At a September 26 meeting the Board of Directors of Mendocino Coast District Hospital (MCDH) approved a new budget for the remainder of the 2019-2020 fiscal year. That budget shows a projected positive net income of $197,751.
Before anyone kicks up their heels, thinking MCDH is on the upswing and solvent enough to go it alone without affiliation, let's throw a bucket of reality on this projected budget. Just a few months ago said same yearly budget was estimated to lose approximately $1.65 million. All of that loss plus about twenty thousand dollars is covered in the new budget due to the suspension of the Meditech electronic health record (EHR) system (a savings of $838,000) and not filling ten fairly costly full time positions on the payroll (permanent chief executive officer [CEO], permanent chief financial officer [CFO], staff development manager, medical records director, coder and charge master coordinator, public relations [PR] director, revenue cycle director, information technology [IT] director, materials manager director, and materials management buyer). The savings for not filling those positions this year amounts to $829,394.
If the hospital does not affiliate in the next year, many of those positions will need to be filled simply to run the enterprise properly. A bigger obstacle for this particular budget is that it shows no growth in revenue. This new budget actually shows total operating revenues down over $300,000. A lack of growth in revenue, let alone a loss, for a hospital already in financial dire straits means big trouble down the road, as in Mack trucks barreling down on you faster than Mark Knopfler can tickle the strings on his guitar.
In the real world of the most recent statistics at MCDH, total operating revenues were down more than a million dollars in August. The net income for August was a loss of over half a million dollars, the eighth month in the last year with a net loss. That's calculating in about $1.6 million in added parcel tax money the hospital collected over that year, money it didn't have in prior years.
Two of the three bond covenants the hospital is supposed to meet in order to please Cal Mortgage, the state run hospital financial piggy bank and main creditor of MCDH, are in non-compliance numbers again. The one covenant threshold the coast hospital does meet is thirty days of cash on hand. The hospital possessed thirty-eight days worth of cash at the end of August. Here again, the thirty-eight number is somewhat deceptive because somewhere around 25 days worth of cash is held in a reserve fund, the Local Agency Investment Fund (LAIF). So, in real, walking around, pay the bills terms, MCDH has a little less than two weeks worth of money to keep the wolves from the door.
Within a month or so, interim CEO Wayne Allen will release an analysis of MCDH's finances projected out to five years in the future. The report will come from the Binder, Dijker, Otte (BDO) accounting firm. Beyond the concocted first year budget, don't look for BDO to present a rosy financial picture for MCDH in the following four years. He didn't repeat the phrase at the September 26th board meeting, but at the MCDH Finance Committee meeting two days earlier, interim CFO Doran Hammett equated the hospital's economic situation to “a slow, downward spiral.” He also warned that these kinds of slow spirals can easily turn jet fast before you know it and leave an institution at rock bottom, meaning no cash to pay the piper.
With that happy thought to digest, let us turn our attention to a hospital-eating beast looming ever larger each day that passes. That is the need for MCDH to retrofit its facility to meet the standards of the Alfred E. Alquist Hospital Seismic Safety Act of 1983 (Alquist Act), SB 1953, and subsequent amendments. By current law those standards must be met by January 1, 2030.
What you need to know to understand where MCDH stands with respect to seismic retrofitting starts with the fact that the hospital consists not of one building, but seven. Each of these needs to meet seismic standards that involve attaining certain levels under structural performance categories (SPC) and non-structural performance categories (NPC).
The seven buildings that make up the MCDH facility include the main hospital. Currently its SPC is at level 2. California Administrative Code (Chapter 6, Table 2.5.3) defines SPC 2 as “Buildings in compliance with the pre-1973 California Building Standards Code or other applicable standards, but not in compliance with the structural provisions of the Alquist Hospital Facilities Seismic Safety Act. These buildings do not significantly jeopardize life, but may not be repairable or functional following strong ground motion. These buildings must be brought into compliance with the structural provisions of the Alquist Hospital Facilities Seismic Safety Act, its regulations or its retrofit provisions by January 1, 2030, or be removed from acute care service.”
The main hospital building at MCDH needs to meet SPC 4, defined by California Code as “Buildings in compliance with the structural provisions of the Alquist Hospital Facilities Seismic Safety Act, but may experience structural damage which may inhibit ability to provide services to the public following strong ground motion. Buildings in this category will have been constructed or reconstructed under a building permit obtained through OSHPD. These buildings may be used to January 1, 2030, and beyond.”
A crucial building at MCDH is called the central plant. As one might surmise, much of the power that runs the entire facility is generated at the central plant. Currently it is only at SPC 2 and needs to be upgraded to SPC 4.
Both the main hospital and the central plant's NPC rating is at level 2. That is compliant only with code from 2002 and means “the following systems are braced or anchored: communications systems, emergency power supply, bulk medical gas systems, fire alarm systems and emergency lighting equipment and signs in the means of egress.”
The main hospital and central plant need to comply with NPC 4, which means complying thoroughly with a set of higher expectations involving the anchoring of equipment and much more. Writing out all the details of NPC 4 would take up pages here but can be accessed online at https://oshpd.ca.gov/construction-finance/seismic-compliance-and-safety/seismic-performance-ratings/
The Emergency Department (ED) at MCDH is divided into two buildings for purposes of SPC and NPC requirements. The western ED meets the required SPC 4; however, it only rates a NPC 2 currently and needs to meet NPC 4 standards before 2030. The east ED also meets SPC 4 standards, but needs to upgrade from NPC 2 to NPC 3.
Here's a bit of seismic good news. MCDH's X-Ray file storage building meets SPC 5 and NPC 4 standards. The emergency generator shelter meets code requirements of SPC 4 and NPC 3.
The respiratory, neurophysiology lab meets SPC 4 standards, but its NPC rating needs to rise from level 2 to 4.
Meeting SPC 5, by the way, means “Buildings in compliance with the structural provisions of the Alquist Hospital Facilities Seismic Safety Act, and are reasonably capable of providing services to the public following strong ground motion. Buildings in this category will have been constructed or reconstructed under a building permit obtained through OSHPD. These buildings may be used without restriction to January 1, 2030, and beyond.”
Considering that what is realistically needed following an earthquake is a functioning ED and an adequate number of beds to provide acute care, some of us have assumed that upgrading the emergency department provided the key for a possible exception to the Alquist Act. The problem at MCDH is that the central plant, which provides most of the power to the rest of the hospital is located at precisely the opposite side of the facility from the ED. The central plant was constructed approximately fifty years ago. To upgrade the central plant and its connections to the ED essentially means tearing apart much of the buildings in between. Some of the lines connecting the central plant to the ED run through roofing that in practical terms can't be ripped apart and reconstructed without incurring massive expense.
The October 2 AVA discussed the “Fact Sheet” put out in relation to a potential affiliation by the coast healthcare district with Adventist Health. That document addressed the basics with respect to the seismic upgrade needs. “Bringing our existing 1972 building to code will cost at least $24M. In which case, we are still left with an old building that lacks modern health care innovations. Building a new hospital will cost around four times that; however, it will be much more attractive, both physically and functionally. The role of Adventist in helping meet this requirement is a key part of the ongoing negotiation.”
The twenty-four million dollar upgrade cost may be a substantial underestimate, considering the potential for rising costs in everything from architectural designs to actual construction work. The nearly 100 million dollar cost for a brand new hospital may be an overstatement in the event of affiliation. Adventist will bring with them blueprints from other facilities they've built around the state as well as the know-how that comes from prior experience.
(More on MCDH in the AVA online archive and at malcolmmacdonaldoutlawford.com.)