Mercy Comes First : Hospital Determined to Treat All Comers Despite Troublesome Cost Increase

When colleagues at Mercy Hospital refer to Dr. Stan Amundson as “Dr. Mercy,” they are acknowledging not only his thorough medical knowledge but his effort to apply it according to the philosophy of the Catholic order of nuns that founded the hospital 96 years ago.

Amundson’s approach symbolizes the order’s healing mission to provide top-flight care and compassion for anyone, regardless of income, who enters the hospital seeking treatment--in particular for those 30,000 patients, including 20,000 low-income Medi-Cal recipients, who visit the Mercy Clinic each year.

The heavily-subsidized clinic operates under the teaching and charity traditions of the Sisters of Mercy, traditions that account as well for Mercy’s nationally-respected training program for interns and residents.

Those same traditions of compassion for individuals underlie the daily visits that all patients receive from members of the chaplaincy services department, a large staff of counselors--Catholic and non-Catholic--who serve various roles, from simply providing conversation to acting as ombudsmen if necessary to unravel a problem.

No other private hospital in San Diego attempts to provide the special clinical services for the poor--many local hospitals do not accept any Medi-Cal patients--as well as the doctor training and other obligations that Mercy believes are central to the healing mission of the Sisters of Mercy. The fulfillment of most of those obligations generates no profit for the hospital and must be subsidized from revenues in other areas.

For years, Mercy has kept to the narrow path, refusing to alter its mission, its vision of caring and treatment, and its low profile.

But the new world of medical economics--with intense pressure on hospitals to develop prepaid medical-care businesses and maximize profits--threatens the ability of Mercy administrators and doctors to maintain the mission of teaching and charity and remain a first-class medical center, San Diego’s largest.

With a $100 million annual budget, Mercy runs a 523-bed hospital, the county’s top-rated trauma center and emergency room, the clinic and a host of other medical programs employing 840 nurses and 2,000 total workers. It posted a $2 million operating profit last year after losing $3 million in 1984. But the hospital’s goal is a 4% annual profit on revenues--a figure far higher than those achieved during the past several years--to keep the physical plant current and buy state-of-the-art equipment.

“We’re struggling to keep the (Sisters of Mercy) commitments, especially for primary care at the clinic, because the financial screws are being tightened” by limited government and private insurance reimbursements, said Greg Schnepple, Mercy executive vice president and chief operating officer.

“Other hospitals don’t have to factor in the additional obligations and care that Mercy gives,” said Sister Joanne, former Mercy president and now head of a new hospital foundation that hopes to provide an endowment cushion to ease the business pain. One of seven Catholic hospitals in California and Arizona under the order’s Mercy Health Care organization in Burlingame, Calif., Mercy receives no funding from and is separate from the Catholic Diocese of San Diego.

Mercy has begun aggressive marketing programs, attempting to attract more full-paying patients and to develop more profit-producing services, particularly through contracts with health plans to feed patients into its facilities.

In a move that is as symbolic as it is visible, Mercy has placed large neon signs for the first time on top of its hospital tower to advertise its name. It also will sponsor the San Diego Padres post-game show this upcoming baseball season.

Yet Mercy administrators say the hospital will continue as long as it can to accept anyone regardless of ability to pay, though they admit such a commitment increases expenses and cuts into profits no matter how attentive to costs the administrators may be.

“Stan Amundson cares about patients; he knows them all by their first name,” said Dr. Charles Miller, director of Mercy’s medical training program and Amundson’s boss. “But the one thing he doesn’t care about at all is their finances.”

The state of those finances has some of the hospital’s friends fearing for its future.

“If Mercy has to close (the clinic and other special services), then the best care in San Diego goes,” said Dr. Sheldon Hendler, a former Mercy chief resident and now in private practice. “It’s sad that a hospital devoted to the best principles of medicine finds it increasingly difficult to operate that way.”

Seven members of the Sisters of Mercy order left Ireland in the early 1850s, traveling by ship across the Atlantic to Panama, by mule train across the isthmus, and then once again by ship up the Pacific Coast to San Francisco, where they began ministering to Gold Rush miners.

In 1890, with $50 between them, two sisters arrived in San Diego and established St. Joseph’s dispensary at the corner of 6th Avenue and Market Street--the first hospital in San Diego. They later moved to near the present Hillcrest site, setting up a school of nursing in 1903 and changing the hospital’s name to Mercy after completion of a large new main building in 1924. (The present buildings were constructed in 1966 and 1982.)

“The Sisters of Mercy sort of got into health by accident, since with diseases like cholera and tuberculosis, nuns had less to lose--they had no family--and others did not want to risk death,” said Sister Mary Jo Anderson, Mercy vice president. “So the tradition has always been of someone akin to a guardian angel watching out for you, which is very patronizing but also very reassuring.

“We’ve always stood for good nursing care and as good supervisors of quality medical care.”

At one time, Mercy was the only major hospital in San Diego, and many native San Diegans claim the hospital as their place of birth.

While the hospital’s traditions remain Catholic, a majority of both its patients and staff today are non-Catholic. All rooms have a crucifix and a picture of Jesus on the wall, but they are easily removed if desired and, in any case, are not as important as the philosophy of treating every patient as an individual, Sister Joanne said.

A sister no longer supervises every floor at Mercy--in fact, non-Catholic lay administrators run the $100-million-a-year operation--but the philosophy is still strongly felt, particularly in the clinic and the teaching program.

The Mercy Clinic was originally known as the Guadelupe Clinic in the barrio area of San Diego, “set up to alleviate suffering for the poor and less fortunate,” Sister Joanne said, not as a teaching facility as are those at public hospitals such as the UC San Diego Medical Center.

Dr. Alfred Cantoni, a 53-year member of Mercy’s attending staff before retirement last year, recalled donating his time once a month to serve at the old clinic in pre-World War II days, lining up schoolchildren by the hundreds in a community gymnasium to remove tonsils.

Moved to the hospital site in 1961, the clinic continues to attract a large percentage of Latino residents. In addition, until operating monies began to shrink in the mid-1970s, the clinic actively recruited patients from Tijuana as part of its charity function.

“We still take care of lots of Mexican nationals whom we accepted before funds really got tight,” said Amundson, assistant director of medical training. “And we still take new ones in an emergency.”

“I try to refer new undocumenteds to the Chicano Clinic and other local organizations, but usually I cannot find myself turning a person away on the first visit,” Wilson said. “When a baby is eligible for Medi-Cal (as California-born) but the mother is undocumented and fears deportation if she applies for benefits, I will see the baby until its condition is stabilized. And unlike many other places, we won’t call the Border Patrol, so the people feel safe.

“That’s why we reflect the philosophy of the Sisters. Who do you turn away? The challenge for us is, how much uncompensated care can we give without going broke?” The clinic today is subsidized by about $1 million a year from other hospital operations.

The teaching program is closely tied to the clinic because the 65 or so interns and residents provide much of the clinic’s care. Mercy received 600 applications from graduating physicians at 101 of the country’s 128 medical schools last year for 21 openings. The doctors who complete the multiyear Mercy program score in the top quarter percentile of subsequent tests for specialty accreditations given to applicants nationwide.

“The teaching program elevates the level of care and gives new doctors experience in treating people at private hospitals, to treat them as individual people,” Dr. Miller, the program’s director, said. The training involves several joint programs with the UCSD Medical Center.

“It took a lot of looking around to find a place like this, with an academic environment and a commitment to care for all patients as individuals in a setting where you don’t just make a profit, or just run someone through a lot of tests,” said Dr. Stephen Carson, director of pediatrics. Carson, who did his residency at UCSD Medical Center, praised Mercy for its emphasis on “the dignity of the patient.”

But there is a growing realization at Mercy that the clinic and teaching programs--the heart of Sisters of Mercy philosophy--would be reduced or eliminated, if necessary, to keep the hospital going in a real fiscal crunch. The hospital’s administration must walk a fine line between fiscal solvency and the healing mission of its founders.

Amundson said that he can’t recall a single instance of pressure being placed on Mercy doctors by administrators to short-change treatment or discharge patients inappropriately. And Dr. Thomas Kravis, director of emergency care, said that Mercy continues to receive poverty-level emergency patients routed to the hospital from other medical facilities that do not want non-paying patients, despite the fact that such referrals violate state and federal law.

“That is very impressive (on the part of administrators) considering the financial demands put on the institution,” Amundson said.

But by the same token, new doctors are now taught more precisely how to understand when a medical test is not needed as well as when it is justified. “We’re more conscious that costs are higher and that funds for people without means are getting less,” Kravis said.

Increasingly, government and private medical insurance plans no longer accept fee-for-service (cost-plus) arrangements but insist upon flat charge contractual arrangements.

In Mercy’s case, chief operating officer Schnepple said that such payments cover only 70 cents of every $1 cost incurred by the hospital, a far higher ratio than other medical centers face, especially those that emphasize wealthier patients. Schnepple said his former employer, a private hospital in Santa Barbara, “would hit the roof” if it did not collect at least 80 cents on every dollar billed.

“There’s only so much cost-cutting you can do at a place like Mercy,” Schnepple said. “This hospital is more sensitive to questions of care, and to its employees, than some other places.”

The alternative to cutbacks is to generate new business, which Mercy is now attempting to do in a major way. “Until recently, we had no active marketing, no comprehensive planning, no provider contracting (flat fee contracts),” said Dick Hansen, director of marketing. For years, the Sisters of Mercy--always reluctant to promote themselves--were able to rely on the hospital’s reputation for excellence to attract individual business. But now Mercy faces the fact that patients belong more and more to health organizations that will choose hospitals for their members based on contracting.

Today, Mercy has contracted with 39 health organizations to provide all or part of the medical services needed by members of the organizations. It has set up joint-venture agreements with physicians for services such as osteoporosis (soft bone) detection for women.

Mercy has been helped in its move to boost profits partly by its long-standing reputation and by having one of the shortest length of patient stays among hospitals nationwide. Its tradition for extra care includes adding neighborhood health support groups and pregnant teen counseling to services offered to group health organizations.

Its standards of care also helped offset its Catholic non-abortion policy as a detriment in bidding for a major new state contract to cut health costs by placing San Diego Medi-Cal recipients into health maintenance organizations and paying flat rates to the organizations. Under state law, persons qualifying for Medi-Cal are entitled to abortions.

Mercy wanted to participate with a new organization of its own in order not to lose the majority of its 20,000 Medi-Cal patients to non-Mercy affiliated doctors and therefore to other hospitals. Under the agreement tentatively worked out with the state, the Mercy Health Care Network will make a referral telephone number available to any person inquiring about an abortion. The number will connect to a subcontractor who will provide abortion information.

“We won’t make the call, however,” Sister Mary Jo said. “And we don’t want any money crossing our palms (from the state contract) that would be used for abortions, even though it would be a pass-through. Instead, the state will withhold a part of our funds and pay the (abortion) provider directly. But it is (because of) our reputation and the willingness of the state to recognize our value that (a compromise) was worked out.”

The abortion question shows the additional difficulties that Mercy faces in competing economically because administrators must combine business with Sisters of Mercy philosophy, Richard L. Keyser, president and chief administrative officer, said. Mercy has dropped several programs, including a dietetic internship training program, but only after it decided they were too costly and not central to its mission or that they could be obtained elsewhere.

And while Mercy has traditionally maintained a well-staffed hospital, administrators are looking at possible ways to lower overhead. About 175 employees are being offered early retirement. However, at the same time, the hospital provided $1.5 million to its employees in December separate from normal bonuses after a salary survey showed that Mercy ranked lower in employee pay among area hospitals than administrators liked.

“At our board meetings, we talk a lot about the effects of our economic decisions,” Keyser said. “The sisters want to know how the Mercy style of care will be affected, how any cuts in staffing would affect the work environment and the careers of individuals. The more business-oriented people may be quicker than the sisters in wanting to act.”

In an effort to strengthen the economics of their hospitals while maintaining their mission, a merger has been announced between the Bulingame organization and the Sisters of Mercy of Auburn, Calif., who operate four Catholic hospitals in California. Effective Oct. 1, the new 11 hospital group will maintain present administrators but have a common board of trustees and be able to take advantage of volume buying in offering larger prepaid health plans.

The business versus mission dilemma is what Carol Stewart, director of the Mercy Health Care Network, called “the fact that we feel a sense of responsibility to the community while working here, not strictly to make a buck although we’re desirous of keeping our job.”

“The hospital is at risk in an environment where people talk about product lines that are profitable, like cardiology or rehabilitation, rather than lung disease,” Dr. Kevin Glynn, a 17-year member of Mercy’s medical staff, said. “Some doctors think our corporate philosophy is hopelessly naive.”

But Sister Joanne hopes--and works--for the best.

“The day may come when we can’t maintain our mission,” she said. “But I like to think that if we continue to help others, as hard as it may be, there will be a way. I believe in God and though this may sound naive to some, if we continue to take care of His people, we will receive assistance.”