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HomeMy WebLinkAboutMINUTES - 12131988 - 2.5 2 . 5 THE BOARD OF SUPERVISORS OF CONTRA COSTA COUNTY, CALIFORNIA Adopted this Order on .__December 13 , 1988_, by the following vote: AYES: Supervisors Powers, Fanden, McPeak, Torlakson, Schroder NOES: None ABSENT: None ABSTAIN: None ------------------------------------------------------------------ ------------------------------------------------------------------ SUBJECT: Merrithew Memorial Hospital Replacement Facility Study The Board considered the recommendations of the Mark Finucane, Health Services Director, pertinent to the Merrithew Memorial Hospital Replacement Facility Study. A copy of the referenced recommendations are attached and included as a part of this document. The following persons spoke: Jeff Smith, City of Martinez, 4991 Alhambra .Valley Road, Martinez, in support for a replacement facility; Don Christen, Executive Director, Contra Costa Taxpayers Association, 820 Main Street, Martinez, on the scope of the proposal; and George Degnan, M.D. , 5355 Alhambra Valley Road, Martinez., in opposition to the proposal. All persons desiring to speak having been heard, the Board discussed the recommendations and approved them as amended. Therefore, IT IS BY THE BOARD ORDERED that the recommendations . of the Health Services Director are approved as presented with Recommendation No. 3 amended to direct the County Administrator and Health Services Director to prepare an RFP for a schematic design. consultant for subsequent presentation for the Board' s review; and Recommendation No. 9 amended to include a request for a specific timetable for further actions, a determination whether or not an Environmental Impact Report will be required, and a request to hold workshops to inform the Board and the public of the activities related to the replacement study. hereby certify that this is:a true and comr Lz:opy of an action taken and entered on the minute cf the Board of Supervisors on the data shown. ATTESTED: PHit. BATCHELOR, Clerk of the Berard of Supervisors and County Administrator cc: Health Services Director County Administrator By Deputy --4V Tom: BOARD OF SUPERVISORS FROM: Mark Finucane, Director Contr, Health Services Department Costa DATE: December 9, 1988 Count SUBJECT: Merrithew Memorial Hospital Replacement Facility Study SPECIFIC REQUEST(S) OR RECOMMENDATION(S) BACKGROUND AND JUSTIFICATION RECOMMENDED ACTION 1 . Accept the Arthur Young/SMP report entitled "Strategic, Architectural and Financial Planning --Replacement County Hospital ". 2. Direct the County Administrator to work with Auditor-Controller and Treasurer-Tax Collector to determine funding resources available to address the urgent capital needs associated with rebuilding or repairing the Hospital , in light of the Arthur Young/SMP report. 3. Authorize the Directors of General Services and Health Services to proceed with selection of consultants for Schematic Design and Project Construction Management, in conjunction with the financing review outlined above, and con- tingent upon final Board approval . 4. Direct the County Auditor-Controller to reserve Tobacco Tax revenues accruing to the County effective January 1 , 1989 and all subsequent years to be used for either a) subvention requirements of the replacement facility_ or b) financing (estimated at $15,000,000) the repair of the existing facility, in compliance with State and Federal mandates to correct existing deficiencies , and related operational costs. k 5. Direct the Health Services Director to utilize SB1732 revenues to the maximum possible extent in planning for a replacement facility or carrying out mandated facility repairs . 6. Direct the Health Services Director to aggressively pursue securing a state commitment for SB1732 funds at the earliest possible date. 7. Direct the County Administrator to convene the Project Oversite Committee on a regular basis for the duration of the Replacement Hospital Project. 8. Direct the County Administrator, Auditor-Controller and Treasurer to evaluate with Bond Counsel and Financial Advisors the impact of hospital replacement 'financing on the County' s total debt structure, and bond rating capacity. 9. Direct the County Administrator and Health Services Director to provide monthly status reports to your Board on the above recommendations . CONTINUED 'JN ATTACHMENT: __ YES SIGNATURE: �. RECOMMENDATION OF COUNTY ADMINISTRATOR RECOMMENDATION OF BOARD COMMITTEE APPROVE �_ OTHER y, -2- FINANCIAL IMPACT None. Contracts for schematic design and project management firm will be funded from the Health Services Department's approved 1988/89 budget. Source of funds , con- sistent with previous Board action, will be from the past sale of licensed. hospital beds to National Medical Enterprises (NME) . BACKGROUND In January 1986, your Board accepted the Health Services Director' s report on the future of the County Hospital . After extensive interviews with hospital and com- munity leaders_ to explore all options for the hospital ' s future, the Director of the Health Services Department recommended replacement of the existing County Hospital facility. Your Board approved this recommendation, subject to a determination of its financial feasibility. In order to generate the information required for this deter- mination, the County Administrator engaged the services of Arthur Young (AY), Certified Public Accountants, and their architectural consultants , Stone, Maraccini and Patterson (SMP) . The final report of this study is submitted herewith. After assessing Contra Costa' s demographic and healthcare environment and projecting utilization of the public and private hospitals, the Arthur Young report outlined the role which the County Hospital must play in the future. ' In order to carry out this role, the report recommends development of major programs in the areas of Geriatrics, Obstetrics/Women' s Health, and expanded psychiatric seryices . This market focus is projected to have a favorable impact on the hospital ' s finances . To house these programs along with other medical and existing psychiatric services, the report recommends building a new hospital with 227 licensed beds . In addition, the Arthur Young report recommended constructing a Skilled Nursing Facility (SNF) , pending a full financial review and assessment. Not surprisingly, SMP' s architectural analysis of Merri'thew's functional and space requirements identified significant space shortages, poor configuration of available space, and numerous instances of departmental fragmentation in the current facility. Their conceptual plan for a replacement hospital includes a core hospital connected to separate psychiatric services and outpatient buildings, with separate entrances for the various services. They have also identified the 'site for a separate Skilled Nursing Facility. Existing hospital operations would be maintained during construction. Replacement could occur in two phases: the first would include psychiatric services and a central plant/maintenance building; the second, the core hospital and outpatient/family practice clinics . SMP estimates construction and project-related costs for the replacement Hospital at $95 million . In the final section of the report, AY presents financial projections for the base case (status quo) and the replacement hospital alternative. RECENT DEVELOPMENTS A number of events , which significantly affect the hospital project, have transpired since the Department, Arthur Young and Stone, Maraccini and Patterson collected their data for the report: 1 , -3- p In July, review teams from the state and federal governments cited Merrithew Memorial Hospital for lack of compliance with current physical plant licensing standards. County staff have been aware of the cited con- ditions for many years. Coupled with the deteriorating physical condition of the hospital , these basic design problems led to your Board' s original concerns regarding the hospital 's future. Now we are faced with not only a price tag of $12-15 million for required renovation and modifications, but also the threat of having our major sources of hospital revenue, Medi-Cal and Medicare, terminated if we remain out of compliance. We do not feel feel that spending' $12 - 15 million on an outdated facility would be a wise 1 expenditure. This cost estimate, it must be noted, results only from a partial review. Shortly, the facility will undergo a more comprehensive investigation that likely will result in a higher price tag. Because of the current licensing problems, the independent firm of Derver and Berkoff, together with mechanical , electrical and cost estimating con- sultants, were engaged to review, in detail , the costs associated with correcting selected deficiencies involving major facility modification and renovations which were cited in the July licensing review. In summary, the Derver and Berkoff report concludes that the $12 - $15,000,000 in construction "MIGHT RESOLVE THE OUTSTANDING CITATIONS, BUT WOULD NOT CONTRIBUTE IN ANY OTHER POSITIVE WAY TO THE FUNCTIONAL OPERATIONS OR EFFICIENCIES OF MERRITHEW MEMORIAL HOSPITAL". The report continues "PRIOR STUDIES OF PHYSICAL FACILITIES AT MERRITHEW MEMORIAL HOSPITAL HAVE CONCLUDED THAT THE COMPLEX HAS OUTLIVED ITS USEFUL LIFE AS A HOSPITAL AND SHOULD BE REPLACED. THE DERVERIBERKOFF EVALUATION TEAM CONCURS o The exploding census which was originally thought to be a transient -pheno- menon has become an enduring fact. Merrithew is now serving more patients than it has in many years. This exacerbates the problems identified in the negative state and federal reviews of the facility. This high level of utilization also underscores Arthur Young' s conclusion that Merrithew plays a unique, indispensable, and expanding role in the region' s medical deli- very system. o The passage of SB1732 was a major victory for counties. In Contra Costa's case, the legislation guarantees subvention of 40% to 45% of the debt ser- vice for a replacement hospital . With $4.7 - 5.2 million share of the debt service covered, it significantly increases the feasibility, desirability, and practicality of replacing the county hospital . o Turbulent changes , in the health care industry have occurred in Contra Costa County, as elsewhere in the country. A review of local events reveals high turnover in top management positions, fierce competition, and an uncertain future; for many institutions . Simultaneously, the County has expanded its role `and has become a stabilizing force in the health care system. o The percentage of the gross national product devoted to health care con- tinues to increase. The resultant pressure on expenditures will mean fewer and fewer hospitals will remain open and fewer still will take the marginally insured,; thus forcing more patients into the county system. Merrithew's Medi-Cal inpatient days have increased 27% in just two years. o Proposition 99, the Tobacco Tax initiative, was passed on November 8, 1988. The language of the initiative is clear: a large percentage of the money was intended for hospitals who treat a high percentage of poor or unsponsored patients . The amount directed to Merrithew could approach $5 million annually. However, the initiative provides that the formula for distribution of these monies is to be developed by the Legislature and the State Department of Health Services . Our experience with both over the past four years forces us to note that the only funding certainty at this time is the Presley bill (SB1732) . However, the tobacco tax initiative could provide major additional relief. r,f -4- . RECOMMENDATION We request that you authorize the next step in the design process , and approve the actions described in recommendations 1 through 7. These recommendations are consistent with the step-by-step approach which has characterized the planning for the future of the County Hospital . The schematic design phase will translate the general require ments and conceptual plan contained in the Arthur Young/Stone, Maraccini , and Patterson report into a more specific form and will provide refined cost estimates. Your Board would then decide whether to proceed with the - next phase of this project. The requested desiqn work would be required if your Board should approve, at a later date, replacement of the County Hospital . It would also demonstrate to the State and Federal govern- ments that we are seriously pursuing the hospital replacement option, and thus should prevent a devastating loss of revenues or an inprudent expenditure of $12 - 15 million on ;the existing facility. Additionally, it will place Contra Costa at the "head of the line" for obtaining funding approval as provided for in SB1732. It must; be noted that SB1732 has a limited five year window for application for these funds . This window can conceivably be changed legislati- vely; however, once ?approved, funding will continue for the life of the bond issuance.