Last Tuesday as Mendocino Coast District Hospital's 320 unionized employees overwhelmingly rejected concessions sought by management, the Hospital's Board of Directors was meeting in closed session to fire CEO Ray Hino.
The next day Mendocino County's only community-owned hospital filed for bankruptcy and Chief Financial Officer Wayne Allen — who has presided over the bankruptcy of two prior hospitals — had been appointed interim CEO.
Hino opposed the bankruptcy filing as did two Board members. He had worked with union representatives to structure a compromise aimed at averting bankruptcy.
But Allen and a three-person Hospital board majority are dead set on bankruptcy — apparently because they either see the union contract as “too generous” and the sole reason for the Hospital's financial difficulties or, as some speculate, they see bankruptcy as a path to privatization of the County's only publicly owned and operated hospital.
Whatever the Board majority's true intentions are, Hino had become an obstacle to them and, because his contract was up, Hino was unceremonially pushed out the door although he is widely credited as having saved Coast Hospital from bankruptcy when he was hired in 2006 to replace the profligate Bryan Ballard.
According to a Coast Hospital press release announcing the dramatic developments late last week, “Wayne C. Allen, 67, of Mendocino, current chief financial officer (CFO) of Mendocino Coast District Hospital, has been appointed interim CEO, effective October 24. Allen will retain his position as CFO. Allen replaces CEO Raymond T. Hino, whose employment contract ends on Tuesday. The hospital is running a deficit and filed for bankruptcy on Oct. 17. The hospital board of directors unanimously voted in favor of Allen, who has more than 35 years experience as a healthcare executive and has successfully guided two hospitals through the bankruptcy process.”
Translation: A bankruptcy expert sees bankruptcy as the first and best solution to financial difficulties.
“Given my experience as a CEO/CFO and Chief Operating Officer in hospitals ranging from 25 to 300 beds, I'm comfortable and confident about guiding the hospital through the bankruptcy process to assure sustainable operating performance into the future whereby access to local healthcare is available,” Allen said, serenely gliding past the difficulties bankruptcy presents and without so much as a mention of other strategies.
“The hospital board,” Allen continued, “has directed the hospital's human resources director to begin a search for a new, permanent CEO.”
That search seems to have found Mr. Allen.
In a move seen by many as an insult to the widely popular Hino, the Board, insulting Hino a second time, offered Hino a temporary consulting position to “help Mr. Allen get through this difficult time.” But Allen quickly nixed that idea saying he didn't need any help from Hino and the Board's offer to Hino was withdrawn.
Further irritation for the Board's critics was found in this item on the Board's October 22 special meeting agenda: “1. DISCUSSION/ACTION: Board consideration of Management Transition Issues.”
As the press release announcing Allen as CEO says, Allen has plenty of bankruptcy experience. What the press release didn't say was that the success of Allen's self-alleged bankruptcy strategy resulted in both of the “small hospitals” he referenced being absorbed in larger private chains.
Critics of Allen's appointment fear that privatization is Allen's ultimate goal in Fort Bragg.
Nobody disputes that the Hospital's revenues are down and that something needs to be done. But is bankruptcy the only way out?
For the last few weeks Hino had been working feverishly with all the Hospital's creditors — the union, the State of California's Cal-Mortgage office, and the doctors with their lucrative contracts — to assemble a bankruptcy avoidance plan which involved across-the-board cutbacks. But the doctors, two of whom sit on the Hospital's board, not only rejected it, some of them have said they want pay increases.
Under Hino's proposal, the union had agreed to forgo their 3% pay increase which kicked in last July and a paid holiday or two. They were also willing to negotiate temporary reductions which would be reinstated when the Hospital recovered financially — if the State and the doctors shared in the cuts.
In addition, Hino had convinced Cal-Mortgage to forgive a $1 million loan the Hospital had obtained last summer to help the Hospital cover an earlier cash-flow gap.
Hino's compromise package also included a proposal to switch to a less-expensive health insurance carrier at an estimated savings of about $400k a year.
“Mr. Hino had a workable deal that should have been given a chance to work,” said one senior employee, “but the Board said no. We don't know why the Board said no. Now, it looks like the Board simply wants to eviscerate our union.”
Which is why 98% of Hospital employees voted to reject the take-aways the Hospital wanted and to declare their overwhelming intent to go on strike if the Hospital or the bankruptcy judge tries to “cram” the take-aways down their throats.
(“Cram-down” is no euphemism. There's a specific provision in municipal [Chapter 9] bankruptcy law that provides a mechanism for a municipal debtor to “cram-down” a “plan of adjustment on non-consenting creditor classes” [i.e., employees] “so long as at least one of the other creditors agrees with the bankruptcy recovery plan” — if the bankruptcy judge determines that debtor's (i.e., Hospital management's) plan “does not discriminate unfairly and is fair and equitable.”
Fourteen years ago this same Hospital Employees Union struck under roughly similar circumstances when Hospital management attempted to take away their health care benefits. Last Tuesday's lopsided strike vote represents a serious threat that employees will again strike. The 1998 strike lasted for almost two weeks and cost the Hospital over $1 million in lost revenue and scab replacements.
In the wake of last week's dramatic developments, management has been told to cancel any vacation plans in apparent anticipation of a strike.
The bankruptcy process is expected to take a minimum of five months.
An employee group has approached the Coast's two local AM radio stations to publicize the situation. They also hope to have a full page dedicated to letters to the editor in the two interchangeable Coast newspapers next week regarding the labor dispute and the pending bankruptcy.
Employee representatives emphasize they are not asking for anything and are not making any demands. They just want to maintain the contract more or less as is — they are willing to negotiate some cutbacks with the Hospital board, as long as everyone, including doctors and administration, is treated equally.
Last week's rush decision to file for bankruptcy — it was originally scheduled to be filed November 16 — also pre-empts other longer-term options such as preparing a ballot measure for an increase in the District's parcel tax. And, since the bankruptcy option arose only in the last few weeks, the August filing deadline for the two Board seats — the seats currently being held by Fort Bragg CPA/tax attorney Sean Hogan and former Silicon Valley corporate accountant Tom Birdsell — which are up for election came and went with no one filing to run against the bankruptcy-leaning incumbents.
After 98% of the employees voted to reject the proposed take-aways and authorize a strike if they are imposed, several employees said that they thought such a lopsided vote “would bring the Board to their senses and bring the Board members back to the negotiating table.”
Instead, the Board fired Hino and filed for bankruptcy.
“It looks like they're hell-bent on this bankruptcy path,” said one senior employee.
One of the most objectionable provisions that management wants to impose on the union is to eliminate health insurance coverage for part-time employees. The union sees this as the first step toward elimination of health insurance for everyone. “If they take health insurance away from part-time employees, it won't be long before full-time employees have their hours cut back to part-time with similar loss of benefits,” is how one long-time Hospital employee puts it.
It's all shaping up as a replay of the strike of 1998.
It's possible the current crop of managers is unaware of how seriously their employees take the threat of losing their health insurance. If so, they are in for the proverbial rude awakening.
Management should have seen this financial crisis coming. They've known for months if not years that patient admissions were down. They know the depressed local economy on the Coast has cut into the number of people who will seek medical care and who can pay for it or have insurance that will pay for it. They know that they could do more to collect on unpaid bills to insurance companies and state and federal agencies like MediCal and MediCare. They also are aware that for months now they've been unable to sterilize their surgical instruments due to an autoclave failure which has not only cost more to work around (instruments must be taken to the Adventist hospital in Willits for sterilization), but the problem has reduced good paying surgery patient admissions. (A new autoclave has been installed, but as of last week still was not operating properly and instruments are still going to Willits for sterilization.)
Some employees at the all-day union meeting last Tuesday speculated that the Board and the newly promoted Allen may be considering a possible merger with the Adventist hospital chain which already operates the County's two other hospitals in Willits and Ukiah. Both of the Adventist hospitals are expanding and looking for increasing patient admissions; they may see a downsized Coast Hospital as to their advantage as more patients are funneled to Willits and Ukiah for care. Any downsizing of Coast Hospital would be opposed by the employee union and would also require approval by a majority of the Hospital District's voters.
Jeri Erickson is responsible for the hospital's non-profit fundraising foundation. She told the Santa Rosa Press Democrat last week, “I'm not worried” about the hospital's future, adding that she was certain the community could somehow “save the hospital.” After all, Ms. Erickson's Hospital Foundation just made $600,000 on this year's Winesong festival.
In the larger picture, several Coast residents have pointed out that the Hospital is an important part of the northcoast economy, and if it closes or is substantially cut back it will further damage Fort Bragg's already precarious financial well-being. “The City Council should be very concerned about this,” said an employee who was at the union meeting last week. “We are going to lobby the Fort Bragg City Council to get involved to pressure the Hospital Board to negotiate in good faith. The union is willing to negotiate. And Ray Hino's package would still be a good place to start. We've already made it clear that we're willing to forgo the raise and make other concessions — if everybody, including management, Cal-Mortgage and the doctors take comparable cuts. A strike would be a public relations nightmare and would cost even more money. But if they try to force these take-aways on us we will strike. We've done it before and, if we have to, we'll do it again.”