Slouching Towards Affiliation

On Thursday, November 7 the Mendocino Coast Healthcare District (MCHD) Board of Directors (BOD) endured a three hour public meeting, preceded by a two hour closed session. The public meeting was then followed by 35 more minutes of closed session. The next morning the BOD got up to attend yet another meeting of three hours. The end result of that November 8 get together was a 3-1 vote (with one recusal) to approve acceptance of a Term Sheet from Adventist Health (AH), moving the Coast hospital one step closer in the affiliation process.

The term sheet and the overall affiliation must gain a final, favorable BOD nod, presumably at a late November meeting. Next, the affiliation will need approval by the voters of the Mendocino Coast Healthcare District as part of the March 3, 2020 election. It passes with 50% of the vote, plus one.

An interim step on the way to complete affiliation is touched on in the Term Sheet. AH and the Coast hospital may enter into a management services agreement (MGA). Under that, AH administrators would take control of day to day operations at MCHD as soon as January 6, 2020. Presuming voter approval, the MGA would continue until the affiliation goes into full effect in April, 2020.

The Term Sheet was submitted by Jason Wells, President of Adventist Health's hospitals in Ukiah and Willits, along with Bob Beehler, Vice President for Adventist Health Strategic Partnerships. The document calls for a thirty year lease of Coast hospital facilities by AH. The name on the lease will be Stone Point Health, LLC, a subsidiary of AH, used for affiliation with entities that have union work forces.

The lease will include the acute care facility, all clinics and healthcare facilities, including ambulance services, owned or operated by MCHD. Ambulances will continue to primarily serve the populace of the coast healthcare district.

As the renter, AH will pay $1.5 million annually to its landlord, MCHD. That money will help to reduce the approximate $11 million in long term debt the coast hospital has been burdened by for several years.

MCHD's Finance Committee chair, John Redding, was the only member of the BOD to cast a vote against accepting the AH Term Sheet. In a statement written November 9, he stated, “[T]he affiliation team has not discussed the District’s finances post affiliation. The only way, it seems, to get my colleagues to focus on due diligence is to threaten not to vote for affiliation.”

Redding went on, “Regardless, I will vote for affiliation. I would just feel better about it if we as a team would take a moment of time to see if the District can meet its financial obligations post-affiliation.” Redding attached a spreadsheet and multiple graphs to make the case that the coast healthcare district may not be financially viable even in a post-affiliation world.

Redding said of his spreadsheet, “Of course, the numbers may be wrong, but that's why I want a review.”

Well, something akin to that exists. That would be the five year financial projection created for MCHD by he Binder, Dijker, Otte (BDO) accounting firm. Their report displays the coast hospital economic situation without affiliation, losing ground steadily into the future, with a projected net loss in fiscal year 2022 of $766,886, in fiscal year 2023 that net loss jumps to $1,233,076, and a loss of $1,707,949 for fiscal year 2024, at the end of the study.

Emblematic of the dire economic situation MCHD finds itself in right now was an item placed on the November 7th BOD meeting agenda at the last minute. It entailed a $337,000 payment made for an intergovernmental transfer (IGT). The way IGT transactions work, about double that amount will come back from the state in the not too distant future; however, MCHD is so strapped that it had to borrow from what is called its local agency investment fund (LAIF), akin to a savings account, because it doesn't possess enough short term cash on hand to cover the deal.

The number of days of short term cash on hand is tucked away on Page 11 of the monthly MCHD financial reports. Some questioning from MCHD Director Jessica Grinberg brought the days cash on hand from the back pages to the light of difficult discussion. At one point Grinberg asked, “What are we actually doing to promote our survival?”

A prolonged silence followed.

In the first quarter of this fiscal year the Coast hospital bottom line was $467,000 in the hole. The budget forecast for that time frame was only a $92,000 loss. For the same quarterly period last year MCHD was $240,000 in arrears. Two of the three bond covenants the Coast hospital is supposed to meet have fallen short for months on end. The only one on the positive side of the break even threshold is the “Days Cash on Hand” covenant. It is artificially supported by the LAIF account. Without the LAIF money the long term cash on hand would fall three weeks short of what is deemed a break even point. At the end of September the short term operating cash on hand amounted to 6.7 days worth.

In addition, Cal Mortgage, the state entity that owns much of MCHD's debt, has refused any more economic waivers to the Coast hospital. There is no sunny, smiling emoji at the end of this text. There exists only one viable solution at this point, and that is affiliation.

There is still one more issue that brings out deeply felt and sometimes divided emotions — an issue that some seem to wield as emotional blackmail for votes in the upcoming affiliation election. That issue is labor and delivery, or obstetrics (OB), if you will.

Whether or not the labor and delivery department remains open within Mendocino Coast District Hospital took up much of the public discussion time at both the November 7 and November 8 meetings. Births at the Coast hospital are down to between 50-60 per year. Twenty years ago the number was four times as high.

A fully staffed labor and delivery department is currently a $2 million annual loss leader at MCHD. The wording of the Term Sheet states, “Adventist Health will continue to provide existing services at the current level for at least 2 years.” However, the two parties are likely to sign an agreement that will void this part of the deal upon mutual agreement. Look for labor and delivery to be the first of the currently existing departments to get the mutually agreed upon ax.

In reality a lot of coastal mothers have been lifting that ax for years, by making the choice to go to Ukiah or Santa Rosa to have their babies. Of course, there are mothers and families in financial need who would find even the trip to Ukiah an economic hardship.

Currently, AH offers to help families in need who desire to stay close to Adventist Health Ukiah for their care at the hospital. A hotel stipend to the tune of $4,000 multiplied by fifty, would only cost $200,000. That figure is about one tenth of the annual loss MCHD incurs while keeping open a fully staffed OB Department for about one birth per week.

There are no recent documentations of babies being born on the side of Highways 20 or 128, nevertheless babies do not always arrive on their due date. One way AH has attempted to work through this potentiality is to have all of their emergency room doctors and nurses at Adventist Health Howard Memorial in Willits trained in birthing procedures. Perhaps after affiliation takes place such training could be extended to the Coast hospital.

The good old days of a full scale labor and delivery department are gone for rural critical access hospitals such as the one run by MCHD. The only way they might return is through radical changes in how our nationwide healthcare system functions. Do not hold your breath waiting.

A MCHD sponsored forum on labor and delivery will be held later in November, most likely at Town Hall in Fort Bragg. Precise time and date to be determined.

Other local alternatives include a birthing center as well as a broader women's health center on the coast. With some assistance from AH and possible grant money these approaches may help to ultimately solve some of the looming obstacles to labor and delivery. Many of these topics have already been touched upon at MCHD's Planning Committee. These meetings are chaired by Director Grinberg and often feature the most proactive, forward thinking ideas to be found in these parts.

One ray of sunshine amid the bleak financial numbers at MCHD has been the swing bed department. Through work initiated by hospital employees and the planning committee chair, the swing bed department has been a consistent money maker this year. Compared to last autumn, this department has shown more than a million dollar improvement. The next meeting of the hospital's planning committee is tentatively set for November 18, 5 pm, in the Coast hospital's Redwoods Room.

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