This may describe my individual circumstances, but certainly describes Alameda Hospital (actually, the Hospital's condition is much worse). I will try to quickly hit the highlights of the May 9 meeting so I can proceed to identifying my concerns with the proposed financial documents submitted for approval for tomorrow morning's finance committee meeting (June 1). The words incredible, unbelievable, fantastic, and misleading probably give you some idea of what I think of next year's budget. Management does not even attempt to reconcile reality with the budget;I guess it's just numbers on a spreadsheet to them since I was promised (on May 9) that there would be alternative scenarios presented if the Hospital could not be viable as an ongoing operation.
1. Jordan Battani reported out closed session announcements. The main point was that, in response to a complaint received (and published on at least one website) by Dr. Jerrold Kram, the Board decided no action was needed at this time. No current business relationship between the care facility and Alameda Hospital exists although discussions with various facilities have taken place. [6/3/11 UPDATE: There is some concern that the previous sentence may reveal a closed session discussion of trade secrets. Let me assure you this is not the case. 1. My assertion of discussions taking place with SNF's in the District is based on a casual open session statement Stebbins made in a previous Board meeting (cannot remember exactly which one but I remember distinctly being surprised when she stated it in open session). 2. The text of Dr. Kram's letter specifically alluded to such a discussion taking place, "Expansion of the Alameda Hospital sub acute is a goal that has been affirmed by Deborah Stebbins in a conversation I had with her shortly after this situation unfolded." which I have no reason to doubt. 3. This goal is mentioned in the strategic plan presented at last Board meeting and 4. The budget narrative for next year specifically calls out a term sheet offered to such a facility. So it is obvious that the statement above is true regardless of any participation in closed sessions. Of course, I feel obligated to repeat once again that I think the transparency in both the nature and the disclosure of closed session items is lacking, but this has nothing to do with any closed session. Let me make it clear that Jordan Battani did not reference these discussions in her summary at the beginning of the 5/9 open session nor reference these discussions in her response to Dr. Kram.]Without commenting on the appropriateness of the transition described in the letter, the issue is not relevant to the Board at the present time. Ms Battani has written a letter to the same effect to Dr. Kram.
2. The consent agenda was approved with the following items taken out for further discussion:
- Financial statements for March. The relatively good cash position was associated with payroll being on a Friday (April 1). So even though the liability had been accrued, the cash remained on the books. Also, parcel tax revenue receipt timing is fortunate. Additional dollars in bad debt (non-cash expense) were charged off in March which offset some of the non-cash revenue from the reversal of the third party liability.
- MILD is a new procedure that will now be offered at Alameda Hospital. Director Chen had some questions about the procedure.
- I was going to pull the Bank of Alameda loan mods but Director Battani beat me to it. There was a back and forth about whether this new provision mattered. Everyone agreed that the District is always reponsible for its indebtedness and pretty much does not have an option of declaring bankruptcy and defaulting on its debts. Of course, if that was the case then why grant Bank of Alameda the loan mod. While negotiating home sale or purchase transactions, this is what I would ask real estate people when they told me a clause didn't matter; I would say then why can't I have it the way I prefer? Whether the rest of the Board wants to concede that the Rubicon may have been crossed or not, I think that a symbolic vote to have the people of Alameda keep on paying for the District's mistakes even after services are terminated is a big deal.
3. The strategic goals discussion was long, boring, and informative in some ways, but since I believe that the premise that they are based on is untenable (the continued operation of the Hospital), the discussion seemed, ultimately, futile. Some additional information and more precision was requested for various items so a vote was postponed.
4. Congratulations to the new members of the Community Relations and Outreach Committee. This means that the Committee can achieve a quorum going forward. The four are:
Hien Doan, Attorney, active in the Vietnamese community
• Shubha Fanse Chairperson of League of Women Voters Health Care Committee,
active in the Indian community
• Monica Valerio, Active in CERT program (Alameda community disaster
preparedness) and volunteer for schools
• Tracy Zollinger, Licensed Acupuncturist in Alameda, active in local schools,
offers community health programs
5. Nothing of particular note that I can recall happened during the remainder of the meeting.
The video is up at the District's website.
Now to the documents that are in the packet for the Finance Committee Meeting. I cannot do justice to these so you will have to read them yourself for the full effect. I will not be able to attend, but trust that I will be asking these questions at the full Board meeting.
1. The Hospital lost almost 1.4 million dollars in April (1,389,000 to be precise). That is, perhaps, an unprecedented poor performance under the current management's tenure. It was not forecast and means that the Hospital will not end the year with a profit. The Hospital starts off in violation of the Bank of Alameda loan provisions so how does the wound care center even get to its first day of operation? I suppose 642,000 was a bit of a surprise; also, the IGT funds appear to be several hundreds of thousands less than anticipated when the Hospital stopped accruing (180k/month). The final number is closer to 3/4 of a million rather than a million. The forecast miss on this number from last year's budget was more than 1.4 million dollars.
2. The management efforts at remediation will possibly provide about 75k benefit per month, but that is obviously not nearly enough. Given the extent of these changes, one has to wonder what suffers in terms of quality.
3. The operating budget for 2011/2012 seems, charitably, to be optimistic. It suggests that with a net reimbursement rate of only 22.4%, the Hospital will be profitable. As an aside, the whole use of gross revenues by Alameda Hospital has been a thorn in my side for over 10 years. Not many other healthcare systems report gross revenues except maybe in a footnote. They are relatively meaningless in understanding the Hospital's finances, but this presentation continues year after year. UPDATE: My sincere apologies to the people who put the budget together. Gross revenues appear to have been ELIMINATED for this year's budget. Thank you!!
4. Some other questions just from skimming the operating and capital budget.
- Where does the 262k of "other non-operating revenue" come from? This needs an explanation.
- If lab draw services are closing at Towne Center, how can we be sure that this will not impact negatively the clinic's financials (not that we have a good handle on them currently).
- What is the seismic plan? The Hospital is out of compliance currently. Even if OSHPD won't act, a lawsuit could shut things down precipitously.
- All of the SNF and sub-acute plans depend on the higher reimbursement rates associated with facilities affiliated with acute care hospitals. This creates a dependency on keeping the acute care services that seems foolish to me.
- How can you assume revenue from the wound care program when the District will not be in compliance with the loan covenants?
- What happens to benefit expenses as the Hospital's workforce skews older due to the inevitable dynamic of younger, more mobile workers leaving while older ones stay?
- When will a response be due to the request for 12 more beds? Shouldn't this budget be based on NOT obtaining approval since it is not given yet. It would be irresponsible of the Board to approve a budget based on speculation. UPDATE: Another mea culpa. The additional 12 beds are not included in the budget. Discharges are increased by 11.5% and LOS decreased to 4.0 Certainly the initiative to minimize observation days and increase actual admits is desireable, but this (if I am understanding the assumptions correctly) overestimates the budgetary impact because the case mix index is going to decrease as a result. So the question remains, can these anticipated changes be realized although the budget does NOT (my fault for skimming) rely on approval of the 12 beds.
- What about unanticipated capital expenses? the boiler costs seem to be lowball to me.
- What about interest expense. It seems in the ballpark, but I cannot get a good handle on the District's indebtedness and the average rate it pays. 148k is about 6% on 2.5 million. I need to get confirmation on the real numbers.
Given the budget as proposed, an alternative should be placed in front of the Board that closes the Hospital in an orderly fashion. That would be the responsible thing to do. I won't hold my breath.
Tuesday, May 31, 2011
Monday, May 9, 2011
May 9 - Board Meeting
I apologize but I have been busy so have not had a chance to regularly update, but this week I should be able to do both a pre and a post commentary on the Regular Board Meeting
1. The closed session agenda is opaque as usual. I have exchanged several emails with Jordan Battani about this and I really have not got a clear idea as to why she maintains that this is the best approach.
2. I will pull the finance statements from the consent agenda to put some things on record. a. I'd like to understand how the operating loss was so large if the census numbers were favorable. b. Friday, April 1 was a payroll day so the cash balance would have been more in line with previous statements. April will have an extra payroll day in it. c. Discussion of IGT (again).
3. I will also pull the Bank of Alameda loan mod. This is a big deal. This is the first time that the tax revenue will be securitized. In the campaign 10 years ago for the District, it was explicitly promised that this would not happen. For those who insist that this original vote represents the current will of the voters and that the District continue even though it provides no benefit in terms of health outcomes, they should be a little wary of breaking this promise.
4. I will vote against the goals and objectives presented. I am not trying to deliberately offend people with my stance, but the Hospital needs to close and, in my opinion, the only arguments in favor of keeping it open are some combination of:
-ignorance. somewhat defensible when being misled by people you trust and when the naysayers are people you don't trust.
-self-interest. nothing wrong with a desire to protect an income stream as long as it does not blind you to the truth.
-interest in having what is perceived as a safer place to go in the event of medical need. Many in Alameda are leery of going to Oakland for medical care and, I admit, the waiting rooms of most of the surrounding hospitals are somewhat "grittier" than Alameda Hospital's ER.
-a misguided faith that the desire of Alamedans is to keep the Hospital open. This is where the cliquishness of Alameda's politics is most at play. Certainly, most Alamedans would be in favor of a local hospital but they are unlikely to fully understand the issues at play. Of the people who actually understand healthcare policy, the majority would be happy with the Hospital closing. I asked a leader in health policy at UCSF to point me to someone in favor of keeping the Hospital open; that person said they could not think of anyone they respected who would be able to engage in that discussion.
5. There is a nice letter in the packet about care at Alameda Hospital. It seems cruel but germane to the discussion of health outcomes to note that the person described was not able to be medically helped. Also, the thrust of the letter is mainly to criticize the other hospital. Finally, we don't have the other hospital's side of the story. I am uncomfortable with publishing this type of correspondence in the official Board packet. After all, much less complimentary material is not published (one such letter I received just last week). I am reminded of the tragic case of Nataline Sarkisyan who should have been denied a liver transplant and was. The California Nursing Association decided to use this as propaganda and got a lot of good this type press out of misleading statements. Bottom line, when it comes to healthcare, making policy on the basis of anecdotes is stupid.
6. NPC-2 requirements. News flash: Alameda is still out of compliance with the 1/1/2002 deadline requirements and will continue to be. The documentation is clear, "No acute care services shall be provided." I guess OSHPD has full discretion on whether to enforce the law (maybe it's only a regulation) or not.
Notes to follow.
(I want to compliment staff on getting the meeting materials posted Thursday. The goal is Wednesday, but, my understanding, is that vacation schedules made even Thursday a challenge this month. Thank you for the additional time to review and I look forward to even more time next month.)
1. The closed session agenda is opaque as usual. I have exchanged several emails with Jordan Battani about this and I really have not got a clear idea as to why she maintains that this is the best approach.
2. I will pull the finance statements from the consent agenda to put some things on record. a. I'd like to understand how the operating loss was so large if the census numbers were favorable. b. Friday, April 1 was a payroll day so the cash balance would have been more in line with previous statements. April will have an extra payroll day in it. c. Discussion of IGT (again).
3. I will also pull the Bank of Alameda loan mod. This is a big deal. This is the first time that the tax revenue will be securitized. In the campaign 10 years ago for the District, it was explicitly promised that this would not happen. For those who insist that this original vote represents the current will of the voters and that the District continue even though it provides no benefit in terms of health outcomes, they should be a little wary of breaking this promise.
4. I will vote against the goals and objectives presented. I am not trying to deliberately offend people with my stance, but the Hospital needs to close and, in my opinion, the only arguments in favor of keeping it open are some combination of:
-ignorance. somewhat defensible when being misled by people you trust and when the naysayers are people you don't trust.
-self-interest. nothing wrong with a desire to protect an income stream as long as it does not blind you to the truth.
-interest in having what is perceived as a safer place to go in the event of medical need. Many in Alameda are leery of going to Oakland for medical care and, I admit, the waiting rooms of most of the surrounding hospitals are somewhat "grittier" than Alameda Hospital's ER.
-a misguided faith that the desire of Alamedans is to keep the Hospital open. This is where the cliquishness of Alameda's politics is most at play. Certainly, most Alamedans would be in favor of a local hospital but they are unlikely to fully understand the issues at play. Of the people who actually understand healthcare policy, the majority would be happy with the Hospital closing. I asked a leader in health policy at UCSF to point me to someone in favor of keeping the Hospital open; that person said they could not think of anyone they respected who would be able to engage in that discussion.
5. There is a nice letter in the packet about care at Alameda Hospital. It seems cruel but germane to the discussion of health outcomes to note that the person described was not able to be medically helped. Also, the thrust of the letter is mainly to criticize the other hospital. Finally, we don't have the other hospital's side of the story. I am uncomfortable with publishing this type of correspondence in the official Board packet. After all, much less complimentary material is not published (one such letter I received just last week). I am reminded of the tragic case of Nataline Sarkisyan who should have been denied a liver transplant and was. The California Nursing Association decided to use this as propaganda and got a lot of good this type press out of misleading statements. Bottom line, when it comes to healthcare, making policy on the basis of anecdotes is stupid.
6. NPC-2 requirements. News flash: Alameda is still out of compliance with the 1/1/2002 deadline requirements and will continue to be. The documentation is clear, "No acute care services shall be provided." I guess OSHPD has full discretion on whether to enforce the law (maybe it's only a regulation) or not.
Notes to follow.
(I want to compliment staff on getting the meeting materials posted Thursday. The goal is Wednesday, but, my understanding, is that vacation schedules made even Thursday a challenge this month. Thank you for the additional time to review and I look forward to even more time next month.)
Wednesday, April 6, 2011
2011-12 Budget - Possibly an Insurmountable Challenge
The numbers, as always, are grim. The District is required to project a balanced budget which is easy with a spreadsheet. You have the luxury of being able to work the numbers until they come out right. Of course, the more than 5.7 million dollar subsidy from the taxpayers is essential to a balanced budget for the District. (You can count on my "No" vote when it comes to assessing the parcel tax, but it will be 4-1 in favor.) Even then, two fortuitous events (that were not part of the original budget) have been required to get to a positive net income the last two years. In 2009-10, the IGT unexpectedly provided more than 2 million dollars to the District. Without that boost, there would have been a loss. In other words, the vaunted financial turnaround for that year was the result of identifying and applying for additional subsidies from the state of California. The agency that granted that additional funding had Alameda resident and big supporter of the Hospital, Wilma Chan, on it's Board. (That agency has since been restructured or dissolved.) In 2010-11, the recognition of extraordinary income from an old 3rd party liability that can no longer be collected will turn a more than 1 million dollar loss (that is post subsidy) into a gain. So the last two years have been no better than the average if you consider the actual operations of the Hospital. In fact, capital expenditures will likely mean the cash position of the Hospital at year end 2010-2011 (June 30, 2011) will be worse than at year end 2009-2010.
For the budget, the starting point will be the FY 2011 projected results presented at the last Board meeting - profit of 196k. Some modifications need to be made to that projection. For example, I am going to guess that any month where the ADC was around 34 is a month that did not have a 125k loss (excluding the extraordinary income). So March will be better than projected. My guess is more like a 50k profit so add 175k total to the projection. Similarly, I am going to guess that the last quarter (Apr-Jun) will not yield over a 3/4 million loss. I think a more realistic number, even being conservative, is -450k. So add a total of 475k to the relatively pessimistic year end projection - thus an accounting profit of 671k seems more likely. Now from that 671k, it is necessary to subtract the 1473k in extraordinary income to obtain a baseline budget projection for 2011-12 of an 800k loss.
More bad news to be factored into the process is the state budget crisis which impacts IGT funds and the Medi-Cal reimbursement rates. The net negative for those, even being optimistic, is likely to be at least 1000k. (if nothing changes, then the number is greater than 2000k.) So the budget process begins with an adjusted baseline of a loss of 1800k (and very possibly almost 3000k).
Maybe the wound care center can contribute 50k in direct profit so now we are at 1750k loss. Although recall, the wound care center's short-term impact on the cash/debt position is negative in my opinion.
Everything else is up for grabs. The budget game works this way. The areas where increases can come is by assuming you can raise prices or increase volumes. Typically, the number for price increases is in the low single digits as a percentage. A 3% increase (on a little over 60 million net revenue) gives you enough to turn a small profit if expenses do not rise. Keep in mind that the combination of this price increase and the change in state reimbursement would offset each other. One can forecast that expenses will rise more slowly than revenue (or even that cost cutting could yield positive results). In last year's budget, the Hospital made the assumption of high single digit (percentage of total) reduction in expenses from the prior year to the current year. I think that cutting expenses again at that aggressive rate is not a reasonable assumption and arguably only was partially successful in the present budget. Instead, I think anything more than a flat expense picture is unrealistic so the budget projection is a profit of about 100k given these assumptions. I do not believe that volume increases are reasonable to forecast, but perhaps I can be convinced by Management.
New services could increase these numbers. But for a profit to happen in actuality (instead of the world of budgets) all of the following has to happen:
1. The projection to year end has to be almost 500k too pessimistic. I will randomly assign a probability of about 0.7 to this event.
2. Loss in state of California revenue(and CMS revenue as well) is limited to 1000k compared to the present year. I am guessing this has a probability below 0.5.
3. The Hospital can realize the 50k in profit from the wound care center. I think that we can ignore this since it has minimal impact either way. So for purposes of ignoring it, I will give it a probability of 1.
4. Finally, revenue in the non-government reimbursement arena must be enhanced by over 5% (in order to get a 3% total price increase, the subset of the other payors has to have an outsized increase.) I think that 50/50 or a probability of 0.5 is generous.
5. Can expenses be flat? I don't think so; I will give this a probability of 0.5 in an effort to compensate for my bias.
6. I am unaware of any new services that will materially impact the financials for the next year that are close enough to realization to be included in the budget.
So for the budget to be balanced, numbers with the appropriate assumptions just need to be put into a spreadsheet, but for the District to actually not have a loss next year, the stars would have to align with a probability of 0.7*0.5*0.5*0.5= 0.0875 or less than a 1 in 10 chance. That is my estimate of the chance that a profit can actually be realized in the next year despite a budget which will/must forecast a profit. This is just for a single dollar of profit; for the district to obtain financing for the seismic retrofit, the profit would have to be somewhere above 1.5 million dollars - no chance of that. Finallly, the chance that the subsidy can be reduced or eliminated and the District realize a profit is essentially zero, unless, of course, we close the Hospital.
I will certainly point this out to my fellow Board members, but am not sure how much impact the grim reality of the numbers will impress them. Witness Mayor Gilmore's outrage and denial when the "two Kevins" with intimate knowledge of the city's finances pointed out similarly obvious facts to the City Council.
When it comes to politics, denial seems to be a popular strategy.
Updated to clean up the wording and clarify some statements (4/10/11).
For the budget, the starting point will be the FY 2011 projected results presented at the last Board meeting - profit of 196k. Some modifications need to be made to that projection. For example, I am going to guess that any month where the ADC was around 34 is a month that did not have a 125k loss (excluding the extraordinary income). So March will be better than projected. My guess is more like a 50k profit so add 175k total to the projection. Similarly, I am going to guess that the last quarter (Apr-Jun) will not yield over a 3/4 million loss. I think a more realistic number, even being conservative, is -450k. So add a total of 475k to the relatively pessimistic year end projection - thus an accounting profit of 671k seems more likely. Now from that 671k, it is necessary to subtract the 1473k in extraordinary income to obtain a baseline budget projection for 2011-12 of an 800k loss.
More bad news to be factored into the process is the state budget crisis which impacts IGT funds and the Medi-Cal reimbursement rates. The net negative for those, even being optimistic, is likely to be at least 1000k. (if nothing changes, then the number is greater than 2000k.) So the budget process begins with an adjusted baseline of a loss of 1800k (and very possibly almost 3000k).
Maybe the wound care center can contribute 50k in direct profit so now we are at 1750k loss. Although recall, the wound care center's short-term impact on the cash/debt position is negative in my opinion.
Everything else is up for grabs. The budget game works this way. The areas where increases can come is by assuming you can raise prices or increase volumes. Typically, the number for price increases is in the low single digits as a percentage. A 3% increase (on a little over 60 million net revenue) gives you enough to turn a small profit if expenses do not rise. Keep in mind that the combination of this price increase and the change in state reimbursement would offset each other. One can forecast that expenses will rise more slowly than revenue (or even that cost cutting could yield positive results). In last year's budget, the Hospital made the assumption of high single digit (percentage of total) reduction in expenses from the prior year to the current year. I think that cutting expenses again at that aggressive rate is not a reasonable assumption and arguably only was partially successful in the present budget. Instead, I think anything more than a flat expense picture is unrealistic so the budget projection is a profit of about 100k given these assumptions. I do not believe that volume increases are reasonable to forecast, but perhaps I can be convinced by Management.
New services could increase these numbers. But for a profit to happen in actuality (instead of the world of budgets) all of the following has to happen:
1. The projection to year end has to be almost 500k too pessimistic. I will randomly assign a probability of about 0.7 to this event.
2. Loss in state of California revenue(and CMS revenue as well) is limited to 1000k compared to the present year. I am guessing this has a probability below 0.5.
3. The Hospital can realize the 50k in profit from the wound care center. I think that we can ignore this since it has minimal impact either way. So for purposes of ignoring it, I will give it a probability of 1.
4. Finally, revenue in the non-government reimbursement arena must be enhanced by over 5% (in order to get a 3% total price increase, the subset of the other payors has to have an outsized increase.) I think that 50/50 or a probability of 0.5 is generous.
5. Can expenses be flat? I don't think so; I will give this a probability of 0.5 in an effort to compensate for my bias.
6. I am unaware of any new services that will materially impact the financials for the next year that are close enough to realization to be included in the budget.
So for the budget to be balanced, numbers with the appropriate assumptions just need to be put into a spreadsheet, but for the District to actually not have a loss next year, the stars would have to align with a probability of 0.7*0.5*0.5*0.5= 0.0875 or less than a 1 in 10 chance. That is my estimate of the chance that a profit can actually be realized in the next year despite a budget which will/must forecast a profit. This is just for a single dollar of profit; for the district to obtain financing for the seismic retrofit, the profit would have to be somewhere above 1.5 million dollars - no chance of that. Finallly, the chance that the subsidy can be reduced or eliminated and the District realize a profit is essentially zero, unless, of course, we close the Hospital.
I will certainly point this out to my fellow Board members, but am not sure how much impact the grim reality of the numbers will impress them. Witness Mayor Gilmore's outrage and denial when the "two Kevins" with intimate knowledge of the city's finances pointed out similarly obvious facts to the City Council.
When it comes to politics, denial seems to be a popular strategy.
Updated to clean up the wording and clarify some statements (4/10/11).
Sunday, April 3, 2011
More detailed preview of 4/4 Meeting
The material is here. I have to agree with Denise Lai that the District should be posting this material as soon as possible, and if possible, much more than 72 hours prior to the start of the meeting. I'm pleased that the Wisconsin Republicans may have been tripped up by an open meeting law, but the current situation wrt the status of the union busting bill there makes it clear that there is always the risk if proper procedure is not followed. Since the Board meeting does not begin until 6:00 pm on Monday, the 72 hours notice was certainly met, but posting earlier would minimize that risk of problems and better meet the needs of the public. (I know that this was an irritation for me when I was a member of the public before I was elected to the Board.)
The consent agenda is relatively full. I could not make the Finance Committee meeting so I need to have that pulled. My questions will mainly be concerning the large loss for February (337k) just to get some clarification as to any urgent remedial steps that could be taken. Also on the consent agenda is a Textile Service Agreement, I will be interested in understanding the terms of this contract especially any fixed costs. Since consent items are always voted on without discussion by the Board (although the public can comment), this will also need to be pulled. The most trivial questions pulls an item from the consent agenda is my understanding.
On the agenda is the President's report which includes an update on discussions with City Officials. I'm not sure what that means. The City Council almost certainly endorses the majority view of the Board that Alameda Hospital is critical to the community. This, as any reader of this blog knows, is not my view. It is in conceivable that Lena Tam or Rob Bonta have changed their minds about the Hospital and given how closely allied Mayor Gilmore is with these two, I am sure that "city officials" view the Hospital in a favorable light.
The CEO's report may include a date for the stroke certification accreditation visit. My understanding as of last Board meeting is that the preliminaries necessary to schedule a visit were almost complete so with an additional month, that should be ready. My views on the stroke program are also well known to most (I am against it.)
The meat of the meeting will be the Finance Committee report. The 2011 YE projections are interesting and seem overly pessimistic to me even given the expected lower census during the upcoming months. Of course, there is going to be a non-operational (extraordinary) income item recognized in April adding 1473k to the bottom line. Even with that boost, management is projecting only 200k of net income for the full year or, in other words, an operational loss of about 8 million dollars on just over 60 million in operating revenue or more than 10% operating loss. In short, that's not good.
The budget calendar is also presented this month. I hope that my fellow Board members seriously consider the fact that the acute care portion of the Hospital cannot survive much longer. The forces of operational losses, seismic requirements, and healthcare reform are too large to be beaten back by optimistic projections or anecdotal assertions of the absolute life-saving necessity of continued operation. Hopefully, the Board will think carefully about proactively addressing change instead of reacting.
Two last things, because I missed the committee meeting I did not get to question the 1206(b) clinic financials. Some time in the next month, I will get the original projections and compare them to the actuals. Management did do that somewhat, but I would like to delve somewhat deeper into the numbers. Also, if the projections regarding the final three months are correct then only if the DSCR includes the non-operating, non-cash net income of the 3rd party liability being reversed will the District meet the covenant ratios that I discussed in my notes of the last meeting.
The consent agenda is relatively full. I could not make the Finance Committee meeting so I need to have that pulled. My questions will mainly be concerning the large loss for February (337k) just to get some clarification as to any urgent remedial steps that could be taken. Also on the consent agenda is a Textile Service Agreement, I will be interested in understanding the terms of this contract especially any fixed costs. Since consent items are always voted on without discussion by the Board (although the public can comment), this will also need to be pulled. The most trivial questions pulls an item from the consent agenda is my understanding.
On the agenda is the President's report which includes an update on discussions with City Officials. I'm not sure what that means. The City Council almost certainly endorses the majority view of the Board that Alameda Hospital is critical to the community. This, as any reader of this blog knows, is not my view. It is in conceivable that Lena Tam or Rob Bonta have changed their minds about the Hospital and given how closely allied Mayor Gilmore is with these two, I am sure that "city officials" view the Hospital in a favorable light.
The CEO's report may include a date for the stroke certification accreditation visit. My understanding as of last Board meeting is that the preliminaries necessary to schedule a visit were almost complete so with an additional month, that should be ready. My views on the stroke program are also well known to most (I am against it.)
The meat of the meeting will be the Finance Committee report. The 2011 YE projections are interesting and seem overly pessimistic to me even given the expected lower census during the upcoming months. Of course, there is going to be a non-operational (extraordinary) income item recognized in April adding 1473k to the bottom line. Even with that boost, management is projecting only 200k of net income for the full year or, in other words, an operational loss of about 8 million dollars on just over 60 million in operating revenue or more than 10% operating loss. In short, that's not good.
The budget calendar is also presented this month. I hope that my fellow Board members seriously consider the fact that the acute care portion of the Hospital cannot survive much longer. The forces of operational losses, seismic requirements, and healthcare reform are too large to be beaten back by optimistic projections or anecdotal assertions of the absolute life-saving necessity of continued operation. Hopefully, the Board will think carefully about proactively addressing change instead of reacting.
Two last things, because I missed the committee meeting I did not get to question the 1206(b) clinic financials. Some time in the next month, I will get the original projections and compare them to the actuals. Management did do that somewhat, but I would like to delve somewhat deeper into the numbers. Also, if the projections regarding the final three months are correct then only if the DSCR includes the non-operating, non-cash net income of the 3rd party liability being reversed will the District meet the covenant ratios that I discussed in my notes of the last meeting.
Thursday, March 31, 2011
4/7 Meeting Placeholder
Did not review the finance committee meeting on the blog even though I reviewed the material. The most interesting information is the February financials (which were poor) and the projections for the remainder of the year. The 1206(b) clinic review was hard for me to evaluate, but I don't know if that report will be brought forward to the Board meeting.
Check back Friday evening or Saturday morning for a review of the actual agenda and materials.
Check back Friday evening or Saturday morning for a review of the actual agenda and materials.
Sunday, March 13, 2011
3/9 Board Meeting
Technical difficulties prevented audio or video recording so until the notes are available, this is the only record of the proceedings. It would behoove anyone trying to make sense of these notes (or the Hospital in general) to read the accompanying material available at the District's website.
1. The Board meeting begins at 6:00 pm with the closed session. I wish the trade secrets agenda items released to the public were more informative. I think considerably more descriptive titles (rather than the same caption always used) could be provided without compromising any interests of the District. I think that the spirit (and to a certain extent the letter) of the law calls for additional disclosure.
2. Consent calendar was somewhat lengthy. Most of the items were from the Finance Committee meeting. I asked that items 3, 4, and 9 related to the Wound Care program be pulled from the consent agenda so I could register a "nay" vote. Jaber funds will be used for upgrading and standardizing the defibrillators throughout the Hospital. Let someone at the Hospital know if you are in the market for a used defibrillator. These are not AEDs which, surprisingly, you can purchase on Ebay if you are so inclined.
3. The Wound Care program documents are all available on the website. Bottom line, in the first year of operation, the wound care program is expected to generate about 375k in net revenue to the hospital directly with another 335k in incremental ancillary net revenue from outpatient and inpatient services. So the total is just over 700 thousand projected. I imagine that these totals are optimistic, but not unreasonable. (In fairness, management describes them as conservative.) A point of comparison will be review of the 1206(b) clinic at the next Finance Committee looking at projected vs. actual results.
Since the numbers above do not begin to address the 5.7 million dollar subsidy that Alamedans provide the Hospital, I voted against the program. I think a plan to address seismic retrofitting and, additionally, a justification of the cost of the subsidy relative to benefit to the District must first be articulated.
Also, the DSCR covenants (debt service coverage ratio) in the wound care loan documents seem risky to me. Although due to extraordinary income, this year may see the Hospital in the black, that is extraordinary income (and may or may not apply to calculation of DSCR) and is a one time benefit. Based on a quick, back of the envelope calculation, there is a good chance (> 50%) that the hospital will not meet the required DSCR 1.00:1.00 for 7/1/11 to 9/30/11. This assumes a debt service of about 50k per month (10k interest + 40k principal which does not include PACS yet I think). The Bank of America master lease would probably double that if it's not included yet. Add another 10-15k for the wound care borrowing and I just don't see the District meeting even a 1.00:1.00 covenant (multiply these numbers by 3 for the quarterly totals). I realize that Bank of Alameda is a friendly lender and I appreciate the LOC that they provide (which I voted for as part of the consent calendar), but I could not support this.
The vote was 4-1 in favor.
4. The Hospital is implementing an EHR. To management's credit, an reevaluation of the COW purchase (Computer On Wheels) is going to save 20,000 by going with a lower cost vendor. Also, the Hospital is taking a reasonable incremental approach starting with 3 (purchased with discretionary funds from the CEO) then expanding to additional units based on Board approval for initial implementation in the ER. The first units should arrive by 3/23. These will be evaluated to see if actual use meets the expectations before additional units are purchased for the remainder of the Hospital.
5. In the President's report, Jordan Battani indicated that the compensation survey results readout may require a special meeting. I expect to be unhappy regarding the results because I think they have serious methodological problems and an inherent bias. Jordan also announced that she will be participating in the leading Alameda citizen's interview panel for the city manager position. Good luck to her, I don't know how much tolerance I would have for that kind of kabuki.
6. a.CEO Stebbins reviewed the FYE 2011 strategic goals and objectives. As you would expect, she struck a positive note. I am not sure who will be participating, but April 6 is legislative day for the California Hospital Association . Obviously the IGT funds, Medi-Cal reimbursement, and seismic retrofitting are all big issues for the District. There is 37,000 grant approved from the County for stroke education.
b. Monthly statistics for February down so probably a loss for that month given the status of IGT funds. Cash management will be very important going forward. First part of March very busy with possibly a late flu not covered by the vaccine hitting (reports lag by several weeks).
c/d. Hospital Updates/Events -The stroke screening is ongoing. Possibility of adding a 94502 location near the end will be explored. Stroke certification is nearing the point at which the application for an inspection date can be made. Training of personnel sounded like the major delay with this part to complete in March.
7. Finance and Management - Clinic update will be next meeting. I requested a timeline of budget process for 2011/2012 be provided for new Board members. The process is beginning already since there is only 3 full months and associated Board and Committee meetings left to this year.
8. Community Relations - Failed to meet a quorum. Please let Stewart Chen know if you would be interested in joining. Stewart is thinking about inviting major Foundation donors to join, but I am sure applications from any member of the community will be accepted. (I am not sure how to finesse it if you want to serve, but are a critic of the Hospital as I am, but it might be worth it to at least inquire.)
9. Medical Staff report - I failed to note anything remarkable except that the time was relatively early for this part (usually near the end) of the agenda.
10. And that was it. Any corrections or clarifications, please let me know.
(Not really something I want to emphasize, so I will sneak it in here. The Board of Pharmacy sent me a letter about two weeks ago letting me know that they would be taking no action with regard to the libelous charges - my characterization, not theirs - that Leah Williams made regarding the November election. That is a relief for me, of course. )
1. The Board meeting begins at 6:00 pm with the closed session. I wish the trade secrets agenda items released to the public were more informative. I think considerably more descriptive titles (rather than the same caption always used) could be provided without compromising any interests of the District. I think that the spirit (and to a certain extent the letter) of the law calls for additional disclosure.
2. Consent calendar was somewhat lengthy. Most of the items were from the Finance Committee meeting. I asked that items 3, 4, and 9 related to the Wound Care program be pulled from the consent agenda so I could register a "nay" vote. Jaber funds will be used for upgrading and standardizing the defibrillators throughout the Hospital. Let someone at the Hospital know if you are in the market for a used defibrillator. These are not AEDs which, surprisingly, you can purchase on Ebay if you are so inclined.
3. The Wound Care program documents are all available on the website. Bottom line, in the first year of operation, the wound care program is expected to generate about 375k in net revenue to the hospital directly with another 335k in incremental ancillary net revenue from outpatient and inpatient services. So the total is just over 700 thousand projected. I imagine that these totals are optimistic, but not unreasonable. (In fairness, management describes them as conservative.) A point of comparison will be review of the 1206(b) clinic at the next Finance Committee looking at projected vs. actual results.
Since the numbers above do not begin to address the 5.7 million dollar subsidy that Alamedans provide the Hospital, I voted against the program. I think a plan to address seismic retrofitting and, additionally, a justification of the cost of the subsidy relative to benefit to the District must first be articulated.
Also, the DSCR covenants (debt service coverage ratio) in the wound care loan documents seem risky to me. Although due to extraordinary income, this year may see the Hospital in the black, that is extraordinary income (and may or may not apply to calculation of DSCR) and is a one time benefit. Based on a quick, back of the envelope calculation, there is a good chance (> 50%) that the hospital will not meet the required DSCR 1.00:1.00 for 7/1/11 to 9/30/11. This assumes a debt service of about 50k per month (10k interest + 40k principal which does not include PACS yet I think). The Bank of America master lease would probably double that if it's not included yet. Add another 10-15k for the wound care borrowing and I just don't see the District meeting even a 1.00:1.00 covenant (multiply these numbers by 3 for the quarterly totals). I realize that Bank of Alameda is a friendly lender and I appreciate the LOC that they provide (which I voted for as part of the consent calendar), but I could not support this.
The vote was 4-1 in favor.
4. The Hospital is implementing an EHR. To management's credit, an reevaluation of the COW purchase (Computer On Wheels) is going to save 20,000 by going with a lower cost vendor. Also, the Hospital is taking a reasonable incremental approach starting with 3 (purchased with discretionary funds from the CEO) then expanding to additional units based on Board approval for initial implementation in the ER. The first units should arrive by 3/23. These will be evaluated to see if actual use meets the expectations before additional units are purchased for the remainder of the Hospital.
5. In the President's report, Jordan Battani indicated that the compensation survey results readout may require a special meeting. I expect to be unhappy regarding the results because I think they have serious methodological problems and an inherent bias. Jordan also announced that she will be participating in the leading Alameda citizen's interview panel for the city manager position. Good luck to her, I don't know how much tolerance I would have for that kind of kabuki.
6. a.CEO Stebbins reviewed the FYE 2011 strategic goals and objectives. As you would expect, she struck a positive note. I am not sure who will be participating, but April 6 is legislative day for the California Hospital Association . Obviously the IGT funds, Medi-Cal reimbursement, and seismic retrofitting are all big issues for the District. There is 37,000 grant approved from the County for stroke education.
b. Monthly statistics for February down so probably a loss for that month given the status of IGT funds. Cash management will be very important going forward. First part of March very busy with possibly a late flu not covered by the vaccine hitting (reports lag by several weeks).
c/d. Hospital Updates/Events -The stroke screening is ongoing. Possibility of adding a 94502 location near the end will be explored. Stroke certification is nearing the point at which the application for an inspection date can be made. Training of personnel sounded like the major delay with this part to complete in March.
7. Finance and Management - Clinic update will be next meeting. I requested a timeline of budget process for 2011/2012 be provided for new Board members. The process is beginning already since there is only 3 full months and associated Board and Committee meetings left to this year.
8. Community Relations - Failed to meet a quorum. Please let Stewart Chen know if you would be interested in joining. Stewart is thinking about inviting major Foundation donors to join, but I am sure applications from any member of the community will be accepted. (I am not sure how to finesse it if you want to serve, but are a critic of the Hospital as I am, but it might be worth it to at least inquire.)
9. Medical Staff report - I failed to note anything remarkable except that the time was relatively early for this part (usually near the end) of the agenda.
10. And that was it. Any corrections or clarifications, please let me know.
(Not really something I want to emphasize, so I will sneak it in here. The Board of Pharmacy sent me a letter about two weeks ago letting me know that they would be taking no action with regard to the libelous charges - my characterization, not theirs - that Leah Williams made regarding the November election. That is a relief for me, of course. )
Wednesday, March 2, 2011
3/7 Board Meeting Cancelled
This meeting should be rescheduled relatively quickly. The meat of the next Board meeting will likely be the issues discussed at the last Finance Committee meeting (wound care clinic, financials, purchase contracts) which I attended to get the details.
Also, I want to say that I attended the 2/28 Employee Recognition Reception. Unfortunately, I had to leave early, but it was nice to see an organization recognizing employees like that. To some it may seem that my critique of the Hospital is aimed at the people who work there. I am certain that there are less than stellar people at the Hospital, but I am also certain that it has its fair share (or more than its fair share) of outstanding employees. The problems at the Hospital are institutional and systemic rather than individual and performance related.
Anyway, congratulations to all who were recognized and especially to Diane Pasquini with 45 years of service who has been a nurse since 1965! If I'm not mistaken, several wings of the existing hospital did not exist when she started.
Also, I want to say that I attended the 2/28 Employee Recognition Reception. Unfortunately, I had to leave early, but it was nice to see an organization recognizing employees like that. To some it may seem that my critique of the Hospital is aimed at the people who work there. I am certain that there are less than stellar people at the Hospital, but I am also certain that it has its fair share (or more than its fair share) of outstanding employees. The problems at the Hospital are institutional and systemic rather than individual and performance related.
Anyway, congratulations to all who were recognized and especially to Diane Pasquini with 45 years of service who has been a nurse since 1965! If I'm not mistaken, several wings of the existing hospital did not exist when she started.
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