On Thursday, March 7, Coast Hospital CEO Wayne Allen issued the following press release. “Mendocino Coast Hospital Files Bankruptcy Motion To Reject Current Union Contract; To Seek Negotiations On A New Agreement Fort Bragg, California – March 7, 2013. Mendocino Coast District Hospital CEO Wayne Allen today announced that the hospital has filed a motion with the US Bankruptcy Court, Northern District of California, to reject the hospital’s contract with its employee union, the United Food and Commercial Workers, UFCW 8.
The District’s motion is scheduled for a hearing before the Bankruptcy Judge on Friday, April 12. ‘We can’t predict how the judge will rule,’ said Allen. ‘However, in anticipation of a ruling that will allow us to reject the current memorandum of understanding (MOU) with the union, I am planning to contact UFCW 8 representatives and request they enter into negotiations to develop a new MOU before the April 12 court hearing.’ Allen would not discuss what issues might be included in the union-hospital negotiations or speculate on a potential outcome. He noted that the motion to reject the current hospital-union MOU is part of a multi-part bankruptcy plan, which includes re-negotiating debt with major creditors, like United Healthcare, to bring debt and expenses in balance with revenue. ‘It’s critical for the hospital’s survival,’ he added. ‘My hope is to negotiate terms for a new MOU with the union as soon as possible,’ said Allen, who has established a debt reduction goal of at least $3.6 million, which is the projected loss for the current fiscal year ending June 30. Over the past week, Allen met with nearly 100 employees to answer questions and explain the hospital’s debt problem. ‘At our employee forums, people were very attentive and asked good questions,’ said Allen. ‘I was as forthright as possible about our situation. … At the forums on Wednesday of this week, I also alerted them that more parts of our bankruptcy plan would be unveiled in the next few days so they wouldn’t be surprised. The petition to reject the union-hospital memorandum of understanding is part of the plan I alluded to in those meetings.’ The District is still hopeful it can exit from bankruptcy by June 30, 2013, according to Allen.”
Sources inside Coast Hospital say that the hospital’s attorney, John Ruprecht, believes it will take at least two years for the hospital to “exit from bankruptcy.” But that may depend on how “exit from bankruptcy” is defined. CEO Allen considers himself an expert in bankruptcy, having converted other publicly-owned hospitals to private for-profit operations at other of his previous stops as Chief Financial Officer. Given the union’s strong rejection of pay and benefit cuts in the past unless they are part of a larger reduction including agreements that management and doctors share the pain, it’s not likely that UFCW 8 will agree to whatever “new MOU” negotiations Allen may have in mind, which we presume Mr. Allen has made his thinking clear. His press release basically says, “make concessions with me or I’ll turn it all over to the bankruptcy court which will force concessions on you.”
Allen’s MOU-busting motion comes on the heels of last month’s announcement that the hospital was firing 12 full-time employees which Allen said at the time would “not compromise patient quality and or safety.” But medical staff in the hospital says that such reductions clearly do affect “patient quality or safety” because the night shifts are down to minimum staffing for the hospital’s 18 acute care beds with no nursing aides or assistants, meaning it's up to nurses alone to handle the mostly elderly patients who fall out of bed and otherwise suffer emergencies requiring much attention and/or clean up.
However, it’s hard to see how a few concessions from the employees will solve the hospital’s overall financial problem. The biggest creditor is the state of California (aka Cal-Mortgage), to whom the hospital owes something like $14 million in long-term debt. Reportedly, CEO Allen wants to jettison this debt by having the bankruptcy judge declare it “unsecured,” meaning that it goes to the very back of the line in whatever bankruptcy settlement payback arrangements end up being made either in June of 2013 or June of 2015. The judge is not likely to approve indefinite repay agreements. (And Cal-Mortgage obviously isn’t going to eat $14 million. The big bill will very likely stay on the hospital’s primary secured creditor list, meaning that “emerging from bankruptcy” will be much more difficult, even with employee concessions.
Given this background, and Mr. Allen’s occasional references in the hospital’s corridors to “liquidation,” the speculation among hospital staff now becomes whether or not Adventist Health, which runs Mendo’s only two other hospitals, and which is investing millions of dollars in large capacity increases in its for-profit operations in Willits and Ukiah, will pick up Coast Hospital for pennies on the dollar by assuming whatever’s left of their debt after the bankruptcy process is over. If that happened, Coast Hospital would probably be reduced to more of an intake-screening operation to funnel paying patients needing actual hospitalization to their newly expanded Willits and Ukiah facilities, leaving Coast Hospital as more of a stripped down clinic and emergency care branch office than a full-service “hospital.”
Coast Hospital is one of only three remaining publicly-owned hospitals in all of California, the rest having been privatized as medicine and medical insurance move more and more into cash-cows for its shareholders and away from its primary mission of providing health care to all people regardless of their ability to pay.
Allen’s insistence on taking the Hospital through bankruptcy — backed by his credulous board of directors which fired former CEO Hino without even giving Hino’s practical non-bankruptcy plans a try — pretty much forecloses other options such as 1. renegotiating reduced contracts with part-time doctors who are not bringing in enough patients to justify all the hospital costs they demand (i.e., admin, nursing, malpractice insurance, and the rest of the hospital’s overhead), 2. issuing new bonds, and/or 3. going to the hospital district’s voters for an increase in the parcel tax proposal to save the popular little public hospital from becoming just another tentacle of Mendocino County's Adventist octopus.
Another sign that Allen is more interested in bankruptcy and liquidation than in recovery, is the administration’s continued failure to fix their ongoing billing problems, problems which the hospital’s accounting staff have pointed out several times. Fixing them would require that administration impose requirements on their contract doctors to make sure that all billable services are properly documented. (One problem that has been pointed out to us is when a patient is scheduled for routine or elective surgery the doctors refuse to itemize the pre-op steps and connect them to the surgery — blood tests, EKGs, x-rays, MRIs, and other tests to make sure a patient can handle the surgery — designating them as simply “pre-op” which are not billable to the insurance agency as part of the surgery itself.)
At the rate they’re going, the hospital’s core medical care functions will be strangled as experienced older staffers quit or retire, pay and benefits are cut or eliminated for everyone else, further cuts in capacity are made (there’s already talk of reducing the number of acute care beds to reduce the number of staff nurses needed), and capital equipment upgrades and acquisitions come to a halt. Once that gutting takes place, what’s left of Coast Hospital will be easy pickings for Adventist.