administrative independence, saying the change "allows us to make decisions far sooner than we could before."
Another member of KMC's governing board, Aera Energy LLC President and CEO Christina Sistrunk, said she has seen Judd and his executive team put in hard work to make the hospital a success.
"They’ve been consistently focused on ensuring the facility is financially viable while delivering improved patient care and working conditions for the staff that delivers that care," she wrote by email. "It is difficult to deliver all three of those things at the same time, but they have made great progress so far."