HAYWARD, Calif. — St. Rose Hospital is struggling financially and is looking to be absorbed into a larger health care system instead of remaining an independent, not-for-profit hospital.
Late last month, Garrett Contreras, chair of St. Rose’s Board of Directors, told the Alameda County Board of Supervisors that the hospital is working with health care consulting firm Kaufman Hall to find out what the communities needs are, as well as find a partner, such as Alameda Health System, that can help it continue operating in the community instead of having to shut down.
“We already have what I refer to as a health care desert in Hayward,” Contreras told the supervisors. “That was compounded when we lost an (emergency room) when Kaiser Hayward moved to St. Rose Hospital.”
The hospital’s financial challenges arise from its role as a safety net facility, serving a significant number of Medi-Cal and uninsured patients. These challenges were exacerbated by the onset of the COVID-19 pandemic, which led to a nationwide drop in hospital patient volumes that have yet to rebound.
The decision to partner with a larger health care system was based on the recommendations in a study on the hospital’s future sustainability, conducted by the health care consulting firm Innova Group. That report stated that option would benefit the service area and surrounding hospitals more than closing the hospital, which would likely overwhelm emergency departments in San Leandro, or realigning services.
"The hospital is a critical community resource ... and it does not appear to be sustainable as a stand-alone hospital without substantial and ongoing increases in public funding," Scott Clay, with Innova Group, told the supervisors.
Clay explained that bigger health care systems can manage rising operating costs more efficiently because of their size. They can also easily connect the hospital with a wide network of doctors, something that's more challenging for independent hospitals. This could open up the opportunity for St. Rose to specialize in specific services and cater to a wider region.
Currently, St. Rose Hospital serves just over 400,000 individuals in the Hayward, Union City, San Leandro and Eden areas, as well as parts of Fremont. However, the population in this service area is projected to decrease by about 0.5% over the next five years while also aging. This is expected to result in a 4% increase in inpatient visits, 6% in emergency department visits and 9% in outpatient visits.
While St. Rose's emergency department consistently operates at over 100% of its standard capacity, other departments experience an occupancy rate of less than half. Maternity beds are typically less than 20% occupied, with an average of two to three patients a day. The report forecasts an additional 10% decline in pregnancy visits over the next five years as fewer young adults have children.
Beyond declining birth rates, Contreras said the decline in pregnancy visits is also a result of the fact that providers are not referring pregnant women to St. Rose; over 90% of the childbirths in Hayward are happening at Highland Hospital because that's where providers with Alameda Health System refer them.
Clay pointed out that because St. Rose doesn't have a large network of doctors, it receives few referrals for inpatient and outpatient visits. Typically, at least half of the revenue for hospitals of similar size across the state comes from outpatient services, such as diagnostic tests and minor surgeries, which don't involve an overnight stay like more intensive inpatient services for major surgeries and complex illnesses. However, for St. Rose, only 26% of the revenue comes from outpatient services.
"That's less revenue to cover overhead," Clay said, "so it puts more strain on the inpatient services that they do have to cover those overhead expenses."
Meanwhile, the hospital's losses have grown steadily since 2020. St. Rose lost $3.7 million in fiscal year 2020, $5.9 million in fiscal year 2022 and is forecast to lose about $10.7 million in fiscal year 2023, draining the hospital's reserves in the process. St. Rose had enough cash on hand to cover a hundred days of operating expenses during fiscal year 2020 but was essentially out of operating cash by the end of fiscal year 2023 until the county provided it with $5 million in emergency funds a few weeks ago.
Ongoing losses, limited available funds and lack of access to capital have left St. Rose unable to pay its debts, recruit new physicians to replace aging medical staff, or make important investments in new services and infrastructure that could bring in additional income, creating a self-perpetuating cycle of financial hardship.
Contreras said the hospital will be working with Kaufman Hall over the coming weeks and months to find a partner to affiliate with before the end of the fiscal year.
Sonia Waraich can be reached at 510-952-7455.
