Wednesday, March 7, 2012
Tuesday, January 31, 2012
Well?
It is clear that the Hospital (as opposed to the District) is going to fail at some point. The reasons for that failure are manifest most prominently the lack of financial viability. Relying on the kindness of strangers (or friends) is not a business plan. At this point almost anything - the Bank of Alameda, DPHS, or a vendor - could trigger the event that shuts the Hospital down. What is the appropriate course of action?
1. Fire Debi Stebbins. Of course, I have been saying this for quite some time, but whether it is a football team or a corporation, the head of the organization needs to be held accountable. The advantage in terms of moving the District forward is that it publicly signals change AND it saves money (~25,000 per month).
2. Hope the State does not approve the Waters Edge transfer. There is one last hurdle before the District becomes contractually obligated to the Zimmerman family for millions of dollars. The financial strength (weakness) of the Hospital being what it is could provide the basis for California to not approve the Waters Edge license transfer. This would be a gift by the State to the District(and it has the advantage of being the correct decision given the tenuous financial position of the District).
2a. Enter into negotiation with the Zimmerman family immediately (would require a emergency or special Board meeting). Maybe they would be willing to take 250,000 right now to void the contract given the risk that the State may deny the license transfer.
3. Create a complete accounting of liabilities. As I have said in the past, the balance sheet debt of the District is only the tip of the iceberg. Until the Board understands how bad the problem is then it will be difficult to put the necessary plan into place. The liabilities that I am currently aware of that do not appear on the balance sheet: Employment contracts, Marina Village lease, Bank of America lease, fine payable to DPHS, Vendor contracts with guarantees and/or termination clauses, and the Waters Edge lease. My best guess is that these total between 3 and 5 million dollars excluding the WE project. I am not sure if there are certain unfunded pension/benefit liabilities that do not currently appear on the balance sheet.
4. Have legal counsel prepare a complete accounting of regulatory obligations including any notice timelines for things like closing the ER or for potential layoffs of employees. Also, any regulatory notice that must be provided to government payers.
5. Approach the County. Of course Alex Briscoe has his hands full already with the possible closure of San Leandro by Sutter plus the St. Rose financial debacle, but the County needs to be engaged. The question should not be "how can you give us money to keep the Hospital open?", but, rather, how could the District be restructured to provide a bigger bang for the buck for Alameda taxpayers.
6. Create a strategic plan. I am reluctant to suggest this because this step usually involves low quality, highly paid BS artists (otherwise known as consultants - see the compensation presentations done earlier last year for example). Maybe a non-profit (that was not compromised politically) would be willing to take on the task; perhaps the Berkeley school of public policy could provide resources. I would like to see this strategic plan include an urgent care center. It is also possible that the wound care center might survive closure of the Hospital. Obviously, the plan would be dependent on whether the District was burdened with the Waters Edge facility or not, but South Shore nursing would need to be addressed.
7. Put the plan before the voters. The District would need to make its case hopefully without misleading the public the way proponents did in the original vote. Terminating the District might be problematic, but drastically reducing its taxing authority could easily be done even if the District lived on.
1. Fire Debi Stebbins. Of course, I have been saying this for quite some time, but whether it is a football team or a corporation, the head of the organization needs to be held accountable. The advantage in terms of moving the District forward is that it publicly signals change AND it saves money (~25,000 per month).
2. Hope the State does not approve the Waters Edge transfer. There is one last hurdle before the District becomes contractually obligated to the Zimmerman family for millions of dollars. The financial strength (weakness) of the Hospital being what it is could provide the basis for California to not approve the Waters Edge license transfer. This would be a gift by the State to the District(and it has the advantage of being the correct decision given the tenuous financial position of the District).
2a. Enter into negotiation with the Zimmerman family immediately (would require a emergency or special Board meeting). Maybe they would be willing to take 250,000 right now to void the contract given the risk that the State may deny the license transfer.
3. Create a complete accounting of liabilities. As I have said in the past, the balance sheet debt of the District is only the tip of the iceberg. Until the Board understands how bad the problem is then it will be difficult to put the necessary plan into place. The liabilities that I am currently aware of that do not appear on the balance sheet: Employment contracts, Marina Village lease, Bank of America lease, fine payable to DPHS, Vendor contracts with guarantees and/or termination clauses, and the Waters Edge lease. My best guess is that these total between 3 and 5 million dollars excluding the WE project. I am not sure if there are certain unfunded pension/benefit liabilities that do not currently appear on the balance sheet.
4. Have legal counsel prepare a complete accounting of regulatory obligations including any notice timelines for things like closing the ER or for potential layoffs of employees. Also, any regulatory notice that must be provided to government payers.
5. Approach the County. Of course Alex Briscoe has his hands full already with the possible closure of San Leandro by Sutter plus the St. Rose financial debacle, but the County needs to be engaged. The question should not be "how can you give us money to keep the Hospital open?", but, rather, how could the District be restructured to provide a bigger bang for the buck for Alameda taxpayers.
6. Create a strategic plan. I am reluctant to suggest this because this step usually involves low quality, highly paid BS artists (otherwise known as consultants - see the compensation presentations done earlier last year for example). Maybe a non-profit (that was not compromised politically) would be willing to take on the task; perhaps the Berkeley school of public policy could provide resources. I would like to see this strategic plan include an urgent care center. It is also possible that the wound care center might survive closure of the Hospital. Obviously, the plan would be dependent on whether the District was burdened with the Waters Edge facility or not, but South Shore nursing would need to be addressed.
7. Put the plan before the voters. The District would need to make its case hopefully without misleading the public the way proponents did in the original vote. Terminating the District might be problematic, but drastically reducing its taxing authority could easily be done even if the District lived on.
Thursday, January 26, 2012
Defcon 5 and ZBA Won't Save the District (quick takes)
1. So the District lost 316k in December. Stebbins described that as over a 50% improvement at the finance meeting which is true but only in the same sense that being unable to pay 1/2 your mortgage would be a 50% improvement over not being able to pay any of it. The bank is still going to foreclose at some point.
2. Bank of Alameda "listened politely" in a meeting with Management. Bob Anderson suggested a new 2 million dollar long-term loan would do the trick. Perhaps this is revealing too much, but if you ever had a friend or a relative who is truly in need but has a history of bad decision-making ask you for a loan (after not repaying back other money you already loaned) I suspect you know how those bankers felt.
3. Needless to say financing is not yet in place for the wound care center construction. Payments to the landlord of about 14k per month begin in April whether it is generating revenue or not.
4. Due to personnel issues (someone's on vacation) the soonest California can approve the license transfer for Waters Edge is 2/13 according to Stebbins. I worry that the representations that the District made with respect to working capital are no longer applicable.
5. If you want to understand the zero balance accounts (ZBA) method for adjustment to patient accounts then this presentation might be useful. One of the reasons that November was so bad was that reimbursement rate (net/gross ratio) was down significantly. At first Management thought that this might be an anomaly (and not altogether real) because of the way ZBA is used to calculate this number. At this point, I think the November loss was very real (even if it might not repeat).
6. January is running stronger than November or December, maybe even enough to have a positive number. Every 1,000,000 of additional gross revenue is another about 225,000 of net. I can make a SWAG that the contribution margin for that additional revenue is probably around 80% so a back-of-the-envelope estimate of January's results suggest that if gross is 10% above December (about 1.5 million additional) then net increases by 1,500,000 x 22.4% x 0.8 = 268,800 which compared to the 316k loss for December is close enough to suggest that January could be break even. If I had to take the over/under on $0 loss/gain, I'd take the under.
7. Average pay period includes payroll so that is the discrepancy between that number (74.3)and "AP days" reported as 150. I think payroll should be excluded from the calculation, but I will defer to Bob Anderson to decide whether to continue the present reporting method.
2. Bank of Alameda "listened politely" in a meeting with Management. Bob Anderson suggested a new 2 million dollar long-term loan would do the trick. Perhaps this is revealing too much, but if you ever had a friend or a relative who is truly in need but has a history of bad decision-making ask you for a loan (after not repaying back other money you already loaned) I suspect you know how those bankers felt.
3. Needless to say financing is not yet in place for the wound care center construction. Payments to the landlord of about 14k per month begin in April whether it is generating revenue or not.
4. Due to personnel issues (someone's on vacation) the soonest California can approve the license transfer for Waters Edge is 2/13 according to Stebbins. I worry that the representations that the District made with respect to working capital are no longer applicable.
5. If you want to understand the zero balance accounts (ZBA) method for adjustment to patient accounts then this presentation might be useful. One of the reasons that November was so bad was that reimbursement rate (net/gross ratio) was down significantly. At first Management thought that this might be an anomaly (and not altogether real) because of the way ZBA is used to calculate this number. At this point, I think the November loss was very real (even if it might not repeat).
6. January is running stronger than November or December, maybe even enough to have a positive number. Every 1,000,000 of additional gross revenue is another about 225,000 of net. I can make a SWAG that the contribution margin for that additional revenue is probably around 80% so a back-of-the-envelope estimate of January's results suggest that if gross is 10% above December (about 1.5 million additional) then net increases by 1,500,000 x 22.4% x 0.8 = 268,800 which compared to the 316k loss for December is close enough to suggest that January could be break even. If I had to take the over/under on $0 loss/gain, I'd take the under.
7. Average pay period includes payroll so that is the discrepancy between that number (74.3)and "AP days" reported as 150. I think payroll should be excluded from the calculation, but I will defer to Bob Anderson to decide whether to continue the present reporting method.
Friday, January 20, 2012
Hospital Cannot Survive if this Continues (even with Waters Edge)
Read the Financials yourself. In December, the District lost another 316,000 dollars. The total for the year is 1,312,000 dollars. This is an annualized rate of over 2.5 million dollars and is greater than the contribution projected by Water's Edge. This is with a favorable sub-acute ruling on AB97 which represented a "win" of over 1.5 million dollars vs. budget. Other lowlights:
1. (p. 14, Balance sheet) Current liabilities exceed current assets by over half a million dollars. This is a violation of the Bank of Alameda loan covenants. The Bank has a 750,000 emergency line of credit outstanding, is the prospective financing for the wound care center, and is the source of working capital for the Water's Edge transition. It's quite possible the Bank will continue to loan money with no guarantee other than the taxing power of the District. After all, that is pretty strong.
The problem is that if the Bank won't impose some kind of fiscal discipline, Management won't own up to the disaster, and the Board refuses to do anything, then the taxpayers are on the hook for it.
2. (p. 14, Balance sheet) Net assets are 7,441,716 which is another violation of the Bank of Alameda loan covenants. This understates the case. If you look, you can see that construction in progress is 3,388,457 which is relatively worthless at this point. The off-balance sheet liabilities are also not represented and my best guess is that they are about 5,000,000 mainly consisting of the Bank of America lease, the Marina Village lease, Stebbins (and others) severance pay, fines payable to the state (50,000). This does not include the multi-million dollar Water's Edge liability which does not kick in until the State approves the license transfer. In other words, any reasonable financial analysis suggests that the effective equity of the District is negative unless you add in "future parcel tax revenue" as an asset.
3.(p 2, Highlights) This may be a mistake, but it states that AP days are 150. That suggests that some vendors can expect to wait six months to be paid? I don't think that can be right. The ratios page (p.18) states "average pay period" is 74.3 which seems more reasonable. (I'm not sure because I may be confusing terms here. I generally assume "days payable outstanding", "average pay period", and "AP days" are calculated the same, but I cannot be sure that I have that right in this context since "AP days" is less familiar as a term to me and I may be getting its definition wrong.)
4. (p 18, Ratios) The whole page is ugly including the previously mentioned current ratio at 0.97, but the ones that jump out are all the negatives - EBITA = minus 2.70%, EBIDAP = minus 12.83%, operating margin = minus 4.15%, and Return on Fund Balance = minus 17.62% .
To me, it is interesting that there is so little interest in an enterprise that costs the people of Alameda over 6 million dollars per year (this is the combination of taxes plus equity losses since the District was formed), and continues to lose money despite reassurances by management and the Board majority that a turnaround is always at hand. I don't know what it will take for people to notice. Call someone a liar and you get excoriated by their allies; events prove that indeed they were lying (or grossly incompetent) and nobody notices.
1. (p. 14, Balance sheet) Current liabilities exceed current assets by over half a million dollars. This is a violation of the Bank of Alameda loan covenants. The Bank has a 750,000 emergency line of credit outstanding, is the prospective financing for the wound care center, and is the source of working capital for the Water's Edge transition. It's quite possible the Bank will continue to loan money with no guarantee other than the taxing power of the District. After all, that is pretty strong.
The problem is that if the Bank won't impose some kind of fiscal discipline, Management won't own up to the disaster, and the Board refuses to do anything, then the taxpayers are on the hook for it.
2. (p. 14, Balance sheet) Net assets are 7,441,716 which is another violation of the Bank of Alameda loan covenants. This understates the case. If you look, you can see that construction in progress is 3,388,457 which is relatively worthless at this point. The off-balance sheet liabilities are also not represented and my best guess is that they are about 5,000,000 mainly consisting of the Bank of America lease, the Marina Village lease, Stebbins (and others) severance pay, fines payable to the state (50,000). This does not include the multi-million dollar Water's Edge liability which does not kick in until the State approves the license transfer. In other words, any reasonable financial analysis suggests that the effective equity of the District is negative unless you add in "future parcel tax revenue" as an asset.
3.(p 2, Highlights) This may be a mistake, but it states that AP days are 150. That suggests that some vendors can expect to wait six months to be paid? I don't think that can be right. The ratios page (p.18) states "average pay period" is 74.3 which seems more reasonable. (I'm not sure because I may be confusing terms here. I generally assume "days payable outstanding", "average pay period", and "AP days" are calculated the same, but I cannot be sure that I have that right in this context since "AP days" is less familiar as a term to me and I may be getting its definition wrong.)
4. (p 18, Ratios) The whole page is ugly including the previously mentioned current ratio at 0.97, but the ones that jump out are all the negatives - EBITA = minus 2.70%, EBIDAP = minus 12.83%, operating margin = minus 4.15%, and Return on Fund Balance = minus 17.62% .
To me, it is interesting that there is so little interest in an enterprise that costs the people of Alameda over 6 million dollars per year (this is the combination of taxes plus equity losses since the District was formed), and continues to lose money despite reassurances by management and the Board majority that a turnaround is always at hand. I don't know what it will take for people to notice. Call someone a liar and you get excoriated by their allies; events prove that indeed they were lying (or grossly incompetent) and nobody notices.
Wednesday, January 18, 2012
Staying Healthy
This morning, I will not be attending the Board Quality meeting. I don't think it will surprise anyone for me to confess that I did not find the structure and discussion of these meetings to be particularly engaging in terms of making meaningful changes. The BQC does a decent enough job in reviewing metrics and oversight, but is simply not designed to make, in my opinion, meaningful changes at the Hospital. Of course, it's hard to make meaningful changes when you don't see that there is a problem.
Nonetheless, I actually am posting to give kudos to the District since much of what can be done to live a longer, healthier life has nothing to do with your medical care. Of course, I am referring to lifestyle choices. If you want to lower your cholesterol, control your blood sugar, lose weight, lower your blood pressure, reduce depression, etc., etc., etc. then lifestyle modification is the way to go. In fact these are enshrined as the official first choice in the official protocols for all of the above except depression (where it is still considered a major adjunctive therapy).
The District sent this email out to everyone who subscribes and most, if not all, of these are great ideas. Promoting healthy lifestyles is one of those things that I definitely want to see the District doing and continue doing even if/when the inpatient acute care services are terminated.
Nonetheless, I actually am posting to give kudos to the District since much of what can be done to live a longer, healthier life has nothing to do with your medical care. Of course, I am referring to lifestyle choices. If you want to lower your cholesterol, control your blood sugar, lose weight, lower your blood pressure, reduce depression, etc., etc., etc. then lifestyle modification is the way to go. In fact these are enshrined as the official first choice in the official protocols for all of the above except depression (where it is still considered a major adjunctive therapy).
The District sent this email out to everyone who subscribes and most, if not all, of these are great ideas. Promoting healthy lifestyles is one of those things that I definitely want to see the District doing and continue doing even if/when the inpatient acute care services are terminated.
| 2012 is just around the corner, and so are New Year's resolutions. With your well-being in mind, Alameda Hospital has come up with this list to help you kickstart some healthy habits. A new routine can take several weeks or even months to become a habit, so don't try to add them all at once! Start with the resolution you feel most confident you can keep, and go from there. | |
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Friday, January 13, 2012
1/9/2012 Board Meeting
1. Nothing to really report regarding the enormous loss in November. It may or may not be an accounting glitch. At the next Finance meeting a presentation on revenue recognition and the calculation of reimbursement rates will be made. What is clear is that something is going on that Management needs to investigate. If you look at pages 35-37 of the Board packet, there are several inconsistencies that just jump right out.
a. The combined acute care MCal reimbursement is listed as 2.8% of gross charges. MCal may be a lousy payer, but that seems unlikely.
b. This MCal number becomes even more confusing when the inpatient acute reimbursement is 10.5% and the outpatient is 4.1%. Clearly, the combined being lower than the individual elements is a mistake or something that needs further explanation.
c. On page 37, the 0.0% reimbursement rates listed for MCal/HMO are incorrect or need further explanation.
d. If you add up the inpatient monthly mix of payers for inpatient SNF on page 37, the number is less than 100%.
e. If you add up the mix for inpatient SNF for YTD payer mix then the number is over 100%.
Clearly these graphs are not able to be used in this form to analyze what is going on. Hopefully, next month will yield explanations for November AND better reporting.
2. The month of December may or may not be good enough to bring the current asset ratio to greater than 1..0. The 12/31/11 balance sheet is a test point for the Bank of Alameda loans. Kerry Easthope had discussions with the Bank of Alameda regarding this and will be in contact with them as soon as December closes (which I believe is happening this week on an accelerated basis). At that point, discussion as to what may happen will be easier with a clear understanding of what the financials are. It seems unlikely that December results could yield a current ratio > 1.0 since that would require net income of over a quarter of a million dollars. If the current ratio is indeed >1.0, then it is likely because the November unaudited results are grossly wrong. I am pretty sure that is what management is hoping for.
(As an aside, it is a dangerous situation when your best hope of averting a crisis is that your financial reporting is so messed up that you have a hundreds of thousands of dollars variance between your actual results and reported results that you cannot identify immediately!)
3. New guidelines were adopted for self pay and community care on the consent agenda. Some may think that the discounts offered cash customers are overly generous. My belief is that they are not generous enough. When no commerical or government payer is ever charged anywhere close to 100% of gross, I think it is fundamentally unfair to bill 100% of gross to ANYONE regardless of their ability to pay.
4. Rossi Builders was the low bidder for construction of the Wound Care Center. Award of contract will depend on financing.
5. Board officers are the same as last year.
6. I was appointed to the Finance Committee replacing Director Deutsch. Director Battani was appointed to Quality replacing me. All other assignments remain unchanged from last year.
7. ACHD Standing committees are part of a reorganization of the ACHD. This is the trade organization for California Health Districts. Originally we were going to stop being members, but it turns out that their workman's compensation fund is the best deal available and membership is required to participate. I believe I will be applying and it sounds like other Board members may also be interested in volunteering.
8. In the CEO report, there is now a preliminary written version in the packet which I compliment Ms Stebbins on providing. I was surprised on the relatively low number for last year's IGT and this year's. I requested that Management check that the monthly accruals are matching up with the actual, final number.
9. Apparently the Hospital has been busy in the first week of 2012. I don't believe, based on past experience, that any conclusion can be drawn from that.
10. There was some analysis from Management of 2 Board referrals from December. Also, I pointed out that a practice that the District has been following already is now law. According to AB1344, if an agency maintains a website, then public notices must be posted simultaneously with any paper copies in order to meet Brown Act requirements.
11. The wound care center is going along. The next big step is award of contract (pending financing). The Waters Edge transition is also moving forward. Of course I was staunchly opposed to this initiative and the November results with the attendant uncertainty surrounding them hardly make me more comfortable with this project. I still feel like the District is going to end up holding a mult-million dollar bag.
Thank you Irene Dieter for attending and commenting. I wish more Alamedans took an interest.
a. The combined acute care MCal reimbursement is listed as 2.8% of gross charges. MCal may be a lousy payer, but that seems unlikely.
b. This MCal number becomes even more confusing when the inpatient acute reimbursement is 10.5% and the outpatient is 4.1%. Clearly, the combined being lower than the individual elements is a mistake or something that needs further explanation.
c. On page 37, the 0.0% reimbursement rates listed for MCal/HMO are incorrect or need further explanation.
d. If you add up the inpatient monthly mix of payers for inpatient SNF on page 37, the number is less than 100%.
e. If you add up the mix for inpatient SNF for YTD payer mix then the number is over 100%.
Clearly these graphs are not able to be used in this form to analyze what is going on. Hopefully, next month will yield explanations for November AND better reporting.
2. The month of December may or may not be good enough to bring the current asset ratio to greater than 1..0. The 12/31/11 balance sheet is a test point for the Bank of Alameda loans. Kerry Easthope had discussions with the Bank of Alameda regarding this and will be in contact with them as soon as December closes (which I believe is happening this week on an accelerated basis). At that point, discussion as to what may happen will be easier with a clear understanding of what the financials are. It seems unlikely that December results could yield a current ratio > 1.0 since that would require net income of over a quarter of a million dollars. If the current ratio is indeed >1.0, then it is likely because the November unaudited results are grossly wrong. I am pretty sure that is what management is hoping for.
(As an aside, it is a dangerous situation when your best hope of averting a crisis is that your financial reporting is so messed up that you have a hundreds of thousands of dollars variance between your actual results and reported results that you cannot identify immediately!)
3. New guidelines were adopted for self pay and community care on the consent agenda. Some may think that the discounts offered cash customers are overly generous. My belief is that they are not generous enough. When no commerical or government payer is ever charged anywhere close to 100% of gross, I think it is fundamentally unfair to bill 100% of gross to ANYONE regardless of their ability to pay.
4. Rossi Builders was the low bidder for construction of the Wound Care Center. Award of contract will depend on financing.
5. Board officers are the same as last year.
6. I was appointed to the Finance Committee replacing Director Deutsch. Director Battani was appointed to Quality replacing me. All other assignments remain unchanged from last year.
7. ACHD Standing committees are part of a reorganization of the ACHD. This is the trade organization for California Health Districts. Originally we were going to stop being members, but it turns out that their workman's compensation fund is the best deal available and membership is required to participate. I believe I will be applying and it sounds like other Board members may also be interested in volunteering.
8. In the CEO report, there is now a preliminary written version in the packet which I compliment Ms Stebbins on providing. I was surprised on the relatively low number for last year's IGT and this year's. I requested that Management check that the monthly accruals are matching up with the actual, final number.
9. Apparently the Hospital has been busy in the first week of 2012. I don't believe, based on past experience, that any conclusion can be drawn from that.
10. There was some analysis from Management of 2 Board referrals from December. Also, I pointed out that a practice that the District has been following already is now law. According to AB1344, if an agency maintains a website, then public notices must be posted simultaneously with any paper copies in order to meet Brown Act requirements.
11. The wound care center is going along. The next big step is award of contract (pending financing). The Waters Edge transition is also moving forward. Of course I was staunchly opposed to this initiative and the November results with the attendant uncertainty surrounding them hardly make me more comfortable with this project. I still feel like the District is going to end up holding a mult-million dollar bag.
Thank you Irene Dieter for attending and commenting. I wish more Alamedans took an interest.
Sunday, January 8, 2012
Board Meeting Preview, 1/9/2012 (UPDATED)
The most important thing is the loss of 681,000 in November and what, if anything, is being done to address this issue. The only item on the agenda directly related to this is the Acceptance of the November, 2011 unaudited financial statements. Interestingly enough, I was the only Board member (UPDATE: Apologies to Dr. Deutsch who chaired the meeting in the absence of Mike McCormick) who attended the Finance Committee meeting on 1/4 (although I arrived too late to hear any discussion regarding this disastrous result).
My questions will be if December promises to be positive. If negative, in what range will it be - slightly, moderately, hugely. Of course, Debi Stebbins never wishes to share bad news (any news actually) until she is ready so we may not learn much tomorrow night. I also want to understand the formula used to recognize revenues so I can evaluate whether this enormous loss is a glitch in some accounting parameter or, what appeared to me initially to be, the beginning of the end for the Hospital.
Specific agenda items:
1. From the closed session agenda IV. F. "Public Employee Performance Evaluation Title: Senior Executives". Once again management and presumably legal counsel (and no doubt my fellow Board members) will disagree with my assessment that this is inappropriate for closed session. It is my opinion that the Brown Act obligates the Board to address this item in open session as it is currently structured.
2. VII. A. 2. Policy No. 83: Cash payment discounts. I would actually like to see the discounts be greater than those being offered. I also would like to know what the actual collection of cash payments is from uninsured patients. My understanding is that it is less than 10 cents on the dollar. Whether that is relative to the gross charges or the discounted charges is unknown to me, but I will ask Management. I see no reason not to approve this new policy.
3. VII. B. 2. Entering into a contract for wound care center construction. I would like to postpone this until the Board understands the financing better. If we are in violation (or close to being in violation) of the Bank of Alameda loan documents then signing a contract with the Rossi Builders is irresponsible in my opinion.
4. VII. B. 4. I may withdraw my preference to be President (because I doubt that there will be a nomination unless I nominate myself so a second seems unlikely). Director Battani has been very inconsistent in her role this past year in my opinion and we have had significant differences. I certainly do not relish another year of her leadership (but I don't relish another year, actually three years, of serving on the Board given the poor quality of analysis and decision-making that passes as Board oversight).
The rest of the agenda is somewhat routine except, perhaps, for the CEO report. Stebbins has a written report which I think is an improvement. I have a question regarding the IGT money since the report has a parenthetical which states, "including our original $369,000 deposit." I am hoping that should read "plus our original $369,000 deposit.". The $587,000 number for FY2012 seems low at a rate of less than 50,000 per month so I need to check that as well. The census numbers for December will be important. Management will have those pretty well determined given the detail in the daily dashboard that is now being distributed (see the Finance packet for an example).
I will update post-meeting when I have the chance.
My questions will be if December promises to be positive. If negative, in what range will it be - slightly, moderately, hugely. Of course, Debi Stebbins never wishes to share bad news (any news actually) until she is ready so we may not learn much tomorrow night. I also want to understand the formula used to recognize revenues so I can evaluate whether this enormous loss is a glitch in some accounting parameter or, what appeared to me initially to be, the beginning of the end for the Hospital.
Specific agenda items:
1. From the closed session agenda IV. F. "Public Employee Performance Evaluation Title: Senior Executives". Once again management and presumably legal counsel (and no doubt my fellow Board members) will disagree with my assessment that this is inappropriate for closed session. It is my opinion that the Brown Act obligates the Board to address this item in open session as it is currently structured.
2. VII. A. 2. Policy No. 83: Cash payment discounts. I would actually like to see the discounts be greater than those being offered. I also would like to know what the actual collection of cash payments is from uninsured patients. My understanding is that it is less than 10 cents on the dollar. Whether that is relative to the gross charges or the discounted charges is unknown to me, but I will ask Management. I see no reason not to approve this new policy.
3. VII. B. 2. Entering into a contract for wound care center construction. I would like to postpone this until the Board understands the financing better. If we are in violation (or close to being in violation) of the Bank of Alameda loan documents then signing a contract with the Rossi Builders is irresponsible in my opinion.
4. VII. B. 4. I may withdraw my preference to be President (because I doubt that there will be a nomination unless I nominate myself so a second seems unlikely). Director Battani has been very inconsistent in her role this past year in my opinion and we have had significant differences. I certainly do not relish another year of her leadership (but I don't relish another year, actually three years, of serving on the Board given the poor quality of analysis and decision-making that passes as Board oversight).
The rest of the agenda is somewhat routine except, perhaps, for the CEO report. Stebbins has a written report which I think is an improvement. I have a question regarding the IGT money since the report has a parenthetical which states, "including our original $369,000 deposit." I am hoping that should read "plus our original $369,000 deposit.". The $587,000 number for FY2012 seems low at a rate of less than 50,000 per month so I need to check that as well. The census numbers for December will be important. Management will have those pretty well determined given the detail in the daily dashboard that is now being distributed (see the Finance packet for an example).
I will update post-meeting when I have the chance.
Thursday, January 5, 2012
It's All Connected (naval gazing)
Of more interest than the Hospital to most Alamedans is the prospect of another tattoo parlor on Webster. You can read about it over at alameda.patch.com. It may be that the proprietor of Inkies could have an irrefutable legal argument that would allow him to open up on Webster regardless of the City's decision. It might be that city ordinances specifically regulating tattoo parlors may not be enforceable. (Of course, I have no idea because I am not a lawyer and I'm sure there's a lot of nuance to this question.) In fact, maybe tattoo parlors must be allowed to open on the first floor even on (gasp!), Park Street.
What I came across was the decision in Anderson v. Hermosa Beach in which the 9th Circuit ruled that a ban on tattoo parlors by Hermosa Beach violated the first amendment.
What I came across was the decision in Anderson v. Hermosa Beach in which the 9th Circuit ruled that a ban on tattoo parlors by Hermosa Beach violated the first amendment.
We hold that tattooing is purely expressive activity fully protected by the First Amendment, and that a total ban on such activity is not a reasonable “time,place, or manner” restriction.Of course, Alameda's restrictions are not a total ban, but because they impose heavier regulation on tattoo parlors than other types of business, my (uninformed) belief is that these additional restrictions would probably be deemed unreasonable as well. This was all serendipity because I was researching the trial judge who issued the AB97 injunction, the Honorable Christine Snyder. She was the trial judge at the District level in Anderson v. Hermosa Beach.
Wednesday, January 4, 2012
Crisis? Maybe Not.
Three things I learned at this morning's Finance Committee meeting that suggest that the District may not be in imminent danger of default.
1. An injunction against implementation of the DP/NF reductions has been issued. You can view the decision here. The judge accepted the argument of the CHA that these reductions could have an impact on access and quality not considered by CMS when the SPA was approved. She rejected the argument that distinct part and stand alone SNF beds were interchangeable. This is just the beginning of what will likely b a protracted process. The District will continue to reserve at the reduced rates, but needless to say, this would be a major windfall for the District. (I have stated in the past that I believe the rate reductions will ultimately be implemented, but other than any ego gratification I might get from being right, I am neutral. On the one hand, more money for the District is a good thing; on the other hand, continued operation of the acute care hospital by the District is not something I am in favor of.)
2. The loss for November may not, in actuality, be quite as steep as shown. The percentage of gross revenue recognized by revenue is based on actual collections in prior months. (I did not get the exact formula, but will probably ask.) This means that if collections have been favoring low reimbursement providers or the amount of bad debt write-off has increased in prior months temporarily (the key word is temporarily) then it may translate into the appearance of reduced revenue for the current month that is not real. There has been an ongoing effort to address the revenue cycle so it is possible that if the revenue cycle glitched in the first part of the year, that the net/gross number may be out of whack. This would be expected, for example, if Medi-Cal billing (and to a certain extent Medicare) was happening without much interruption, but 3rd party payor billing was interrupted. The lower reimbursement rate would translate into the income statement. In November, one major reason for the poor financial performance was the net/gross percentage dropping about 2 percentage points below the year-to-date number. This would not make up for all of the shortfall, but would translate the situation from an emergency to an urgency. Of course, unless December is very surprising to the positive, the impact on the current ratio remains.
3. On the other hand, I mentioned in my first post regarding the current ratio, that it was being calculated without reference to restricted assets. If it turns out that those assets listed on the balance sheet under "Assets Limited as to Use, net" can be incorporated into the calculation of the current ratio, then perhaps the District is not in violation of the revised Bank of Alameda load agreement.
I'm sure more will be revealed at the Board meeting for some of these issues and as the lawsuit by the CHA winds it way through the courts with respect to the first issue.
1. An injunction against implementation of the DP/NF reductions has been issued. You can view the decision here. The judge accepted the argument of the CHA that these reductions could have an impact on access and quality not considered by CMS when the SPA was approved. She rejected the argument that distinct part and stand alone SNF beds were interchangeable. This is just the beginning of what will likely b a protracted process. The District will continue to reserve at the reduced rates, but needless to say, this would be a major windfall for the District. (I have stated in the past that I believe the rate reductions will ultimately be implemented, but other than any ego gratification I might get from being right, I am neutral. On the one hand, more money for the District is a good thing; on the other hand, continued operation of the acute care hospital by the District is not something I am in favor of.)
2. The loss for November may not, in actuality, be quite as steep as shown. The percentage of gross revenue recognized by revenue is based on actual collections in prior months. (I did not get the exact formula, but will probably ask.) This means that if collections have been favoring low reimbursement providers or the amount of bad debt write-off has increased in prior months temporarily (the key word is temporarily) then it may translate into the appearance of reduced revenue for the current month that is not real. There has been an ongoing effort to address the revenue cycle so it is possible that if the revenue cycle glitched in the first part of the year, that the net/gross number may be out of whack. This would be expected, for example, if Medi-Cal billing (and to a certain extent Medicare) was happening without much interruption, but 3rd party payor billing was interrupted. The lower reimbursement rate would translate into the income statement. In November, one major reason for the poor financial performance was the net/gross percentage dropping about 2 percentage points below the year-to-date number. This would not make up for all of the shortfall, but would translate the situation from an emergency to an urgency. Of course, unless December is very surprising to the positive, the impact on the current ratio remains.
3. On the other hand, I mentioned in my first post regarding the current ratio, that it was being calculated without reference to restricted assets. If it turns out that those assets listed on the balance sheet under "Assets Limited as to Use, net" can be incorporated into the calculation of the current ratio, then perhaps the District is not in violation of the revised Bank of Alameda load agreement.
I'm sure more will be revealed at the Board meeting for some of these issues and as the lawsuit by the CHA winds it way through the courts with respect to the first issue.
Saturday, December 31, 2011
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.
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.
UPDATE: Here is the packet.
Thursday, December 29, 2011
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."
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."
Saturday, December 24, 2011
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.
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.
Wednesday, December 14, 2011
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.
Monday, November 28, 2011
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.
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.
Sunday, November 27, 2011
Alameda Politics
(Actually most politics)
It consists of the Cowards, the Corrupt, the Cliquish, and the Cranks. Which one are you?
It consists of the Cowards, the Corrupt, the Cliquish, and the Cranks. Which one are you?
Friday, November 18, 2011
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.
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.
Saturday, November 5, 2011
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.
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.
Thursday, November 3, 2011
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.
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.
Wednesday, November 2, 2011
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)
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)
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