Located in San Francisco’s legendary Chinatown neighborhood, the century-old Chinese Hospital faces both the unique financial and demographic challenges of serving its primarily Chinese patients as well as the same hurdles as all hospitals, especially independent ones in underserved areas. These challenges include physician and overall workforce shortages and labor cost increases stemming from the impacts of the COVID-19 pandemic.
As a small community hospital, Chinese Hospital has limited resources and needs to garner support from government and the community. That includes forming partnerships with entities such as the city’s Department of Public Health and UCSF Health.
Founded in 1925 with roots in a medicinal dispensary that dates to 1899, Chinese Hospital was once the only place Chinese American patients in the community could seek care. As the only independent hospital remaining in San Francisco, a city that is about 23% Chinese and 37% Asian American overall, it remains a pillar of both the area’s healthcare services and the community in general.
With a two-building, 88-bed acute care hospital and five outpatient clinics in San Francisco and northern San Mateo County, the hospital offers a blend of Eastern and Western medicine. More than 90% of patients are Chinese and many others are Asian Americans; the percentage of Chinese is higher at the main hospital campus than the clinics, given the location.
Challenges—Before and After the Pandemic
The hospital has plenty of hurdles to surmount, and the pandemic brought unprecedented challenges. The suspension of elective procedures, which are a vital source of revenue, resulted in a significant financial strain to the organization. Simultaneously, the hospital faced increased costs associated with personal protective equipment, additional staffing for COVID-19 response and the implementation of new safety protocols. Labor shortages were exacerbated as healthcare workers fell ill or faced burnout, and the costs of retaining and hiring staff rose sharply.
The pandemic also brought a surge in anti-Asian hate crimes, adding another layer of difficulty for staff and patients. Many community members faced discrimination and violence, making them hesitant to seek medical care or leave their homes. Chinese Hospital responded by increasing security measures and working with local authorities to ensure the safety of patients and staff. The hospital also provided resources and support for those affected by these hate crimes, reinforcing our commitment to being a safe haven for the community.
Significant financial challenges during the past two years resulted in the need to obtain loans from various sources, such as California’s distressed hospital fund. This is partly due to the patient population comprised of Chinese-speaking seniors on fixed incomes, with 80% relying on combination of federal Medicare and state Medi-Cal insurance.
The reimbursement rates for these programs are not the same as private health insurance—they often do not cover hospital costs. Due to an obscure federal rule, Chinese Hospital receives an even lower rate than others serving predominantly lower-income patients. Change in Medicare disproportionate share hospital policies in the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 permanently imposed a 12% DSH payment adjustment cap for urban hospitals with fewer than 100 beds. Eliminating this adjustment cap of 12% would provide $550,000 in additional reimbursement dollars annually that would go directly back to our patient services as well as create new and improved existing patient service lines.
Labor shortages and costs have been significantly worse since COVID-19 due to inflation, as they are in so many other fields. According to the California Hospital Association, labor costs for hospitals and other healthcare providers have risen 15%, while pharmaceutical costs are up 41% in the state compared to pre-pandemic. Chinese Hospital’s figures are, unfortunately, similar.
The specific challenges of serving the hospital’s patient population stem from the need to provide linguistically and culturally competent care. Workforce shortages are even tougher to reverse when bilingual physicians and other staff are needed, including chaplains who can address the various religious backgrounds of our patients. Culturally competent care also requires bridging Western and Eastern medicine, including the latter’s focus on holistic care and providing services like acupuncture and herbal treatments.
Chinese Hospital also provides culturally relevant health-related education and disease management, such as how to prevent or manage diabetes within the context of Chinese diets, given the predominance of rice and other carbohydrate-heavy foods. Cultural competence extends to issues such as knowing what patients like to eat when they are ill: soups that have been boiled for hours are considered to be very healing, while sandwiches and salads are not. Yet it is necessary to prepare the latter for non-Chinese patients. This has required a costly expansion of the hospital’s kitchen to retain its California Department of Public Health license.
Lastly, Chinese Hospital continues to develop protections against discrimination in healthcare, ensuring individuals, including those with disabilities, receive equitable access to care. Chinese Hospital aims to improve in four areas: web and mobile accessibility to health programs and activities; medical equipment accessibility; programs that meet the needs of individuals with disabilities; and communication methods for patients with hearing, vision and/or speech disabilities. These efforts also generate costly expenses.
Solutions to Date—and to Come
Like other institutions serving Bay Area residents on fixed incomes, Chinese Hospital has surmounted its patient care losses thanks to revenue from a combination of ceaseless fundraising and the provision of ancillary services.
The capitation payments received from our own health plan and others—especially during the stay-at-home phase of the pandemic, when elective procedures were all postponed—provided much-needed income for our operation.
Our partnerships also have helped us survive. Chinese Hospital has partnered with San Francisco’s Department of Public Health to create a hospital-based skilled nursing facility/sub-acute unit, a type of facility the city has lacked. Over the past two years, $10 million in state funding was secured to help Chinese Hospital establish the unit. The partnership with UCSF Health enabled the hospital to expand access to much-needed complex specialty care for more patients such as the primary stroke center.
For independent community hospitals like Chinese Hospital, mainly serving low-income Medicare and Medicaid patients, government subsidies and community support are crucial to sustain and continue to provide culturally and linguistically appropriate care.
As part of that, if the Medicare DSH cap is removed, it will ensure community hospitals are fairly reimbursed for the critical services they provide. The cost of making this change for all the urban hospitals affected would be less than $10 million annually, which represents a fraction of the Centers for Medicare & Medicaid Services budget.
The additional reimbursement would pay for itself over time by helping us improve the overall health of the patients we serve and, likewise, helping other hospitals to do the same in their communities. The removal of the DSH cap will eliminate the unintended discriminatory and unfair CMS reimbursement policy on small urban community hospitals, which mostly serve disadvantaged populations and promote health equity and access.
Jian Q. Zhang is CEO of Chinese Hospital in San Francisco and an ACHE Member (JianZ@chasf.org).