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Henry A. Barrios / The Californian Rudy Salas has introduced legislation that would take one step toward putting Kern Medical Center under a hospital authority.

County officials are unveiling a new plan to help rescue Kern Medical Center: a merger with Kern Health Systems.

Under the carefully crafted proposal, the struggling county hospital and the successful public health insurance management firm would become one integrated service called the Kern County Health System Authority.

Basic details of the idea will get their first public airings before Kern County supervisors on Monday and the Kern Health Systems board on Thursday.

Leaders hope the merger will help provide better preventative health care for the 140,000 low-income and disabled Medi-Cal patients Kern Health

Systems serves while allowing Kern Medical Center to dump restrictive county civil service rules and approve its ability to attract Kern Health Systems patients to the hospital.

It is not, they say, an attempt to push all KHS patients to KMC or drain the organization’s substantial reserves.

“This is the long-term vision,” said county hospital CEO Russell Judd. “This is where KMC is a year from now.”


The county needs Kern Medical Center, which is bleeding money and forcing other cuts to county government, to succeed. Officials hope the health authority will help KMC strip away county procurement processes, civil service rules and bureaucratic systems that slow down operations, cost excess money and make the hospital less nimble.

But the toughest part of the move, if approved, would be integrating KHS and KMC in a manner that benefits both.

Kern Health Systems is a county-created “local initiative” that manages health care for 140,000 local residents on Medi-Cal. It’s been in the news a lot in recent years, including for its controversial spending of $8 million on an audit — something uncovered by The Californian — and for sitting on huge cash reserves; currently at $75 million.

County officials have been critical of the health plan’s relationship with the three Kern County “safety net” health care providers — Omni Family Health, Clinica Sierra Vista and KMC.

The local initiative was created to support those three entities as they cared for the county’s poorest residents. But Kern Medical Center, the county reports, gets only 17 percent of KHS’s hospital referrals.

Judd said there is a natural conflict between hospitals that don’t get paid unless they do something and health insurance plans that don’t want unnecessary hospitalizations.

But federal health care reform aims to end that conflict by partnering health insurance companies and providers together, Judd said.

If KHS and KMC merge their finances, the conflict goes away and, he said, the combined group can focus on getting members care that’s right for them.

Kern Health Systems CEO Doug Hayward said he received the plan earlier this week — and will work with the county to develop it.

“We would welcome the concept they are attempting to deploy,” Hayward said. “It’s certainly consistent with what we see as the direction that health care is going.”

He said 50 percent of KHS members use the three safety net providers and they would clearly benefit from the more cost-effective care and better access to services the health authority could provide.

But he and his board will have to make sure that the ultimate arrangement benefits Kern Health Systems and its members, Hayward said.

The county, though, has control over the makeup of the Kern Health Systems board and has changed it in the past when it’s been unhappy with its actions.


The county plan could spark controversy.

Hayward said he will not support the health authority if it prevents other hospitals and medical providers from serving KHS’s 141,000 members.

Judd said that won’t happen.

Both the county hospital and the health system would still contract with outside hospitals, doctors and health insurance plans, he said. But he said more patients will naturally move to KMC if the health authority is created.

“When you are in the system, you move much more easily inside the system than outside the system,” he said. But he also noted that “KMC has to provide the level of service and quality of care that patients want.”

Judd also said the county is not trying to capture the $75 million Kern Health Systems holds in reserve and use it to mend Kern Medical Center’s fiscal situation.

“Kern Health Systems must maintain its reserves to maintain its obligations. KMC cannot get the reserves of Kern Health Systems,” Judd said. “It’s not a money grab.”

Kern County Supervisor Leticia Perez said the money grab wouldn’t be a real solution to KMC’s problems anyway.

“It’s a temporary fix and it doesn’t solve the structural problems at KMC,” she said.

Supervisor David Couch concurred.

“Some will say it's a money grab. It's not. Some will say it's about driving all KHS members to KMC. It's not that either,” Couch said. “Other hospitals and doctors would still provide care to KHS patients and KMC would still provide care to patients with private insurance.”


As for KMC employees, they would become employees of the health authority.

The county and the Service Employees International Union, Local 521 have been negotiating on the plan and will continue to do so.

“SEIU will represent all the people moving into the authority,” Judd said.

Perez said KMC’s 1,400 employees need to know their jobs are there for them as this transition happens.

“The labor force is important. There has to be a sense of security in their work,” she said.

Officials for SEIU Local 521 released a statement that cheered the health authority idea.

“At this initial stage, the proposal to develop an integrated health care delivery system in Kern County appears to be a smart move that will benefit everyone in the community, including those who have Medi-Cal managed care,” the statement read. “We look forward to collaborating with the county to flesh out this innovative strategy."


The authority would not be created overnight.

Assemblyman Rudy Salas, D-Bakersfield, is drafting the legislation that — after January 2015 — would allow Kern County to create the authority by ordinance.

How will the authority be formed? That would be answered by the ordinance.

What would happen to Kern Medical Center’s fluctuating $100 million debt to the Kern County general fund?

The county would handle that question as it builds the ordinance.

“We are months, if not a year, away from this happening,” Judd said.