CRISIS?(!)

The finance committee packet is out.  The bottom line numbers are truly alarming with a loss of 681k for the month of November alone.  This brings the YTD loss to just under 1 million dollars (combined loss of 995,000).  The impact on the District cannot be understated.  In addition, if the daily dashboard presented on the last page of the document is accurate (it is a sample for 12/29, but I assume that the numbers are actual numbers for that date), then December may be better, but not good enough to make up the difference and get the District to breakeven for the month.  In addition, the entire 750k of the Bank of Alameda line of credit authorized by the Board has been drawn upon.

Consequences:

1.  Current assets minus current liabilities is less than zero.  The current ratio is now less than 1.00 so unless this can be reversed in December to the tune of over a quarter of a million dollars (18,608,387 - 18,868,850 = -260,463), the District is in violation of the Bank of Alameda revised loan documents.

2.  The Net Assets line on the balance sheet is 7,746,083 which means that any future cumulative loss of $246,083 over and above the 995k already lost this year will put the total net assets below 7.5 million which is another violation of the Bank of Alameda loan agreements.

3.  Although I believe the District received an installment of parcel tax revenues in cash in December, this does not change the current assets picture (receivables decrease by the same amount that cash increases) so using the proceeds to pay off the Bank of Alameda LOC will just delay the inevitable when the District needs access to that liquidity again.

4.  This puts the development of the Wound Care center at risk.  Best case, another modification to the Bank of Alameda loan documents would need to be made.  Worst case, lack of financing will kill the project entirely.

5.  The working capital/management attention/state approval process for the the Waters Edge project will be seriously constrained by this development.

I must assume that something in December has changed to give Management optimism that the Hospital is not in imminent danger of default or, as a Board member, I feel blindsided by this development.  Even if December has resulted in a reversal (positive) of fortunes, I am staggered by the magnitude of November's loss and wish that I would have been alerted sooner.

Finance Committee Documents for 1/4 not Posted Yet

I do not consider the information I have official until it isposted on the website.   I expect they will be up ASAP.

UPDATE:  Here is the packet.

Sanjiv Handa, RIP

I never knew the man except for one passing reference somebody made to him in a discussion about Alameda politics.  He was most commonly referred to as a gadfly, but, from all appearances, he cared a lot more about good government in Oakland than his many detractors especially his nemesis, Ignacio De La Fuente.

What he did not realize is that few people in Oakland (and Alameda?) really put a priority on doing right.  Sure, most want to do the right thing, but the priority is political allegiance, money, and sticking it to your detractors.  The goal of benefiting people only gets factored in after it makes it through those filters.  That's why people like Perata and De La Fuente have enormous power and Sanjiv Handa had none.  Because if you are not in it for yourself then like Eugene McCarthy said, "Being in politics is like being a football coach. You have to be smart enough to understand the game, and dumb enough to think it's important."

Holiday Cheer

I hope that Alameda Hospital has been relatively empty this month, or, alternatively, people got in and out quickly because it stinks to be worried about your health or your loved one's health at this time of year.  And:

1.  For Kristen Thorson and the rest of the administrative staff who put together Board packets, update the website, and respond to special requests so quickly and efficiently.  Thank you.

2.  For Kerry Easthope who as far as I know is on good terms with everyone at the Hospital and has always graciously responded to my requests for information.  Thank you.

3,  For Jordan Battani and David Burton, who have sent an invitation both last year and this year to their holiday party.  (Unfortunately I could not attend either year.)  Thank you.

4,  For Michael McCormick and Stewart Chen who have at least paused to consider my arguments at times.  Thank you.

5.  For Denise Lai and Carol Gottstein who have publicly supported my position with regard to the District plus those who have privately reassured me that I am not crazy.  Thank you.

6. For Jim Oddie who has reached across a nasty political divide more than once.  Thank you.

7. For the commentors at Blogging Bayport especially Jack Richard where it seems to me the most engaging and engaged debates about Alameda issues takes place.  Thank you.

8.  For Action Alameda News which posts useful news and commentary about Alameda (often times first).  Thank you .

9. For all of the people at the Hospital and the various other facilities of the District who at the individual level provide care and support to patients.  Thank you.


Insert your favorite seasons greetings here.  Happy New Year too and keep an eye out next week for the Finance and Management Committee packet for the January 4, 2012 meeting.

Political Futures (navel gazing)

It's interesting that as of  10:00 this morning, you can buy at Intrade (I'm not sure if US citizens can) the chance that the Democratic nominee will be elected President for $5.12 and sell the chance that Obama will be re-elected for $5.16.  This would guarantee an arbitrage profit of $0.04 or about 0.8% which would be huge in the finance world.

October Results - Quick Notes

1.  The loss for October after backing out adjustments from prior periods (+815k for AB97, - 502k for IGT accrual, net +313k) was a 42,000.  This is basically break even for the District.

2.  The results are somewhat more favorable than the negative 42,000 suggests since it includes 54k to HFS for revenue cycle consulting and 37k to the state for SNF licensing application fees. or a total of 91k.  Without these expenses, the District would have shown a slight profit for the month of October (after applying the parcel tax revenues and before applying prior period adjustments).

3.  There is a slight offset in the unrecognized liability of the 50,000 fine from the state which I consider material and which I do not believe the District's chances of prevailing on appeal are high enough as to justify not reserving for this expense.

4.  The current assets "cushion" is down to 436k.  This is important because of the modified terms to the bank of Alameda loan.  It may be difficult, but not impossible to maintain the 1.00 Current Ratio once the borrowing for wound care construction kicks in.

5.  The District has some opportunities in terms of uncompensated care reimbursement from Alameda County.  This was brought forward a few months ago.  I will query Ms Stebbins at the next Board meeting as to when we will have a more definitive answer to this including an estimate of its impact.

6.  Maybe a typo or maybe the schedule on page 24 will be provided at the actual meeting, but I could not locate the information referenced in the first bullet point of the overview. ("See schedule on Page 24 for
detail of the impact of the adjustments and a roll forward from the October actual to adjusted results.")

In summary, not great, but not terrible especially when you discount the need to finance seismic retrofit or other capital improvements.  Alternatively, you might believe the income from the SNF expansion (Water's Edge) will take care of future capital financing needs.  Opinions differ.

Alameda Politics

(Actually most politics)

It consists of the Cowards, the Corrupt, the Cliquish, and the Cranks.  Which one are you?

Fortune Cookie

"Nothing in the world is more dangerous than sincere ignorance."

That indeed was what the slip of paper said.  On another note, I have not updated the blog, not because I don't have anything to say, but because there is no urgency.  At this time, the District is like a ski jumper who has started their descent.  The next thing that will happen is the launch, but only after a quick buildup where nothing remarkable generally happens and the only things that can happen are all bad.  October will be a positive income number due to adjustments and closer to break even on an ongoing basis (maybe even slightly positive) due to the favorable decision by CMS on the sub-acute reimbursement adjustments.    October financials will be available prior to the 11/30 finance meeting so we will see exactly how the 1.8 million dollar positive surprise (~ 150k monthly)  will have relative to budget. 

11/7/11 Board Meeting - Preliminary

1.  The Closed Session agenda has a trade secrets item that does not meet Brown Act disclosure requirements.  I hate the fact that I am associated with a Board that does not have a sufficient commitment to transparency.  Of course the vote is 4 to 1 against changing anything.  Mr. Driscoll, the District's counsel stands firmly behind his interpretation of the law (against fuller disclosure) even though the Brown Act if fairly explicit about the form that closed session agendas should take and most interpretations of the law I have read suggest placeholder type of language is inappropriate.  Of course, from a practical point of view, Mr. Driscoll is right because there is little to no downside to this type of violation.

2.  September financial reports.  It would seem that based on Debi Stebbins statements on 11/2 that the District would have a loss for the first quarter.  She estimated the decision by the State to withdraw the sub-acute rate changes to be worth about 1.5 million annually.  I'm not sure why, but the impact is much greater than that; it appears the positive is to the tune of about 2.4 million annually (about 200k per month).  This is surprising since the 1.5 million came straight from Stebbins and, I think, the budget for this year stated 2.1 million total including the SNF rate changes and those were approved.  Not sure why the large discrepancy but, in this case, not a case of her being overly optimistic.  By rights, given the huge swing to the positive, the District should be swimming in net income.  Unfortunately, the IGT numbers had to be adjusted the other direction so that the YTD loss will be reported as 272k.  If you would like to keep FY11 stuff in FY11 and FY12 in FY12 then the YTD is the original -585k + 617k for sub-acute - 121k for IGT or at YTD loss for just FY12 numbers of 89k.  That is obviously considerably better than previous and suggests that District has a chance of not having a miserable year.  It's only 284k below budget.  Certainly,holding losses to below 100k and missing budget by more than a quarter of a million dollars represents a stellar performance on the part of CEO Stebbins.  She is to be complimented.

3.  Modification of Bank of Alameda loans.  I thought we had done this already, but the Board needs to approve the changes to the agreements that are necessitated by poor financial performance.  Bank of Alameda is more than willing to accommodate since the District is pretty much legally obligated to make good on these debts.  This minimization/elimination of risk is one reason that Chris Zimmerman is so eager to lease to the District.  He really does not have to worry about the District ever going bankrupt.  It is unfortunate for the citizens of Alameda because their liability just keeps on piling up due to mismanagement.  Stebbins is very comfortable putting other people's money at risk.

4.  Waters Edge.  I am sadly thinking it will be approved.  Chris Zimmerman gets a partner and payments totaling over 20,000,000 through the years for a lease rate that is higher than comparables in the Bay Area and for more beds than will actually be occupied.   Debi Stebbins gets a mulligan on her dismal performance.  Alamedans gains not a single SNF bed.  Alamedans take on a huge risk that depends on the Hospital staying open for 20 years despite consistent operational losses, questionable quality of outcomes, and current violation of OSHPD regulations.  All I can really do is witness this since the votes appear to be there.

Memo to Debi Stebbins

In the past, I have suggested that you should resign.

If you want to avoid criticism by me with regard to the financial performance of the District (loses money), your credibility (the escape clause is weak, at best, based on Chris Zimmerman's own statements), and the quality of the financial analysis you endorse (the Water's Edge project numbers are overly optimistic and the "Return on Investment/Contract Risk" presentation is a completely non-standard/useless presentation) then there is an easy solution.  Resign.  One would suspect though that the significant compensation that you receive and the severance of almost 500,000 promised in your contract would preclude you from taking advantage of that solution to your problem.

11/2 Board Meeting (Actually the Water's Edge Public Forum)

Just some odds and ends:

1.  AB97 cuts for distinct part SNF's were approved.  The rate cut chart is here.  The sub-acute rates for distinct part were not cut due to a shortage in beds.  The impact on the District's finances will be substantial - somewhere around 1.5 million dollars or more (I believe it is more) positive.  I think one way to calculate it is to go to here and compare the difference between the 08/09 reimbursement rate and the most current reimbursement rate.  The District has somewhere between 900 and 1000 sub-acute days per month and it looks like the difference is around $725 vs. about $875 so about $150 per day.    This makes the first three month loss out to be somewhere between 150k and 250k which is quite an improvement from the $585k in the current financial report through September.  This will be updated for the 11/7 Board meeting.

2.  The South Shore facility was originally estimated to contribute 800k per year to the bottom line.  A comparison between that number and the actuals may be available for the next Board meeting.

3.  Mr. Zimmerman of Waters Edge wants a partnership to continue operation of Water's Edge.  He sees this as an opportunity to do estate planning and make sure that the facility stays locally operated.  One glitch is that he was not prepared to allow that the Board can exit the deal by exercising the "escape clause" with an exit from acute care services.  It is clear that he does not envision that this will happen, but I believe that it is clearly a possibility especially over a 20 year period.  He was NOT willing to say that such an event would trigger this "escape clause".  He felt that discussion was too speculative to commit to allowing the Board to exit the deal in that fashion.  Debi Stebbins wants to insist that she is being unfairly maligned, but this is exactly what I feared and if that cannot be part of the deal then the District is potentially liable for the entire 20,000,000 of lease payments.

4.  Both Stebbins and Battani talked about using this deal so that the District would be "less reliant on the parcel tax."  That suggests that without the parcel tax, the District loses money, but that with the assistance of the parcel tax, the Hospital stays open.  The truth is without additional revenue, the parcel tax is not enough to allow the District to continue to operate the Hospital.  In addition, the Waters Edge project has to meet the numbers in the pro forma's or it might not be enough to save the Hospital.

5.  Stebbins does not want an urgent care center in Alameda.  As best I can recall, the statement went, "That is so nineties; read the literature.  Why would we want to open an urgent care center when we have a fully staffed emergency room available for people to use?"  My answer was that there was a difference in cost for people, but I confess, I do not have the literature.  I do know at Kaiser, there is a separate clinic that triage will divert patients to at the ER that looks, to me, a lot like an urgent care center.  I also know that many Alameda residents I have spoken with want to keep the Alameda Hospital ER open for urgent care issues, but are not interested in being admitted to Alameda Hospital for acute care.  So I don't know if that makes Stebbins right and me wrong or vice-versa, but clearly these Alamedans would be just as satisfied with an urgent care center and clearly they value the Hospital's ER because it can offer those services.  I will point out that the tremendously successful Washington Hospital runs an urgent care (and an ER as well)

It's Not Hard to Be Right When the Odds Are With You

Back on April 6, 2011 I wrote a blog post titled, "2011-12 Budget - Possibly an Insurmountable Challenge ."  Damon Runyon famously wrote in Guys and Dolls, "It may be that the race is not always to the swift, nor the battle to the strong - but that's the way to bet."  (He also wrote, "One of these days in your travels a guy is going to come up to you and show you a nice brand-new deck of cards on which the seal is not yet broken, and this guy is going to offer to bet you that he can make the jack of spades jump out of the deck and squirt cider in you ear. But son, do not bet this man, for sure as you stand there, you are going to wind up with an earful of cider," but that is a different post.)


Anyway, the question is how can Stebbins make the projections she does without totally sacrificing here credibility.  It is because she is an hopeless optimist.  Suppose you have some outcome involving a complicated process (or even a simple, but repeated process) and you want to predict what might happen.  If you take the most likely event for each step then you will undoubtedly miss the mark.  Let's say you are 95% sure of each result going your way.  If it takes 10 correct guesses to reach the desired outcome then you only have a 60% chance of being right overall.  Lower the odds to 90% (still pretty good) and the odds drop to about 1 in 3 (35%).  And make it 80% for each individual part and you may as well give up because you are going to fall short about 9 times out of 10 (11% success).  Now suppose the number of things that have to go your way are not 10, but an even dozen; the odds drop to 54%, 28%, and 7% respectively.

 When you look at the District budget and wonder what, so spectacularly, is going wrong, you just have to understand that the budget is based on an interconnected set of events.  All of these things were predicted towards the overly optimistic side.  Stebbins had no choice really because a realistic acknowledgment of the prospects for 2011/2012 would have been admitting the Hospital's acute care services were doomed and she was not prepared to go there.    Just some of the interconnected pieces that make up the District's budget:


1.  Acute care census (including critical care).
2. # of ER visits.
3.  % of ER visits that become inpatient admissions.
4.  # of inpatient surgeries.
5.  # of outpatient suregeries.
6.  Sub-acute census.
7.  SNF census.
8.  Medicare vs. Medi-Cal mix in the SNF census.
9.  Accuity of Medicare patients admitted to SNF.
10. Expenses for nursing (in all units).
11.  Other expenses.
12. Insurance mix for acute care services (Medicare/Medi-Cal/3rd party insured/private pay).
13. Sick time and vacation time.
14. Efficiency of personnel (such as the business office).
15.  Case mix index.
16.  Length of Stay (ties into census so may not be strictly separate).
17.  Disproportionate cost stays.
18.  Government reimbursement policies.
19.  Outcome of labor negotiations.
20. Outcome of 3rd party payer negotiations.
21.  Wound care center schedule.
22. Wound care center budget.

That's all I can think of off the top of my head.  Clearly, if each one of these represents anywhere from a 100,000 to 2,000,000 dollar swing in the budget and they are all estimated towards the high side  then you can have a budget which, on paper looks reasonable, but is impossible to meet.  That's what happened with last year's budget (2010/2011).  That's what is happening with this year's budget (2011/2012).  That's the flaw in the Waters Edge project analysis/budget.

You Can't Get Fooled Again.

Or can you?

The District will hold an orchestrated propaganda push on November 2.  The point will be to introduce the community to the Water's Edge project.   Let's look at the track record of Deborah Stebbins in predicting good things for the Hospital and having them come true.

1.  2009/2010 positive budget:  Oops, there was a positive number at the end of the year but  only due to an unanticipated surprise in the form of the IGT money from the State.  This is the best prediction she has made.  It gets worse from here.

2.  The renewal of the Kaiser contract:  Not so much.

3.  Completion of a financing plan for seismic retrofit:  Uh uh.

4.  Profits from the 1206b clinic:  Not really.

5.  The wound care center open in 2010/2011:  Still not open.

6.  The wound care center providing positive contribution in 2010/2011 and again in 2011/2012:  Hope you weren't holding your breath.

7.  A 2010/2011 positive budget:  Only if you think losing millions equals "positive".

8.  A 2011/2012 positive budget:  Maybe it was going to be too easy, so she decided to start with a $580,000 loss in only three months to give herself a challenge.

9.  The 50,000 administrative fine from DHCS has a chance of being reversed on appeal:  I am confident enough in this failure of Stebbins's predictive powers to say it publicly even though the actual decision may take a long time.  Snowball's chance in Hell doesn't even begin to describe the futility of this appeal.  Even though it is a smart business/public relations decision, it only postpones the inevitable.

10.  Finally and most distressing is the prediction that is going to be credulously believed by too many that the contribution of the Water's Edge project will save the Hospital.  Also, the idea that the escape clause is anything but a multimillion dollar liability that will be litigated when it has to be exercised.  (The Zimmermans, owners of Waters Edge, are not going to give up over $20,000,000 of guaranteed income without a fight.)

Unless Director Chen bucks the formidable pressure that will be brought to bear on him, the District is going to be in an even bigger hole on November 8 (after a November 7 Board resolution to approve this impending disaster).  Of course, most people have learned the following lesson well:  better to be wrong and with the crowd than right and standing alone.  Who could blame Director Chen if he votes yes?  After all, Director Battani and Director McCormick plan to vote with Stebbins (because they believe in her and based on her track record why shouldn't they).

Worse than I Imagined

That was my reaction when I saw the bottom line number for September.  A 349,000 loss in just one month so early in the year!  The District has lost over half a million dollars in 3 short months (585k to be more 8precise).  The variance to budget is over three quarters of a million dollars in just one quarter (780k to be more precise).  And this is with the added benefit of an additional 40k per month because the IGT funds are boosted over the planned budget.  Stebbins wants me to believe that she can accurately forecast the intricacies of a deal 20 years out requiring a commitment of over 20,000,000 dollars to the Zimmermans and an operating budget exceeding 1,000,000 dollars per month and she cannot even come close to the mark on a budget that she prepared less than six months ago!

Mark my words, the District is going to be stuck holding the bag (Stebbins has her 18 month severance - a 400-500k golden parachute plus pension benefits)  when, the distinct part contribution is not enough to make up for the acute care losses (and that assumes there is any contribution to be had in the first place).  Then the District will have to test the escape clause and woe to the taxpayers of Alameda when they find out how expensive this deal (Waters Edge) ultimately becomes.  Remember, the Waters Edge deal adds not a single SNF bed for the taxpayers of the District to benefit from; in fact, it raises the price and limits the availabiltiy of SNF beds within the District boundaries.

No Accountability

During this year's budget debate, I suggested that the numbers were overly optimistic, unrealistic, and inaccurate.  My fellow Board members disagreed, sometimes vehemently.  Here we are some months later and Management presents another set of numbers that are overly optimistic, unrealistic, and, in my opinion, likely inaccurate. 

And the vaunted escape clause for this project is inadequate at best and worthless at worst.  The clause allows AH to begin the process of termination,  not for any reason, but only for the reasons outlined:
(And the lawyers can and should correct me if I'm wrong.  I would be comforted if AH - AH? Are we not the City of Alameda Healthcare District?  why is the Hospital always the be all and end all of what people think we should be doing instead of concentrating on improving healthcare outcomes? - had sole discretion for any reason, or no reason,  to exercise its termination option, but I am pretty sure that is not the case.)

1.  Regulatory reasons:  This would be easy for the Zimmerman's to argue that AH overreacted.
2.  Elimination or "drastic" reduction in reimbursement:  Drastic is not defined so the Zimmerman's can easily argue that there is no problem here.  The District's own analysis points out that contribution is positive even when distinct part reimbursement drops to freestanding levels.  Never mind that this analysis is incorrect, I wonder if it might lead to an expensive legal fight.  Also, what does drastic mean, is it relative to the rate today or relative to each bill passed by the Legislature.  What if rates are just reduced 5% more and then frozen for the next 20 years.  Does that qualify as "drastic"?
3.  Adverse regulatory or statutory requirements:  Similar problem as 1 and 2 above.

What is missing is an escape clause if the District no longer qualifies for distinct part because it wants to close down its acute care services.  Read the clause again, absent a forced closure by the State, I am not sure that this qualifies unless you read everything after "no longer continue to operate a distinct part SNF whether ..." as moot.  But that won't happen because the argument will be that the language would not be present if it was moot.

So there is a good chance that this much touted escape clause which, at a minimum requires continued payment of a minimum of 9 months at the current lease rate plus significant liquidated damages plus the absorption of at least 9 months of operating losses (and losses are almost guaranteed during that 9 months because, otherwise, why would the District be exercising the termination clause in the first place?).  In addition, operating losses have to be continued to be absorbed until every last patient has been placed.  This is a potential liability far in excess of the numbers that management presented in the non-standard, "ROI/Contract Risk" analysis (an approach and presentation I have never seen in my career).  The number easily could be over $5,000,000 and maybe even more because, after all, operating expenses in their own analysis are over $1,000,000 per month.  Management has presented a rosy scenario where the District chooses to exercise its termination option while it is still making money.  Does nobody else see the contradiction in that analysis?

So back to the budget; Management has already missed budget in just two months of reported results by over half a million dollars.  Shouldn't we be asking Management why we should believe them this time instead of complimenting them on their hard work?

Public Forum Scheduled

November 2, 7:00 pm. 

This was posted on the District's website with no other details.  I assume there will be a presentation with a Q and A following, but nothing else.  I intend to be there so if two of my fellow Board members are going to be there as well (I think Stewart Chen said he planned to come) then it will probably have to be noticed as an official special meeting.

Predictions and Observations

Predictions:

1.  The District will never realize the contribution identified in the presentation.  I cannot say if theis SNF proposal will lose money, but I am 95% sure it is overly optimistic.  The tell is the "sensitivity analysis' that showed a $39k contribution assuming that the District was reimbursed at free-standing SNF rates.  Mr. Zimmerman is no dummy; he is a skilled businessman.  If it was that easy to make money then he would not be giving up this lucrative business.  That 39k contribution is after the Zimmerman's are paid their lease and is with lower reimbursement rates than they receive now (since their private pay rates are higher than the Medi-Cal freestanding rate).  Also, the 39k is with higher expenses than the Zimmerman's currently have.  The District can argue that they are better able to maximize Medicare reimbursement, but, if it was so easy and lucrative then Mr. Zimmerman could hire very expensive expertise to recruit Medicare patients (there is no "distinct part" Medicare) and come out way ahead.  Ergo, the numbers are inflated - 95% certain.

2.  The South Shore Medicare reimbursement rate average is less than $619 per day.  I make that prediction with an estimated 50% chance of being right.  When someone asks for a single number and, instead, the answer given is something slippery like "72% of the South Shore patients are reimbursed at or above $619" then you either do not have a clear understanding of how to answer a question clearly or you are trying to obfuscate the answer.   $619 is not the right number for South Shore - only 50% chance.

3.  AB97 reductions with respect to distinct part will be approved.  This is 99% sure thing.  The standard CMS must use is whether the Medi-Cal rate will cause unequal access for Medi-Cal patients vs. private pay.  Since the distinct part rates exceed private pay rates, CMS would not have a leg to stand on in denying this part of the state plan amendment.  There are other parts of AB97 that certainly may cause CMS to deny portions of the SPA, but this part will be approved.  AB97 is not a all or none thing so even if parts are denied, this part can still take effect.  In fact, that is how the bill was written to allow any parts that were approved to go forward even if CMS denied other parts.  All of Stebbins's talk about her hope that AB97 changes will be rejected by CMS ignores this part of the equation.  AB97 reductions in distinct part are eventually upheld - 99% chance.

Observations:

1.  There is a certain amount of hubris/risk in relatively tiny Alameda operating the 2nd largest distinct part SNF in the State (that is what my preliminary research shows - please correct me if I'm wrong).    Somebody might see that as inappropriate use of this program and move to amend it to exclude this kind of blatant opportunism. 

2.  I'm sure that Jordan Battani's interest in expanding SNF options is sincere, but since this proposal adds zero beds to those already available in Alameda, I'm at a loss as to how she thinks this helps.  In fact, by removing private pay beds from circulation, it actually goes against her and Director McCormick's stated preferences.  I mean, look at the assumptions, most of the private pay patients who are stably housed at Waters Edge will be forced by economic pressure to move - the exact opposite of Battani's and McCormick's stated desire. 

3.  The District was ready with a press release trumpeting the vote the Board took, but has no concrete plans for the public forums.

4.  Certain Hospital building might meet 2030 SPC requirements (but not 2002 NPC requirements? hmm) but not without expensive work to shore up or tear down other structures so, in fact, in the broader context, that is not really an accurate statement.  A March 24, 2006 letter from Roy Lobo assigns a SPC-1 rating to the West Wing so I am unclear why Management thinks it is close to SPC-3 unless soil testing submitted this year has changed something (and what about NPC-4?).  Also, the letter dated January 13, 2005 states that the South Wing is declared SPC-3, but that testing needs to be done to confirm that.  I don't know if the "steel moment resisting frame joints' have been tested subsequent to that letter. [Both these letters were in the 1/10/11 Board packet..]

Incomplete, Rushed, and Risky

That would be my analysis of the proposal that has been laid before the public for the 10/10/11 Board meeting.  This discussion has been going on in closed session much longer, but, even after multiple attempts, I do not have the questions I asked answered.   Hopefully, I can provide a useful framework for people who are trying to get this quickly.

Opportunity:  Skilled Nursing expansion.  The reason this is "expansion" rather then "new" is because the District already operates SNF (Skilled Nursing Facility) beds at South Shore.  You can see those additional beds on page 62 of the packet (page 19 of the August unaudited financials) where, in FY 2008, there was a bed capacity of 135 and it increases to the current 161 in FY 2009.

Revenue:  SNF compensation for the District has 5 (updated from 4) components.
1.  Private pay -  This is very small because, unlike the Hospital,  SNF beds are not allocated without evaluation of ability to pay.  Similar to how you are evicted or foreclosed upon if you do not pay your rent or mortgage, the same would happen if the SNF bill was left unpaid.  Because the District is reimbursed by Medi-Cal at a significantly higher rate (distinct part reimbursement)  than private, freestanding nursing homes (such as how the current Water's Edge) there is little reason for private pay patients to use District beds at a higher cost to them than the alternatives.  This is why virtually all of the private pay clients left South Shore when it was taken over by the District and why the plan presented, similarly, calls for private pay to be reduced to less than 5%.

2.  Medi-Cal - This is the bulk of the beds.  These beds are reimbursed on a cost basis up to a cap.  The current rate is $315, if I read the financial information in the packet correctly.  This is after the AB97 changes have been rolled into the analysis.  I believe that CMS will approve the AB97 reductions, but CEO Stebbins has always expressed the hope that CMS will reject AB97.   [I would like to see this decision delayed until the Board sees whether a pessimistic outlook for reimbursement is appropriate (my view) or a more optimistic one (Stebbins's view).]  The majority of the patients at South Shore and at the proposed Water's Edge will be Medi-Cal.

3.  Medicare - These are Medicare patients who are placed in short term care for, I believe, up to 100 days per incident.  The rules can be complex for both the patient and the facility, but this revenue is higher than that offered by Medi-Cal because Medicare, in general, is a more generous payer, and because these patients need more services so the reimbursement is correspondingly higher.  [I believe the $619 per day average that this proposal uses is overly optimistic.]  Management should provide a comparison to South Shore reimbursement averages to validate the $619 average rate.

4. Other (Updated because I forgot this one in the first iteration of the post) - This would be private, 3rd party insurance.  The numbers are not large and the rate ($450/day)  is half way between the Medi-Cal rate and the Medicare rate.  It is unclear to me what this rate is based upon. 

5.  Dilution - This one is non-intuitive and here I will agree with those who bemoan the complexity of healthcare accounting.  Basically, this component of revenue is embedded in the $315/day Medi-Cal rate because that number is partially cost based.  Since Water's Edge operating as part of the District uses District resources that also are used in operation of the Hospital, the cost allocation for reimbursement is shared between all of the services/operations of the District.  By acquiring the Water's Edge beds, these shared resources can be cost allocated across a broader base.  At the Hospital level, this means cost savings (for the most part).  At the SNF level, it is an additional expense, but an additional expense that is compensated for by the government as a cost of doing business so this dilution of overhead becomes revenue to the District in the form of higher reimbursement rates on SNF beds.  Because it already is revenue in the reimbursement area, it becomes negative revenue when calculated for presentation purposes (because the allocation interacts with a reimbursement cap for Medi-Cal rates).


Expenses:

I do not have to say much about expenses except to observe that Management plans to operate Water's Edge more cheaply than South Shore.  In fact, I wish there was a pro forma comparison of this expense with South Shore's on a per bed basis, but that has not (and my understanding is will not) been provided.
 

Risks:


1.  Overly optimistic budget forecasts:  I think this one is the most obvious.  Stebbins and I may disagree about the quality of her success in meeting budget projections in 2009/2010, but there is no question that 2010/2011 was a failure.  So far, in 2011/2012, the budget projections versus actuals have not been encouraging.  In just two months of reported results, the District is missing its budget by over $500,000.  Projected over the year, that would be a miss of millions which means that the Water's Edge proposal, even if it meets all of the budget projections (formed by the same people who formed the District's budget projections) does not make up the gap.

To put a spotlight on what I mean by overly optimistic, in actual operation, the District has missed its budget projections for revenue in just the first two months of the year in the 6 to 7% range.  When I asked for a sensitivity analysis on the projections in this proposal, the District's pessimistic scenario reduced first year patient days by only 5%.  So in a business that they have been intimate with for years, the District misses budget by 6-7%, but Management considers a "pessimistic" scenario to be one where they only miss budget by less than 5%.   That is just one example.

2.  Acute Care Services are interrupted so Distinct Part Reimbursement is unavailable:  The District must operate acute care services to be entitled to the higher Medi-Cal reimbursement rates.  For me, this is a huge negative to the proposal, but, I suspect, it may be a positive for other Board members because it raises the stakes for changing acute care services.  There are two risks that I can see here.  The first one is that the State finally decides to enforce current seismic retrofit regulations.  There are both NPC and SPC requirements, but the ones that the Hospital is currently not in compliance with

The NPC-2 requirements

"After January 1, 2002, any general acute care hospital
building which continues acute care operation must, at
a minimum, meet the nonstructural requirements of
NPC 2, as defined in Article 11, Table 11.1 or shall no
longer provide acute care services."

If the state were ever to enforce this regulation or subsequent SPC regulations then the Hospital would lose distinct part reimbursement and thus, lose money on the SNF.    The proposal goes out 20 years to 2031/2032.  I think that it behooves the Board to understand the risk of not being able to complete seismic work relative to this proposal.

 The second risk is one I touched on in risk #1 above which is, despite the District's best efforts, acute care services continue to lose so much money that a radical restructure would be needed.  This proposal does not fully incorporate this risk.   In fact, I consider the "ROI/Contract Risk" analysis as to be so wildly misleading that they should be pulled from the packet.  I have never seen anything like that in my career.

3.  Reimbursements are Reduced:  This one speaks for itself.  The California budget crisis is not over.  Beds are available to Medi-Cal at freestanding SNFs at a much lower rate than distinct part rates.  That seems to me to be low hanging fruit for budget people at the State.  Sure there might be challenges for the State if they did that (such as Laguna Honda in San Francisco), but I think those challenges would be overcome by special deals that excluded the District.  There would be little political sympathy for a small, money-losing entity that had still not spent the money to complete seismic retrofit.  I think the Board could get a sense of what direction this might go by, as I suggested above, waiting to see if AB97 is rejected before approving this proposal.

Hopefully this helps people trying to digest the Water's Edge material.  Any comments are welcome (although I understand that blogger has a tendency to swallow comments - movement to wordpress may be  imminent.)  If you have a question and do not wish to or cannot comment here then email me and I will try to respond ASAP.

Placeholder for 10/10 Board Meeting

I want to wait until the District gets the full Board packet up this evening before commenting.  My earlier post is here.  This opportunity does not increase the number of beds available for SNF services since Waters Edge is currently operating and will, as far as I know, continue operating whether the District takes it over or not.  Thus, it must be evaluated on the basis of whether it makes financial sense.  For that question to be answered, a critical look at the numbers that Management has provided is necessary.  Of course, the initial take is very good; otherwise, why would they bring it to the Board?   The question is whether the incentives to shade the presentation so as not to have to admit a mistake (or the futility of the Hospital's financial plight) is overwhelming accurate analysis.

Update:  I may soon move from blogger to wordpress.  It looks like an easy transition and although I don't know it to be better than blogger, that's what everyone has told me.

I Admit It

I guess it's time to stop blaming others, own up to my mistakes, and come clean.

Not for suggesting the Alameda County Registrar of Voters made a mistake when they failed to use my official declaration for my ballot designation.  It's pretty clear they made a mistake on that one:

If a candidate is licensed by the State of California to engage in a
profession, vocation or occupation, the candidate is entitled to consider it
one of his or her “principal” professions, vocations or occupations if (i) the
candidate has maintained his or her license current as of the date he or she
filed his or nomination documents by complying with all applicable
requirements of the respective licensure, including the payment of all
applicable license fees and (ii) the status of the candidate's license is active
at the time he or she filed his or her nomination documents.

 Not for suggesting that the Alameda County Registrar of Voters should not have altered my official declaration and, instead, should have notified me if they were proposing to use an alternate.  At which time, I could have argued for my original designation (which I 100% was entitled to) or chosen another alternative:

An official copy of the decision of the Secretary of State regarding a
candidate's ballot designation will be made in writing and transmitted directly to
the candidate by registered or certified mail, return receipt requested, to the
address provided by the candidate. The Secretary of State shall also provide a
copy to the elections official in the candidate's county of residence and to the
elections official of each county within the political subdivision. Copies may also
be made available to all other candidates in the race.

And (Indeed, I did request to be contacted if there was any issue):

At the request of the candidate, the Secretary of State will transmit an
unofficial copy of the decision of the Secretary of State regarding the candidate's
proposed ballot designation by facsimile transmission sent to the facsimile
number listed on the candidate's Ballot Designation Worksheet. When the
candidate does not have reasonable access to a facsimile machine, the Secretary
of State will transmit to the candidate, at the candidate's request, an unofficial
copy of the decision by means of overnight express delivery to the address listed
on the candidate's Ballot Designation Worksheet provided. If the candidate has
not submitted a Ballot Designation Worksheet, the Secretary of State will
transmit an official copy to the facsimile number provided by the candidate or, if
the candidate does not have reasonable access to a facsimile machine, by
overnight express mail to the address provided by the candidate.

I won't apologize for not being ashamed of being designated a pharmacist when the Alameda County Registrar of Voters made their mistake and took away my first option because, of the choices left, "pharmacist' was unfortunately, probably the most accurate (it is truly a shame that intern pharmacist was removed as a choice without notification to me):

4030. Intern Pharmacist
"Intern pharmacist" means a person issued a license pursuant to Section 4208.

4114. Intern Pharmacist: Activities Permitted
(a)
An intern pharmacist may perform all functions of a pharmacist at the discretion of and under the direct supervision and control of a pharmacist whose license is in good standing with the board.

1793.1. Duties of a Pharmacist.
Only a pharmacist, or an intern pharmacist (emphasis added) acting under the supervision of a pharmacist, may:
(a)
Receive a new prescription order orally from a prescriber or other person authorized by law.
(b)
Consult with a patient or his or her agent regarding a prescription, either prior to or after dispensing, or regarding any medical information contained in a patient medication record system or patient chart.
(c)
Identify, evaluate and interpret a prescription.
(d)
Interpret the clinical data in a patient medication record system or patient chart.
(e)
Consult with any prescriber, nurse or other health care professional or authorized agent thereof.
(f)
Supervise the packaging of drugs and check the packaging procedure and product upon completion.
(g)
Perform all functions which require professional judgment.

I will not apologize for my article in Synapse.  I am actually quite proud of the quality of the writing in the article.  It perhaps does not have the tone of gravitas that some people hoped for and there are some minor editorial errors which certain people have tried to latch onto so as to shift the blame to me.   I like the last paragraph especially since it sums up the campaign for me.  I like the whole article, but I'll just quote that final paragraph:

The race is a minor one far down a relatively long ballot so who knows what the ultimate result will be. In my favor is the healthcare related profession listed next to my name, the fact that there are three positions for four slots, (I may feel a slight sting of humiliation if I can’t win with those odds.) and that there may be more people who agree with me than I thought. After all, the owner of the local pizza place surprised me by telling me that she voted for me as she handed me my order for our street’s Halloween party. She told me that until she saw my name on the ballot she didn’t even know I was running. For me, it hadn’t occurred to me that anyone would notice.

(ed.:For the record, "intern pharmacist" has just as much a healthcare related ring to it as "pharmacist" so I doubt that the difference of one word swayed those people who were comparing my ballot designation to "Business Owner/Attorney".  After all my margin of victory was over 750 people.)

I will not apologize for expecting that people who hold themselves out as leaders in the community and bloggers who claim to be unbiased observers should be able to easily see when someone has crossed a line of decency using words like "election fraud" and attacking me purely for purposes of revenge with inaccurate complaints that could literally destroy my livelihood.  Leaders and bloggers should not be hypocrites and/or cowards just because that's the most comfortable position for them to take:

OBAMA: We don’t believe in that. We don’t believe in standing silent when that happens. We dont’ believe in them being silent since. You want to be commander in chief, you can start by standing up for the men and women who wear the uniform of the United States even when it’s not politically convenient.

I will not apologize for contacting Leah Williams and asking one last time (before the year statute of limitations is up for a defamation suit)  for an apology.  I will not apologize when Leah Williams not only refuses to consider an apology to me but  could, maybe, even now, long after the election, be trying to make life difficult for me.

I will apologize for using a blogging system that, apparently, has a very poor interface for comments.  It led John Knox White to put up a maliciously inaccurate statement that he refuses to correct directly and only kinda sideways corrects in a subsequent post.  It has also led to consternation for supporters of my position such as Denise Lai so this is not a political alliance issue.

I absolutely apologize.  My fault for being too comfortable with a solution that was convenient and easy for me.  I should have realized that this would cause problems down the road.  I was warned and I ignored those warnings.  I promise, beginning tomorrow, to investigate other platforms.  As soon as I find one that is better (and free), I will switch to it.  Mea Culpa.

Generating More Heat Than Light

Some people will never be convinced no matter the documentation or the facts.  If anyone wants to read the 3 navel gazing posts then email me.  I am disgusted with many in Alameda and will not be shy about saying so, but I will not have arguments within my family.  For the record, the reaction was not, "That's wrong and unfair to Leah Williams".  The reaction was, "You don't understand, they don't care if people die, why should they care if your life is destroyed.  Truth means nothing to these people."

P.S.  I'm sure people have screen shots.  It is what it is.
P.P.S.  John Knox White's and Lauren Do's blog posts suggesting I am "the source" of all that happened are nothing more than a sophist "he was asking for it" defense of their political allies.

Hospital loses $100,000 in August

At this point the District is over 1/2 million dollars behind in its budget.  Not much else to say.  The entire packet can be found here.  I would be surprised if September can be positive since the 50,000 administrative fine will hit for that month and although there may be some modification to that in the future, my guess is it would be too early, from an accounting point of view for this to be recorded as anything but an expense/liability.

Give Me Money

1.  No updated financial reports so no way to tell if Management missed budget again in August.  These will be available for next week's Financial Committee meeting.  I am sure that they will be carefully prepared because, even though the original date was for today (that was  before the scheduling of the Special Board Meeting), Management, this morning, did not want to recklessly offer an opinion about August results.  Management (Stebbins) is very careful about controlling the flow of information.

2.  The major initiative outside of the current budget is the expanded long term care services.  The anticipated date of public disclosure is October 10, 2011.  (Actually disclosure will occur when meeting materials are posted.)

3.  Alex Briscoe and Debi Stebbins, I am guessing, are exchanging information (whether face-to-face, via email, or phone I am not privy to) regarding the use of funds from the County's uncompensated care moneys.  Even with the backing of Wilma Chan, I am a little bit surprised that this is such an easy deal given the needs of St. Rose, and ACMC (and its ancillary operations).  The magnitude is unclear.  Stebbins will likely be updating progress on this front in future CEO reports at Board meetings.


4.  The conversion of acute care beds to sub-acute I assume is ongoing, but we do not have firm dates yet as to if, or when, this might have an impact on the financials.  My guess is that, at this point, there is little material impact that will be possible in 2011/12 given the actual logistics and licensing hurdles that need to be addressed.


5.  Changes in the wound care center (which is an on-budget item) project will have a negative or neutral impact on meeting the budget.  From what I understand, opening is delayed and costs are anticipated to be higher.  This year's impact of the wound care program was small regardless.

6.  Additional IGT funds may become available.  I find this hard to believe and a diligent Google search does not reveal to me, the news that there might be an additional 700k available to Alameda for the current fiscal year.  Of course, the news would be that IGT funds were doubled rather than a specific reference to the District.  I just cannot find anything.   Maybe someone can provide me with a link or I will ask Management at the next meeting we are at  together for pointers to this information.

With all these irons in the fire along with the slim, in my opinion, chance that Management execute against the originally approved budget, the District could still meet it's 2011/2012 income goal.  Hopefully, management has enough time and energy to stay on top of all of these projects.  I am not encouraged in that hope by today's lack of financial results.

Odds and Ends

1.  There is a special meeting at 7:30 next Wednesday  morning to discuss "long-term care expansion".  It would be unprecedented, but I encourage anyone who cares to show up and speak at 7:30am either for or against this expansion before the Board goes into closed session.

2.  Again, I am limited what I can say by certain dishonest people but I think I am safe in saying that the information given for next Wednesday's meeting does not meet the criteria I laid out previously.

3.  The one year mark for my election to the Board is fast approaching (although I did not begin serving until a month afterwards).   It was that last meeting before I took office that the former Board (which included a Board majority of the current Board - Deutsch, McCormick, and Battani) gave CEO Stebbins a >$500,000 gift of 18 months severance. That Board also approved spending about a million dollars on a seismic retrofit project that will likely never happen.

4.  One thing that surprises people about the District is that the parcel tax is in perpetuity.  Another thing is that Board members serve without compensation (even Dr. Deutsch who does a great deal of business in and with the Hospital but that is, theoretically, unrelated to his Board membership).

5.  I can extend an offer to anyone the opportunity to comment anonymously, to the community, but not to me.  If you want me to repost a comment without any identifying information then send it to my email and I will post it verbatim (or send you a reply explaining why not). [Sorry to be cryptic, but to avoid spam - "my last name" then a period "the @ sign spelled out" then a period "alamedahospital" then the at sign "gmail.com"]

6.  I will be requesting of Management that the reports for August financials be available before next Wednesday's special meeting so that the adherence (or lack of adherence) to the 2011/12 budget can be evaluated as part of the process of assessing the credibility of the plans that will be presented in closed session.

UPDATED: 7.  One last thing.  I do not collect information about visitors to this blog.  Mainly because I am cheap and the free tools available for that sort of thing are not that good, but also because I am not totally comfortable with the idea.  My "hello management" comment in a post below was based on the idea that the "perception" that Stebbins was referencing would most likely have originated from this site and not on any examination of a list of IP addresses.

Notes for Board Meeting 9/12

[Sorry, I'm not going to respond to Lauren Do; I assume she knows the definition of statistical significance, but chose to ignore it.   I want to get these meeting notes out there and I will leave Lauren to her "fair and balanced" approach to Alameda news.  Obviously, she is a talented and prolific writer who has created a vibrant online community, but her self-appointed role as enforcer for a political clique she denies even exists is tiresome.]

1.  Not much to say about closed session.  The process of CEO performance evaluation has begun.

2.  Consent agenda was approved with the items below being pulled for individual discussion.
a. The regular meeting notes were amended by me slightly.  In the previous month's discussion on the use of electronic devices (still wondering how that resolution got on the agenda and whether Mr. Driscoll drafted it for free), Director Battani had made an assertion that materials that I wanted to read into the record were unavailable to the Board.  This was reflected in the meeting notes.  I just wanted to have the record corrected to  point out that I had not distributed that material but that it had been part of the materials delivered to each Board member.   Director Battani should have known since she puts the Board agenda together as President (more on that below).  Too many words to explain a trivial correction.
b.  ALPHA Fund Resolution is a self-insurance pool for workman's compensation.  This was the lowest price way to obtain workman's comp insurance although it requires membership in the Association of California Health Care District at a cost of $28,000.  This amount was not included in the analysis that management included with the packet.  It still was the lowest cost alternative and it means I will continue to get junk mail from the ACHD as one of the perks of being a District Trusteee.
c.  July, 2011 unaudited financial statements.  I tried to find out whether there was any additional measures management hoped to take to avoid continuing losses.  The short answer was "no".  The longer answer was that there might be some additional places staffing could tighten up.  Also, there is the unending hope for additional revenues.
d.  Approval of physician recruitment.  I abstained and thinking about it further wish I would have voted no.  This is a grant of up to 125,000 dollars to Alameda Family Physicians to pay for a new doctor in their office.  It is unclear to me how giving a large amount of money to fairly wealthy people to improve access for people who already have insurance is a good idea.  There is an access problem in Alameda, but it is not that dire for the insured.  An urgent care center would be much more beneficial than this use of funds, but Stebbins has denied that possibility because she fears it would cannibalize ER customers patients.  In other words she would rather route urgent care complaints through the ER where they are more remunerative to the Hospital even though that is more inefficient (and likely less profitable in the long run).


3.   The Board meeting for 10/3 was cancelled.  It is likely to be rescheduled for 10/10.  This Board meeting is intended to be the presentation of an expansion of SNF since the date listed for disclosure is 10/1.  I hope that Director Battani and Management give people sufficient time to evaluate the information that will be presented in support of the proposal.  Three days (or even five days) over a weekend is not going to cut it especially for the people, like me, who will assume, based on previous representations on other projects, that the numbers are less than completely trustworthy.

4.    District referrals policy was approved with one change which was denial of placement on the agenda would need to be at least four days in advance of the meeting so that the "2 person rule" could be invoked if necessary.  That is the rule that allows any 2 Board members to place an item on the agenda even if the Board President disapproves.  The discussion was confusing to me since it is the Board President and Management who, in my opinion, have been most likely to spring surprises on fellow Board members (such as the Physician Recruitment Agreement, this self-same resolution itself, or more annoyingly the electronic device resolution Battani unilaterally placed on the agenda last month).  Also, Battani claims that she has never denied a request which I believer is literally true, but she has certainly deflected and discouraged me from making requests.  Since I believe since my election, I am the only one who has made any type of request, I have to assume that this resolution only impacts me. 

5.  Do not recall if there was any President's Report.

6.  CEO Report.
a.  Stroke survey is this Friday, September 23.  Routing of stroke victims already resumed to Alameda Hospital.
b.  Possibility of receiving funding from Alameda County Uncompensated Care Program.  Director Chen asked what changed between now and previous times when the County has told the Hospital to pound sand when seeking these funds.  The answer for me, is that now big Hospital booster, Wilma Chan is on the Board of Supervisors.  My guess, although I haven't confirmed it, is that Chan sits on the Health Subcommittee that will approve any request from Alameda Hospital.  (She also sat on the State Subcommittee that approved the IGT funds in 2009/2010 - the surprise funds or "bluebird" that made the District cash flow positive that year.)  Not really a mystery why things changed; somebody please correct me if I am wrong.
c. IGT Update.  Stebbins claims that the pot will be bigger this year representing an opportunity for 700k more than budgeted from IGT funds.  Sounds like "happy talk" to me.  I'll believe it when I see it.
d.  Every month Stebbins will be highlighting a quality metric.  Hardly expect any actual discussion about these.  See previous posts regarding this type of information where the Board and Management choose to be willfully ignorant or just go on over to Lauren Do's blog for distorted analysis (or what passes for analysis).
e.  August volumes were up.  Case mix index was down.  Stebbins emphasized one and glossed over the other.  Dishonest or not?  You decide.  My prediction is that the District failed to meet budget in August unless the additional (unbudgeted?) parcel tax revenues (I think I heard about 200k) are booked as revenue for this month rather than last year.
f.  Alameda Hospital is offering tickets to the gala on October 1 for $175 per person.  I cannot afford that; have better places to make my charitable contributions, and would hardly be welcome.

7.  The Marina Village Wound Care Program is going to take longer than previously projected to get started and cost more than originally estimated.  This is the kind of thing that makes me doubt Management.  That kind of shading/spin/mirepresentation/consistent misforecasting usually flows straight from the top - in other words, Stebbins.

8.  Audit will be complete in October, I believe.  The results will not vary much it is assumed from the unaudited results with the possible exception of the 200k additional in parcel taxes.  I'm not entirely clear on that point.

Whatever you call it, is it really the whole truth?

Back in January, there was a discussion of stroke certification at Alameda Hospital.  CEO Stebbins was happy that the risk adjusted mortality rate for the Hospital for 2009 was not identified by the State as being statistically worse than the state average.  I was disgusted with the whole discussion and the comfort level the people in the room had with outright ignorance, especially the medical people.  For the record, Stebbins contended that these numbers showed Alameda Hospital doing a good job even though the statewide average for mortality was 10.4% and Alameda Hospital's was 12.6.

I made a statement about the statistics and was roundly ignored or even outright criticized for trying to apply analysis to these numbers.  Now that Alameda Hospital is authorized by the County EMS to receive stroke victims again, I want to revisit those numbers.  Here is a simple chart of the 2009 (most recent) numbers for the hospitals that County EMS will allow stroke victims to be brought to if within 4 hours of onset of symptoms:

Hospital	% Mortality
Alameda Hospital	12.6
Alta Bates Summit Medical Center – Alta Bates Campus	8.2
Alta Bates Summit Medical Center – Summit Campus – Hawthorne	7.8
Eden Medical Center	9.5
Kaiser Foundation Hospital – Hayward	7.3
Kaiser Foundation Hospital – Oakland Campus	7.1
Washington Hospital – Fremont	7.5
Stanford	7.7
San Jose Regional Med. Ctr	8.3
John Muir	9.2

7 of thes hospitals are in Alameda County and 3 are outside but listed in the County EMS manual.  If something doesn't pop right out at you when looking at those numbers then I have to conclude that you are innumerate.  Only one hosptial in that list has a double digit risk adjusted mortality.  Only one hospital has a rate that is below the statewide average ["below" means inferior in this sentence] .  But we, in Alameda, really do not care specifically about the statewide average, we care (or should unless you are trying to spin the numbers) about the alternatives where we may actually receive treatment.  The average for these 9 hospitals (excluding Alameda Hopital) is 8.1%.

Now I can take this one step further and will, but didn't earlier because I did not think it would convince anyone and because I am not a statistical expert ("a little knowledge is a dangerous thing") even though I am fairly confident that I know more statistics than the rest of the Board and Management ("in the land of the blind, the one-eyed man is king").  I used an online calculator like this one.  Given my hypothesis that Alameda Hospital is worse than average, I was comfortable using a one-sided test in which the difference is statistically significant  p=0.04 (less than 5% chance that the difference is due to random variaton).  A more conservative approach where the hypothesis is simply that the two proportions are not equal uses a two sided test where the difference, in this case, is not statistically significant  p=0.14 (less than a total of 5% chance that the difference is due to random variation but split between both sides of the distribution - 2.5% chance on each side).  Of course if you are a Bayesian and your prior is that Alameda Hospital is likely inferior in outcomes , then you don't even have to resort to a test since the number for Alameda is the worst of the lot.

So you can decide whether I was doing a little spin of my own.  I think whatever you decide about my statements, you can readily conclude that Stebbins's contention that these numbers showed that these quality metrics are no cause for concern is a significant overstatement.

Dishonesty

So the comment in this post did not refer to Deborah Stebbins or the new service being considered.

But let me give an example so any reader can independently evaluate why I do not believe the arguments for the new service will be honestly presented.  The following is quite representative of the type of statements that Stebbins will make and which I consider less than truth, the whole truth and nothing but the truth.  In the video for the September 12 meeting.  Stebbins states (about 1:05):

"But I have to be honest that the majority of what will improve, even beyond what we have budgeted, and I think there is a perception [editor: Hello readers associated with District Management] that we have not hit budget in the past few years.  In fact, prior to 2011, in 2009/2010 we exceeded our budgeted bottom line. We hope to do that again; that's always our target to exceed budget."

Now this quote contains two ideas conflated.  One is that the perception that the District has not hit budget is incorrect and that 2009/2010, was, in fact above the budget.  (Why can I hear John Stewart in my head going, "Pow! Take that Mr. Gorelick, can't execute a budget?  You're so wrong; 2009/2010 was awesome!")

Stebbins has been CEO of the District for almost four years.  She should consider herself primarily responsible for the financial performance for 2007/8, 2008/9, 2009/10, and 2010/11.  The June 30, 2007 audited financial statements show net assets for the hospital of 9.9 million dollars.  The June 30, 2008 audited financial statements show net assets of 7.4 million dollars.  In other words, In her first year as CEO, Stebbins underperformed the budget by 2.5 million dollars.  The June 30, 2009 audited financial statement show net assets of 8.1 million dollars which overperformed the budget by a significant amount (some 600k).  A mixed bag through those first two years, but nothing to suggest a fundamental problem.

In 2009/2010, the budget called for the hospital to have a net income of 360k and the June 30, 2010 audited financial statements show net assets of 10.1 million dollars.  In other words, a net income of about 2.0 million dollars which greatly exceeded that years budgeted number.  In fact, Stebbins at this point had added slightly to the net assets from the time she took over.  (Keep in mind though that this feat -about a 200k increase, even without the closer look I want to take below, was only possible with over 17 million dollars of tax subsidy from the parcel tax.  Perhaps not so great a performance?) 

Let's take a closer look at 2009/10 (all numbers unaudited - in thousands):

Month     YTD Budget     YTD Actual     YTD Cumulative
7/09             18                     61                  +43
8/09             34                   103                  +69
9/09           104                   107                  +  3
10/09         127                   142                  +15                 
11/09         cannot access - 404 error
12/09           74                  (151)                -224
1/10            133                 (  74)                -207
2/10            205                 (  30)                -235
3/10            233                 (    5)                -228
4/10            319                 (245)                -564
5/10            340                 (353)                -692
6/10a          359                 (335)                -694
6/10b          ---                  2165              +1471

So look at the line labeled 6/10b.  That line represents the IGT money received by the District which was NOT part of the budget for 2009/2010.  Without that "bluebird" as Director Battani characterized it, there is no way that Stebbins could have "exceeded our budget bottom line" for 2009/2010.

Furthermore, as I have documented here, there is no way that Stebbins can contend that Management came close to meeting the 2010/2011 budget.  The unaudited results suggest a miss of between 1.5 and 2 million dollars (depending on how you true up surprises).  We also know that Stebbins (and the management team) cannot point to July, 2011's results as any indication that they can follow a budget.  In just one month, 135k has already been lost which means a miss vs. budget in just one month of 238k. 

Bottom line, the Hospital has lost money over Stebbins's tenure, not come close to generating enough cash flow to fund the seismic retrofit, and only survives due to "free" money either in the form of the parcel tax or IGT money.  Readers, please evaluate this information and judge for yourself whether that "perception" she calls out is a misperception or reality.

Fiduciary Responsibility

I always assumed that being on the Board of the District meant I had a fiduciary duty to the citizens of the District (whether they voted for me or not).  Maybe I am wrong and there is no such obligation.  Certainly, some of my fellow Board members act as if there is no reason to exercise utmost care in spending money or evaluating new investments.  I mean when Director Battani can chastise me publicly for caring whether the District will be in violation of loan covenants or get upset that I ask too many questions about the budget, then clearly, (just my opinion) fiduciary responsibility is not at the top of her priority list. 

Nonetheless, I boil down my approach to evaluating investments to 3 questions:

1.  Do I trust that execution will be successful?  This encompasses an evaluation of the credibility and competence of the team charged with overseeing the investment project.  I look at track record (has this management team met budgets in the past?  have other projects been completed in a timely manner?  have commitments made in the past been met?).  The Board majority apparently answers these questions affirmatively for the current management team although I look at the near constant losses, the missed dates on the wound care project, the loss of the Kaiser contract, and the seismic retrofit debacle (I could actually go on, but I think this is sufficient) and cannot fathom my fellow Board members' thinking.

2.  Is the analysis thorough and accurate?  Bland reassurances with spreadsheets that have no backup and are not provided on a timely basis are hardly confidence building.  The amount of analysis should be proportional to the size of investment.  Any numbers should have justification and backup that can be readily referenced in real time.  Putting the package together for evaluation should be considered a project and if deadlines are missed or the information presented has obvious flaws then that should be a huge flag.  Of course, if the team presenting the information has shown themselves to be willing to lie, fib, or shade the truth (just different degrees of dishonesty) in the past when doing analysis then there is little reason to proceed.  A very smart blogger, d-squared, had this to say in another context:

Fibbers' forecasts are worthless. Case after miserable case after bloody case we went through, I tell you, all of which had this moral. Not only that people who want a project will tend to make innaccurate projections about the possible outcomes of that project, but about the futility of attempts to "shade" downward a fundamentally dishonest set of predictions. If you have doubts about the integrity of a forecaster, you can't use their forecasts at all. Not even as a "starting point".

 (Actually the original context was investment.  He translated this lesson to politics.  Since District Board membership has both a political and fiduciary element, it applies doubly.)

3.  Have the costs, benefits, and risks been presented?  It's fine to talk about the wonderful things that a project will yield.  The analysis may show that the investment has a great return, but unless you factor in risks, then the job is less than half done.  After all, a lottery ticket pays off millions for just a dollar investment, but the probability of winning is very small.  Every project has risks and the individual elements within a project has risks too.  An analysis might have zero spread in the anticipated revenues, but huge variations in the anticipated expenses for example.  If the analysis is presented without a discussion of risk and, preferably, a sensitivity analysis of the relevant elements then it is incomplete.

People who would never make a personal investment or act in their job while ignoring these principles are quite happy to throw them out the window when it comes to the Hospital.

Stupid, Stupid, Stupid

From the 9/12 closed session agenda:

Discussion of Report Involving Trade Secrets:

1. Discussion of Hospital Trade Secrets applicable to development of new
hospital services, programs and facilities related to long-term care
expansion. No action will be taken.

Estimated Date of Public Disclosure: October, 2011

Under the Brown Act, I could and probably should (given my responsibility to the community) say much more but I am hampered by what I can say by, what I consider, certain dishonest people making dishonest threats.

50,000 Administrative Fine

Some quick, relatively unfiltered thoughts:

1.  The first I knew about this was last night at about 10:30pm.  I am going to find out whether that's a problem or not by reaching out to people who fill out these types of forms and deal with the State.  They can tell me whether the Board should have been or was informed (it happened prior to my election) and whether there would have been advance warning of the fine.  If I should have known about it before the news report then that is obviously a problem.

2.  This was one fine for multiple patients.  Not all of the patients in the report were of the same level of concern.  Just by reading the report (and I do not know to what extent the report is one-sided), in my opinion, the case of patient 2 is clearly malpractice (my opinion only).  Keep in mind that patient 2 was hospice and likely unconscious so I am not sure how much loading him up with an inappropriate dose of narcotics hastened his death, but it appears, from the report, that it did.

3.  I know that the interim pharmacy director has been terminated, but I do not know who the other people identified only by number are.  Therefore, I do not know what action may have been taken.  I have barely skimmed the "plan of correction" side of the report so it may be right there in the Hospital's response.

4.  I will be inquiring as to whether there are any other 2567 plan of corrections that have been filed in the last two years to try to minimize surprises like this in the future.

In summary, clearly things went wrong and it was a process problem and not a single incident.  Hopefully, the Hospital has made the necessary changes; the State has approved the plan of correction so it appears that they are satisfied for now.

Preliminary Board Packet for 9/12

The preliminary Board packet is up at the District's website.  I have already commented on some of the financial pieces.  I am not sure why the rest of the Board is so sanguine in the face of continuing losses. 

I am of mixed emotions regarding one item in the packet.  In a letter dated August 25, 2011, Joe Barger, Alameda County Interim Medical Director, approved routing of stroke patients to Alameda Hospital as of August 29.  Just noticed the press release, and, so far, no change to the online EMS manual.  I say I am of mixed emotions because although I would never, if at all possible, want to receive care for a CVA at Alameda Hospital (please note that to anyone who may be around if I have a witnessed event, I want transport elsewhere!), the Hospital did set a goal and meet it.  The original press release is here (scroll down a bit) and, although it's been 10 months when they originally stated 6 months, missing a schedule by only 4 months is much better than most initiatives Management has been working at.

Last item is not related to the Hospital, but is related to strokes.  A great study published in the NEJM shows that a stroke treatment which many thought would be beneficial was in fact quite harmful.

Need a Hospice Plan

Certain patients in the hospital have no chance of recovery.  The medical team struggles mightily, but their health continues to deteriorate.  First one organ and then another starts to fail until nobody remembers what the patient was in for in the first place.  Now all they are is just a bunch of tubes, medicines, and procedures; making sure no mistakes are made in the regimen and hoping that they don't die on your watch becomes an end in itself.  At that point somebody might suggest a palliative care consult (it should have happened much sooner actually).  That meeting may go well if the patient's family understands the situation or it can go poorly with people accusing the medical team, other members of the family, and the insurance payor as just trying to kill off the beloved family member because that's more convenient/saves money/or they never really liked him/her.  Thing is, the patient dies eventually no matter how fiercely the family fights. 

Highlights from the Finance and Management Committee Packet for tomorrow (8/31) at 7:30 am:

1.  135,000 loss for the very first month despite the cost savings measures being pretty much fully implemented.  The District did this horribly despite successfully performing on the expense front favorably to budget.

2.  Only 250k drawn down on Bank of Alameda emergency line of credit, but no pay down on accounts payable.  In fact, accounts payable increased by over 350k.

3.  I like the presentation of fixed assets that breaks it down more.  Construction in progress in over 3 million dollars and the part of the number that is associated with the seismic retrofit is pretty much worthless in my opinion.

4.  The "cushion" on the 1:1 current ration is down to 930k.  This does not factor in any issue with possible CMS reduction in the IGT reimbursement.  Since the IGT reimbursement is still on the balance sheet, I assume that there has been some indication of when it will be paid finally so maybe there was no reduction after all.  (Also, no update on the SPA for the skilled nursing facilities, but I would be surprised if CMS does not approve it.  Luckily, the reduced compensation is build into the budget.  Unfortunately, the District is already missing its budget by 238k.)

5.  Mandatory stroke training in July negatively impacted the nursing budget in July.

6.  Cash is down to below 700k but there is 500k left on the emergency line of credit plus eventually the IGT funds will be returned so this seems manageable.

It is [fill in your favorite word for not taking care of business] for the Board to not direct management to create a contingency plan for winding down acute care operations.  Management should be recommending to the Board that they engage in that planning on their own initiative.

It seems that a reference to the old quote about the inevitability of taxes and death is the best way to end this entry.

Current Affairs

So I promised to revisit the balance sheet when I had the chance.  I want to talk about the current ratio because it is one of the reasons I refer to the District as being a financial disaster and because current ratio is part of the modified Bank of Alameda loan agreements.  Current ratio is just Current Assets/Current Liabilities.  It is unclear whether, if push came to shove, the District would include restricted assets in that calculation, but, for now, they do not.  The current ratio needs to stay greater than 1.0 to be compliant with the modified loan agreement.

Now  the 2003 current ratio is a respectable 3.08.  That is a fairly desirable number.  It's actually even better since there was enough cash and liquid investments to cover 100% of the current liabilities.  In fact, the District in 2003 had enough cash to pay down every debt to zero.  In 2011, the current ratio is a dismal 1.05 and the cash would barely cover 10% of the current liabilities. 

For purposes of the loan, most likely the current ratio will dip below 1.00 at some point in this fiscal year, but that event may or may not coincide with the quarterly test dates (9/30/11, 12/31/11, 3/31/12, and 6/30/12).  For the current ratio to dip below 1.00, current assets minus current liabilities would need to be less than zero.  The Districts current "cushion" from this happening is a little under 1 million dollars --$970,785 to be precise.  Any combination of decrease in current assets or increase in current liabilities that totals more than this will cause the current ratio to fall below 1.00.

1.   Borrowing short term and paying off bills will not change the current ratio because it just rearranges the current liability numbers so accessing the emergency LOC from Bank of Alameda does not change much.

2.  Borrowing short term and holding cash or purchasing short term assets changes the current ratio (decreases it), but does not change the "cushion" because increasing the numerator and the denominator of a ratio by the same value just moves it closer to 1.00, but will not change the sign of the log.

3.  Borrowing long term and holding cash or purchasing short term assets changes the current ratio (increases it).  In fact, this is a desirable situation so I have never understood what it means to think that the lack of long term debt for the District is an especially positive aspect of the balance sheet.  Sure less long term debt is better than more long term debt, but, on the whole, adding to long term debt to adjust other parts of the balance sheet is almost always a positive.

4.  Borrowing short term and increasing fixed assets changes the current ratio (decreases it) and decreases the "cushion".  This is the main reason I believe that the District is almost guaranteed to have a current ratio below 1.00 because, until the wound care construction loan is converted, it is short term debt.  The wound care build out is fixed assets so with a draw of 700k, the "cushion" just got reduced to less than 300k at some point when construction is nearing completion, but conversion of the loan has not happened yet.

5.  Losses on a ytd basis that exceed 300k.  It will not be good enough for the District to make a profit in the coming year, that profit will have to be consistent on a year-to-date basis.  Someone can check me, but I do not believe the District has had more than 3 years since its formation where this was true.  Certainly neither of the last two years would the District have achieved this goal.

Two big numbers to watch for to determine if the District can maintain the 1.00 current ratio will be the July income numbers, after the parcel tax subsidy is applied, of course (positive is a positive sign and negative is terrible); and the final IGT number from CMS since even a relatively modest 50k hit takes away another 1/6 of the "cushion".