Coast Hospital Prognosis: Grim

by Malcolm Macdonald, April 5, 2017

The leadership at Mendocino Coast District Hospital (MCDH) has circled the wagons. Chief Executive Officer (CEO) Bob Edwards has moved out of the traditional CEO office because the room was not sound proof enough for his liking. At about the same time he fired the administrative assistant to the Chief Human Resources Officer, who in turn has been placed on a months-long administrative leave. The reason for the firing appears to be that Edwards suspects the Human Resources (HR) assistant of leaking inside information of some sort. Just in case CEO Edwards thinks that HR assistant has contacted this writer, he has another think coming. I have never spoken to or otherwise communicated with said HR assistant; wouldn't know the MCDH Human Resources assistant if I met her on the street.

The administrative leave of the Chief Human Resources Officer is connected to a recent personnel review of the hospital's Chief Financial Officer (CFO), Wade Sturgeon. That review is ongoing with the Board of Directors promising to conduct more interviews with fellow staff members.

Then there’s the obstetrics (OB) department which has been close to a million dollar a year money loser for quite some time. At the end of 2016 the MCDH Board commissioned an ad hoc committee to look into the matter. The committee, chaired by new board member, Dr. Kevin Miller, submitted its report at the March 30, 2017 Board of Directors meeting. When he finished a summary of the committee's report, which did not take a position for or against closing the OB department, Dr. Miller publicly announced he was in favor of closing obstetrics. At that point an emotionally charged voice from among the standing room only crowd uttered, “Your child was born here!” The voice apparently belonged to a current OB nurse. Since the March 30 Board meeting Dr. Miller has made it clear that he wants a vote on closing the OB Department placed on the April MCDH Board agenda.

Miller's OB report was part of the monthly Planning Committee report. Though an ultimate vote on closing or keeping open OB was not part of accepting the Planning Committee report, nevertheless when Board chair Steve Lund called for a vote concerning that report only Dr. Peter Glusker voted, “No.” Glusker stated his vote was based on his understanding that the OB ad hoc committee had also been tasked with finding potential solutions to the monetary losses incurred.

Three members of that ad hoc committee (Carole White, Tanya Smart, and Lucresha Renteria) penned dissents to the report submitted to the full MCDH Board. Perhaps it is ironic that the three dissents were authored by three female members of the committee. Ms. Renteria, executive director of Mendocino Coast Clinics, made this case regarding the possible closure of the coastal OB, “[T]here are women who cannot afford or who will be unable to arrange for a delivery over the hill. Since the Ad Hoc Committee's report was unable to highlight that we do in fact have a vulnerable population that will be affected by this discussion. I felt the need to advise you that 56% of our prenatal patients are on Medi-Cal. These women and/or families are living below 138% of the Federal Poverty Level; which we know is much lower than a living wage for the Mendocino Coast.”

Renteria also criticized the direction in which Dr. Miller took the OB committee, “I believe that the Ad Hoc committee function was hampered by an overly aggressive agenda to quickly submit a very narrowly scoped report. Discussions regarding possible solutions, approaches, and non-data-driven discussions about how this department's closure would affect our community were swept away by Chair Miller under the remonstration that the topic(s) were 'out of scope of this committee'.”

Having been a first hand witness of these meetings, this writer concurs with Ms. Renteria. There were meetings when it was obvious to any observer that Dr. Miller had a pre-set internal clock in his mind. He displayed extremely limited patience with anyone's discussion beyond his own ideas. At the first OB ad hoc gathering Miller allowed retired Dr. Keevan Abramson to go on at great lengths in what appeared to be a sour grapes whine about how he and his OB/GYN partner had lost business near the end of their careers to Ms. Renteria's Mendocino Coast Clinics. Renteria displayed uncommon restraint, at that meeting, by remaining silent throughout Abramson's rant.

Several times at these meetings, Dr. Miller cut off Ms. White and Ms. Smart when their comments or questions went on too long for his own purposes. Full disclosure: Dr. Miller performed two cataract surgeries for me last year. He did a good job. There are aspects of his personality that are very likable, but it might serve him well to personally observe a Fort Bragg City Council meeting so that he might understand how a meeting can be run effectively and to understand that public meetings are a bit like baseball games, there is no pre-set time limit.

What Dr. Miller, and perhaps a majority of the MCDH Board, doesn't seem to understand is the OB question is a no-win situation as currently presented. Sure, closing OB might cut off nearly a million dollar money drain, but the public relations backlash of closing OB will be far more costly in the long run. First, a closure of OB makes passage of any kind of district-wide parcel tax nothing less than a pipedream. Who in their right mind would vote in favor of taxing themselves more for a hospital that can't deliver an OB department to its public? Second, in all likelihood, an OB closure will bring about something akin to an unspoken boycott of most MCDH services. Combine that with a hospital only two years out of a prolonged bankruptcy and the picture being painted fades to black pretty quickly.

The concept of time appears to be a problem for MCDH's current Board of Directors. They scheduled an 8:30 a.m., Saturday, April 1 (no kidding) special board meeting. Only problem: the public notice for it didn't get out until 9:31am Friday on March 31st. The Brown Act, the law regarding public meetings, requires 24-hour notice to media outlets. Just getting sorta-kinda-close at slighly less than twenty-three hours doesn't cut it. In addition, the meeting was held at the Harbor Lite Lodge in a room without any identification on it about being a meeting venue. One might get the idea the public wasn't really wanted at this meeting.

Further irony abounded at this April Fool's Day meeting. Dr. Glusker did not attend. At the meeting other Board members made snide references about Glusker, essentially because he doesn't follow their lead blindly. I will say that MCDH Board legal counsel John Ruprecht made a valid point about board members inundating him with legal opinion requests in the last days before board meetings. This, too, appeared to be addressed at Glusker. However, the snide comments made by fellow board members was obviously unprofessional and counterintuitive to the main agenda item at the meeting, an educational presentation, much of which centered around how board members can get along and be mutually supportive. These are the same four MCDH Board members who censured Dr. Glusker for violating the Brown Act in “leaking” an email concerning closed session, confidential matters. It is doubtful that any of them will make a motion to censure themselves for violating the notice requirements of the Brown Act. They were apprised of the violation as the meeting started by one of the two members of the public who figured out which unmarked room at the Harbor Lite Lodge they were hiding/meeting in.

At that faultily noticed meeting the Board, by a 4-0 vote, authorized management to submit a Help II loan application in the amount of $3,500,000 through California Health Facilities Final Authority (CHFFA). According to CFO Wade Sturgeon $2 million of the loan will be paid back at 2% interest over twenty years. The other $1.5 million will have a 3% interest payment attached to it over a five year term. That million and a half is slated toward part of the purchase price for new electronic health records (EHR) equipment (full, actual cost of the EHR upgrade equals approximately $2.4 million). Two million dollars of the CHFFA loan will be spent on facility remodeling and other construction projects.

This brings us to Project Manager Steve Kobert's report at the March 30 board meeting. The five main issues regarding capital maintenance are the nurse call system, telemetry, the automated transfer switch (ATS), HVAC (heating, ventilation, and air conditioning) equipment, and the central sterile system. The nurse call system is essentially completed at an estimated budget cost of $525,000. The wireless telemetry systems that allow patients to wear small battery powered devices that signal monitors has an estimated budget of $295,000. The expected time to completion is thirty-six weeks after a formal notice to proceed from the Office of Statewide Health Planning and Development (OSHPD). The ATS system's estimated budget cost: $573,487 (which is an estimate based on prior MCDH Board approval); expected completion: 42 weeks after notice to proceed from OSHPD. Readers should keep in mind that OSHPD approval is far from a “rubber stamp” occurrence. The estimated budget, from 2015 numbers, for the HVAC equipment is $373,021. On March 7, OSHPD granted MCDH a six month extension to start this project. The new deadline to start (yes, that sounds inherently contradictory): August 31, 2017. The central sterile system also has an out of date estimate at $663,000. Once an up to date budget is approved it would take a year to complete the project.

Lest we forget, readers who pay taxes and vote within the Mendocino Healthcare District may want to remember the annual payments still owed by our local hospital as part of its exit from bankruptcy: In 2017: $1,638,595; in 2018: $1,547,177; 2019: $1,635,794; 2020: $1,420,742; 2021: $1,118,864; 2022: $1,113,921; 2023: $861,216; and in 2024: $857,654.

That adds up to $10,193,961. Keep in mind that the hospital district is required to have a new hospital facility in place before the start of the year 2030. At that well kept secret of a meeting on April Fool's Day, MCDH Board counsel John Ruprecht said, in regard to a topic centered around strategic planning, “There's no way this district can afford to build a new hospital at this time. It's not going to happen.”

That might be conclusion enough, but let's add former MCDH Board member Patricia Jauregui-Darland's observations concerning CFO Sturgeon's March Finance Report to the mix. “This Report should be labeled 'Eight Months (YTD) [Year To Date] February 28, 2017.' This far into the fiscal year it is important to make year-over-year actual comparisons and not to compare to budget-only real numbers.”

Ms. Jauregui-Darland questioned Sturgeon's line item “Total Services Revenues,” noting, “Total patient service revenues has increased $6,182,563 or $6.2M for FY [fiscal year] [20]17. That is a very large increase. How much was related to charge increases vs. volume increases?”

Going on she cites, “The net patient service revenues have decreased $364,282 for FY17. This means all of the $6.2M of additional bill gross patient service revenue for FY17 was written off and even an additional $364, 282. Where did the 6.2M go? Was it all written off and if so why? I can see the $1,386,217 or $1.4M negative swing in the Bad Debts (from Page 6 of the Finance Report if readers have obtained copies of the voluminous March 30th MCDH Board meeting agenda packet).”

Jauregui-Darland asks two more questions: “What was the justification for the additional $4.8M write-off? Has there been a significant change in the payor mix?”

Jauregui-Darland had more queries about operating expenses. Her notes about the entirety of the Finance Report include these terse comments: “It appears that not $1 has dropped to Net Rev [enue]. I haven't seen anything like this in years! This is shocking and alarming.”

Her final thought, after questions concerning the hospital's potential large cash outflows in the current final quarter of the fiscal year, “Where is the money going to come from?”

By May we should be able to delve further into why Sturgeon's numbers are unconvincing and whether or not the Help II loan application actually gets approved.

2 Responses to Coast Hospital Prognosis: Grim

  1. John Kriege Reply

    April 5, 2017 at 12:55 pm

    Looked at the latest annual financial report filed with OSHPD, for the year ended 6/30/2016. The income statement shows gross revenue and deductions from revenue (“writeoffs”) pretty consistent for that year and the year before. The big increases reported to the board for the first eight months of this fiscal year may be overstatements of both numbers. Gross revenue is a squishy number, supposed to be based on “full-established rates”, or prices, that nobody really pays. Would need to look at whether utilization, and expenses, also changed for this year.

  2. Joan Hansen Reply

    April 9, 2017 at 10:53 am

    It seems obvious to me that O.B. is financially failing because the payments are funded by Medical. The hospital is paying high salaries for professional rent a staff services. The proof is in the money lost each year. Since this is unsustainable the only solution is to close the department.

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