Elephants In The ER? What Elephants?

by Malcolm Macdonald, October 25, 2017

The former Chief of Human Resources at Mendocino Coast District Hospital (MCDH) has filed suit in federal court against the hospital, its Chief Executive Officer (CEO), Chief Financial Officer (CFO), and the President of the hospital's board of directors. The case was filed in the Northern District of California in Eureka on September 25th.

This is the same HR Chief who filed a workplace harassment claim against MCDH's CFO Wade Sturgeon last winter. At that point, either the CEO, Bob Edwards, or a majority of the hospital's board placed the alleged victim of the harassment on administrative leave while the accused harasser continued in his position.

Since mid-March the MCDH Board has repeatedly ignored two basic questions related to this: 1) When the CFO was accused of workplace harassment, why was the victim of the harassment placed on administrative leave instead of the accused? 2) Does MCDH have a clear written policy regarding whether the accuser or accused in harassment cases is placed on leave?

The majority of this board of directors, with Dr. Peter Glusker the lone exception, has gotten good at ignoring the elephants in the room, which sometimes are themselves. On March 16th of this year, the MCDH Board finished up a closed session regarding the job performance review of CFO Sturgeon with a promise to conduct more interviews with hospital staff. Those interviews never took place. Instead, in a breach of proper protocol, the next day Board President Steve Lund, a retired school administrator, walked into the office of an employee working under the direction of Sturgeon (an employee who had filed her own complaint against Sturgeon, in addition to the one filed by the HR Chief). According to the employee working under Sturgeon, the words and actions of Lund, in the employee's office, were at the least intimidative. Within a few days the employee filed a harassment complaint against Lund as well as harassment charges against board member Kevin Miller and CEO Bob Edwards for fairly similar reasons.

In the meantime, despite the promise of the MCDH Board to conduct more interviews regarding the HR Chief's complaint against the CFO, Edwards sent the HR Chief a termination letter. In short: HR Chief complains of harassment by CFO; another employee complains about CFO; months later Board promises to conduct staff interviews regarding the original matter; CEO terminates HR Chief; no interviews by board, not even the second employee who also filed complaints; Sturgeon continues on the job with board approval (again, with the exception of Glusker).

Normally, names and details of personnel cases would not be discussed here, but since at least two MCDH Board members have violated the sanctity of the process themselves, those guidelines do not apply in this situation. In something out of Orwell, or at least the Trump White House, the majority of the MCDH Board has used the confidentiality of personnel issues as an excuse to hide their own inappropriate actions. So just what is at the root of the original complaint by the former HR Chief against the CFO? The federal court filing, on behalf of the former HR Chief, cites U.S. Code 3729, known as the False Claims Act. This provides for liability in certain acts concerning “any person who

(A) knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval;

(B) knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim;

(C) conspires to commit a violation of subparagraph A. B. C. D, E, F, or G...;

(D) has possession, custody, or control of property or money used, or to be used, by the Government and knowingly delivers, or causes to be delivered, less than all of that money or property;

(E) is authorized to make or deliver a document certifying receipt of property used, or to be used, by the Government and, intending to defraud the Government, makes or delivers the receipt without completely knowing that the information on the receipt is true;

(F) knowingly buys, or receives as a pledge of an obligation or debt, public property from an officer or employee of the Government, or a member of the Armed Forces, who lawfully may not sell or pledge property; or

(G) knowingly makes, uses, or causes to be made or used, a false record or statement material to an obligation to pay or transmit money or property to the Government, or knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to the Government, is liable to the United States Government for a civil penalty of not less than $5,000 and not more than $10,000, as adjusted by the Federal Civil Penalties Inflation Adjustment Act of 1990 plus 3 times the amount of damages which the Government sustains because of the act of that person.

Phrases that sound like “knowingly presenting a false or fraudulent claim for money,” relates to something written about in early March 2017 AVA articles. A March 8th paragraph states: “In the fall of 2016 Mendocino Coast District Hospital's Chief Financial Officer (CFO) downplayed the seriousness of billing and coding errors made by the newly contracted Emergency Room (ER) provider in official report after report to the hospital's Board of Directors and its Finance Committee. In addition, both the CFO and the MCDH Chief Executive Officer ignored internal warnings to add employees to sort out the billing and coding mess.”

Another possible connection to the False Claims Act can be seen in a question posed in a March 22nd AVA piece, “Is it true that fourth quarter (Oct. - Dec.) 2016 professional fees, from Medicare, were not paid to two North Coast Family Health Center (NCFHC) physicians in anything resembling a timely fashion? Reports are that this was an ongoing problem as of Monday, March 13, 2017. A problem not reported by the CFO to the Board or the Finance Committee of MCDH.”

The connection to harassment may have come from employees being asked to write up hospital billing that they believed was incorrect and/or improper. Who would those employees take those concerns to? That's right, the Chief Human Resources Officer at MCDH. That would put the HR Chief in the position to question the CFO's tactics. If the CFO refused to address the situation the HR Chief might very well have felt compelled to file a harassment complaint. At some point the HR Chief would have taken the issue to the CEO. In such a scenario, CEO Edwards would not only be complicit with CFO Sturgeon, but at the core of the problem. This could explain the CEO's eagerness to terminate the HR Chief.

If the Hospital, because of the actions of its CFO and/or CEO, is found culpable in court the $5,000 - $10,000 fines would be puny in comparison to triple the amount of damages the government has sustained, through Medi-Cal and/or Medicare. In addition the hospital could be barred from continuing as a Medicare provider for some years to come.

Money issues continue to be of concern at MCDH. At a special board meeting on October 12th, CFO Sturgeon requested and the Board granted permission to dip into their Local Agency Investment Fund (LAIF) to the tune of one million dollars. That amounts to approximately a quarter of the hospital's entire LAIF account. Most of the money was needed to finalize an application for IGT (Intergovernmental Transfer) dollars. The process works roughly this way: A hospital transfers funds to the State Department of Health Care Services (DHCS) which then uses them to increase Medi-Cal payments (within federally allowed levels) to the hospital. This results in the hospital getting back the transferred funds, along with the matching federal funds that are contained in the Medi-Cal expenditures.

In other words if MCDH can make a payment of several hundred thousand dollars to the state, within a matter of months it can get back something like one and a half the original amount. On October 12th, CFO Sturgeon requested $750,000 for the IGT payment to the state DHCS. The other $250,000 is presumably for day to day operation expenses at the hospital.

So, in a few months MCDH should pocket about a million dollars from the IGT process, but it will have a million dollars less in LAIF. Obviously, MCDH did not have $750,000, much less a million, in available cash on hand in the days and weeks leading up to October 12th. The question readers might ask themselves reads something like this: How solvent is a hospital that needs to withdraw a quarter of its LAIF (think of this like an individual's retirement or savings account) money simply to continue operating?

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