HomeMy WebLinkAboutMINUTES - 05061986 - 2.2 TO- BOARD OF SUPERVISORS
FROM• T PhilBatchelor County Administrato r
COYIt!'a
Mark Finucane, Health Services Director
Costa
DATE*. April 29, 1986 County
SUBJECT: Progress Report, Replacement County Hospital
SPECIFIC REQUEST(S) OR RECOMMENDATION(S) & BACKGROUND AND JUSTIFICATION
I . RECOMMENDED ACTIONS:
A. Accept this progress report dealing with a number of issues which were
unanswered at the time of the January 14, 1986 report to the Board on
this subject, including such issues as:
1. the City of Martinez' planning requirements as they
might impact a hospital rebuilding project;
2. the impact of such projects on the County' s debt limit
and credit rating;
3. the location of a skilled nursing facility in relation
to the general acute hospital for reimbursement purposes;
4. the relationship of these projects to other current and
proposed capital projects;
5. the possibility of joint ventures with the Veterans'
Administration, Kaiser and national hospital management
firms; and
6. proposals to form a countywide hospital district.
B. In order to provide additional comprehensive information on the propo-
sal to rebuild the hospital including such items as size, appropriate
services to be provided, cost, methods of financing, and architectural
parameters, approve distribution of a Request for Proposals to provide
strategic, architectural , and financial planning assistance to the
County. Funding for the resulting contracts will be recommended to
be paid from monies to be received from National Medical Enterprises
in return for bed license transfers.
CONTINUED ON ATTACHMENT: _ YES SIGNATURE:
RECOMMENDATION OF COUNTY ADMINISTRATOR RECOMMENDATION OF BOARD COMMITTEE
APPROVE OTHER
SIGNATURE(S):
ACTION OF BOARD ON May 6, 1986 APPROVED AS RECOMMENDED X OTHER X
APPROVED recommendations as presented in this progress report; REAFFIRMED continuing discussions on
joint ventures, to include Supervisors' participation in meetings with hospital administrators in their
respective Districts; and REQUESTED a report from Health Services Director on the current occupancy figures
for all public and private hospitals in the County and the costs to have empty beds.
VOTE OF SUPERVISORS
1 HEREBY CERTIFY THAT THIS IS A TRUE
UNANIMOUS (ABSENT AND CORRECT COPY OF AN ACTION TAKEN
AYES: II, IV, V & I NOES. III AND ENTERED ON THE MINUTES OF THE BOARD
ABSENT: ABSTAIN: OF SUPERVISORS ON THE DATE SHOWN.
CC: Health Services Director ATTESTED
County Administrator
PHIL BATCH OR, CLERK OF THE BOARD OF
SUPERVISORS AND COUNTY ADMINISTRATOR
f.
BY �C. ,DEPUTY
M382/7-83
2.
C. Approve the following working assumptions for purposes of soliciting the
proposals for strategic, architectural and financial planning:
1. The hospital will be located in Martinez on the present
campus.
2. The hospital will continue to be the major provider of
services to low-income residents of Contra Costa County.
3. The new hospital will be one element in a continuum of
services for the elderly, forming a Geriatric Institute.
4. The emphasis on outpatient services throughout the County
will continue.
5. The County will continue to provide a full spectrum of
mental health services, including acute hospitalization.
6. The County cannot afford a significant increase in
General Fund subvention of Health Services. Net costs
of operation and debt service must be minimized and
external funding obtained if necessary.
7. Wherever possible and economically justifiable, existing
structures on the hospital campus will be renovated, if
necessary, and used for outpatient services and support
staff.
D. Direct the County Administrator and the Health Services Director to return
to the Board with a recommendation for a contractor or contractors to pro-
vide the services described in the Request for Proposals.
E. In order to explore the feasibility of establishing a skilled nursing faci-
lity for patients with Alzheimer's Disease by remodeling F and G Wards at
Merrithew Memorial Hospital , take the following actions:
1. Authorize the Health Services Director to prepare and submit
an application to the California Health Facilities Authority
(CHFA) for funding of the F and G Ward remodeling project.
2. As is required by the funding application to CHFA, authorize
the Health Services Director to submit an application to the
Office of Statewide Health Planning and Development for a
Certificate of Need (CON) to convert 30 bed licenses from
the acute category to the skilled nursing category.
3. In order to provide the professional expertise necessary to
prepare the CON and to prepare the architectural drawings
needed for the CON application, authorize the Health Services
Director to negotiate contracts with a firm specializing in
the preparation of skilled nursing facility CON' s and with
an architectural firm approved by the Director of General
Services, both contracts to be returned to the Board for
approval .
4. As is required by the CON application, adopt a Resolution
approving the remodeling of F and G Wards at Merrithew
Memorial Hospital to convert the wards to a skilled nursing
facility for patients with Alzheimer's Disease, with the
understanding that adoption of such a Resolution does not
authorize any actions toward actual construction or remodel-
ing until a source of funds is identified. and such construction
is approved by the Board of Supervisors.
F. Remove from active consideration at this time the creation of a countywide
hospital district.
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3.
II . FINANCIAL IMPACT:
The cost of the consultation engagement for the replacement hospital will be
known following the bidding process, at which time we will request expen-
diture authorization. We intend to offset the entire cost with proceeds
from the agreement with National Medical Enterprises regarding transfer of .
bed licenses. The F & G Ward remodeling project will , when authorized,
require expenditures of $700,000 to $900,000 which will be financed through
AB 830 funding if our application is approved. The contract to develop the
Certificate of Need required for the F & G Ward Conversion would cost
$5,000, and related architectural work would be approximately $15,000, both
amounts to be offset with NME payments.
III .REASONS FOR RECOMMENDATION/BACKGROUND
On January 14, 1986, your Board approved the Health Services Director's
recommendation to construct a replacement County Hospital subject to a
feasibility determination and the collection of other information identified
in the County Administrator's accompanying letter. The County Administrator
and Health Services Director were directed to make a status report to the
Board within ninety- days.
In addition, your Board directed that we distribute the report and solicit
comments. A summary of replies is attached (Attachment A) .
A. Request for Proposal (RFP)
Our January 14, 1986 submission to your Board raised a number of
questions regarding the feasibility of the proposed project. Since
that time, a number of these issues have been addressed, and the
results included in Section C of this report. However, since neither
the County Administrator' s Office nor the Health Services Department
have staff available with the appropriate expertise, the majority of
the issues identified will require outside assistance to address. We
are aware of the fact that several previous studies have been conducted
in connection with the replacement hospital issue. The study for which
consultation is needed will differ from these by being more focused, as
a result of your Board's action on January 14, and more oriented to the
financial feasibility of specific, realistic combinations of service
mix, volume, and anticipated revenue.
The task categories for which consultation is needed include strategic
planning (e.g., projected utilization based upon population need and
other resources available to the target population) , architectural
planning (e.g., preliminary design and projected project costs) , and
financial planning (e.g., pro-forma financial statements under various
assumptions of debt service, service mix and volume, and revenue mix) .
A complete list of the required information is contained in the RFP
which is submitted as Attachment B.
The cost of the contract or contracts necessary to obtain this informa-
tion, while not inconsequential , is small in relation to the risks
involved in making uninformed decisions regarding a replacement hospital .
One source of funding for this study could be the money to be received
from National Medical Enterprises (NME) for the bed licenses to be
transferred from Merrithew Memorial Hospital to the proposed NME hospi-
tal in San Ramon. Early results from the consulting engagement may
indicate that the proposed replacement hospital is not feasible, at
which point the contract would be terminated and expenditures limited
only to work actually performed.
B. Conversion of Existing Ward to Skilled Nursing Facility
In his report the Health Services Director proposed converting F&G
Ward, which currently houses a small physical rehabilitation program,
to a skilled nursing facility (SNF) to serve elderly patients with
Alzheimer's disease. This would be a first step in the development of
a Geriatrics Institute, capitalizing on existing program strengths and
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meeting an increasing need. The structure to be converted is located
at a corner of the hospital campus and would be retained if a new
hospital is constructed at the current site.
We have received a preliminary estimate of $600,000 to $700,000 for the
required alterations to the existing facility. As with the decision to
proceed with a replacement hospital , your Board will no doubt require
information on the F&G Ward conversion' s financial impact before
approving this project. At this time, we are requesting approval to
pursue AB 830 funding and a Certificate of Need. AB 830 is intended to
support capital projects in public hospitals. While the exact nature
of this support has not yet been determined by the California Health
Facilities Authority, we anticipate that it will take the form of sub-
sidized loans or outright grants.
A CON will be required to convert existing acute-care licensed beds to
SNF-licensed beds. CON approval will be needed eventually should we
proceed with the project, but a more immediate need is the requirement
that a CON be approved prior to receiving AB 830 funding. As we expect
that there will be significant competition for limited AB 830 funding,
it would be in our best interests to submit our application as soon as
possible.
The CON application process is not a purely mechanical one, and most
applications are deemed incomplete after one or even several successive
submissions. To avoid these delays, and because we have no experience
in this area, we propose to contract with a firm which specializes in
such matters. We have received an initial estimate of $5,000 to pre-
pare the application.
The CON application must be accompanied by certain preliminary archi-
tectural materials, including a project schedule, single line drawings
of the proposed facility, and cost estimates certified by a licensed
architect or engineer.
We intend to engage, subject to approval by the General Services
Department, the services of an architect familiar with the design of
health facilities and, preferably, with experience in the type of faci-
lity that we are contemplating.
Finally, the CON application, which can be completed within one month,
requires "a resolution of the governing body approving the project".
We are today requesting this approval , subject to determination of
financial feasibility. It must be emphasized that your Board is not
making a commitment to begin construction. There will be ample oppor-
tunity in the future to reconsider your endorsement, based upon data to
be developed by the consultant as described in Section A of this
report.
C. Other Issues Related to Replacement Hospital
The interdepartmental committee which has been formed to carry out the
replacement hospital project has developed information on a number of
concerns so far identified in connection with this proposal .
1. Planning Requirements
An Environmental Impact Report (EIR) would probably be required
whether the hospital is constructed on its present site or at
another location. Final determination of the need for an EIR will
depend upon the extent of the project's impact on the immediate
environment, including such factors as noise, pollution, traffic
and visual impact. If an EIR is required, its preparation could
take six to eight months.
County-owned property is not legally subject to local planning and
zoning requirements. Thus, the County could ignore a city's
height restriction and build a hospital taller than that allowed
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by a city's zoning code. However, the height of the building
would be a visual impact factor under the EIR process and, there-
fore, subject to mitigation. Also, although the County may not
legally be bound by local zoning ordinances, it is certainly
incumbent upon the County to cooperate with local jurisdictions to
mitigate their concerns to the extent possible.
A Certificate of Need from the State will not be required for
hospital construction after January 1, 1987. However, a bill (SB
2408, Maddy) has been introduced which would retain State review
and approval of skilled nursing beds. In any case, as described
previously, we would like to proceed with the SNF Certificate of
Need before January 1, 1987.
2. Debt Limit and Rating Agencies
The replacement hospital project would be unaffected by regula-
tions regarding limits on the County's bonded indebtedness. The
debt ceiling laws apply to general obligation bonds supported by
ad valorum property taxes. Under Proposition 13, the County may
no longer issue general obligation bonds. Even if section 29909
of the Government Code did apply, the debt ceiling would be
approximately $1,600,000,000 (5% of $32,000,000,000 ad valorum) .
Of greater consequence is the effect on our credit ratings and the
effect that has on our interest payment requirements. The ratings
agencies look to several factors in their determinations. Among
those factors are the economic health of the community, the'
"solidness" of a revenue stream to pay off the indebtedness in
future years, and the marketability of the security in event of
default. The "revenue stream" is the key factor here.
Because many factors are to be determined (size of issue, length
of issue, etc. ) , it is premature to put dollar values on annual
debt payment required under various rating scenarios. We will try
to ascertain the impact, if any, on our credit rating when we have
a more precise idea of debt payment and revenue stream.
3. Location of Distinct-Part SNF
A Distinct-Part Skilled Nursing Facility is one which is asso-
ciated with an acute-care hospital and which generally houses
patients requiring a higher level of care, and consequently more
intensive staffing, than patients in free-standing SNF 's. This
higher level of care is recognized in Medi-Cal reimbursement,
which is $50- per day in free-standing SNF 's and $133 in distinct-
part SNF 's.
We have confirmed that a distinct-part SNF must be located on or
adjacent to the hospital grounds. Thus, if we pursue the
distinct-part SNF conversion before constructing a replacement
hospital , the new hospital would have to be located at the present
site in order to continue receiving the higher SNF rate.
4. Other Capital Projects
In considering whether to proceed with a new hospital , we felt it
would be useful to summarize other County capital projects, both
approved and proposed (Attachment C) . The major current projects
include the second Detention Center, the Superior Court Annex, and
the East County Social Service Building. Financing of these pro-
jects is primarily through a combination of grants, tax exempt
securities, Court fines, and the General Fund. Nine other pro-
jects have been proposed but are on hold pending development of
funding.
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5. Joint Ventures
Your Board has requested that we explore the possibility of joint
ventures, including public/private partnerships. We have iden-
tified National Medical Enterprises (NME) , the Kaiser Plan hospi-
tals, and the Veterans Administration Hospital in Martinez as the
most likely partners in an arrangement of this type.
The VA Hospital response (Attachment D) is quite definitive.
While the hospital 's Director would like to cooperate with us, he
points out that "the absence of legal authority and adequate adja-
cent land represent insurmountable obstacles to an otherwise novel
and innovative approach to a difficult problem." Thus, a
County-VA joint venture does not appear possible.
We will be meeting with NME on April 25, 1986 and with Kaiser
on May 5, 1986 to discuss possible joint ventures.
6. Countywide Hospital District
The possibility of developing a hospital district encompassing the
three existing district hospitals plus, possibly, Merrithew
Memorial Hospital , was discussed in the Health Services Director's
January 14 report. Further information since obtained indicates
that it would be politically difficult to form such a district.
The creation of a countywide hospital district would require that
the three existing districts be reorganized into the single
district either by consolidation, annexation, or dissolution.
Under existing law such reorganization would probably require the
concurrence of the existing district governing boards plus a
favorable vote of the voters in each district. We judge this as
unlikely to occur.
In addition, although the first board of hospital directors of a
new countywide district would be appointed by the Board of
Supervisors, their successors would be elected, so that the
District would function independently of the County government.
Yet the creation of a countywide hospital district would not
reduce the County's current Welfare and Institutions Code Section
17000 duties. Faced with this continuing responsibility, the
County could not expect the newly-created countywide district to
contract for indigent care below cost, since this is explicitly
prohibited by Health and Safety Code Section 32125.
In summary, the combination of practical difficulties, loss of
operational. control , and unpredictable costs makes this option
inadvisable.
7. Continuing Activities
The interdepartmental working group will continue to:
a. Work with State and Federal officials to develop alter-
native sources of funding for the proposed replacement
hospital .
b. Explore shared services and joint ventures with other
hospitals and organizations.
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` ATTACHMENT A
4/18/86
SUMMARY OF RESPONSES TO HOSPITAL REPORT
Of the 43 individuals and organizations who were sent copies of the report, 11
responded to our request for comments. A list of the respondents and a summary
of their comments follow.
Contra Costa County Support for a new hospital in the belief
Employees Association - that it will be needed as more and more
Henry L. Clarke, people become dependent on the County and
General Manager that it will enhance the marketability of
the Health Plan.
Contra Costa Health Support for concept of new hospital and
Plan Advisory Board - geriatrics institute. Issues they feel still
Genelle Lemon, Chair need to be addressed: integrated system of
care and relationship of Health Plan with a
new hospital .
Ian B. Johnston, M.D., Agrees there is a need for county hospital
Chief of Staff - to serve elderly poor and medically under-
John Muir Hospital served. "The immediate and unsolved problem
(replaced Douglas Lange, M.D.) of providing compassionate and quality medical
care to those who are unable to obtain it for
themselves will have to be solved, and solved
soon." Thinks this is the most "logical
choice" of the options.
Contra Costa County Support new hospital , not cost effective to
Legal Services - remodel the old one. Opposed to Countywide
Evelyn Rinzler, Paralegal hospital district (no obligation to serve
poor, lack of accountability) ., Support pre-
sent location for hospital .
Gray Panthers Support for recommendations.
Central Contra
Costa County -
Irving Kanter
Alameda-Contra Costa Supports replacement of existing facility as a
Medical Association - "positive step toward fulfilling the County's
Eugene Taylor, M.D., responsibility.. .enhance the quality of
President patient care.. .".
J. Kendall Anderson, Support for recommendations. "Even if.. .some
President, John Muir - services could be shared or contracted out,
Hospital the health care delivery system in this
county needs a viable county-sponsored
hospital" . Recent legislation and industry
changes strengthen need for a new county
hospital .
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Human Services Advisory Supports new hospital and geriatrics insti-
Commission - tute. Recommends not for profit model for
Shirley Marchetti , Chair governance change and a Countywide hospital
district as a source of revenue.
San Francisco Health Agrees with conclusions about role of county
Commission - hospitals and burden of uncompensated care.
Philip R. Lee, M.D.,
President
Veterans Administration Concurs with recommendations. "[I]f Contra
C.H. Nixon, Director Costa County is to remain a viable health
care provider of acute services, the County
Hospital must be replaced." Believes County
wide hospital district should be explored and
that governance should be studied.
California Association of Supports report' s conclusions and recommen-
Public Hospitals - dations. Believes there is a need for "an
Carol Emmot, Exec. Dir. integrated range of geriatric services, espe-
cially for indigent seniors" and that County
leadership in this area would be a
"significant contribution to community well
being."
Contra Costa County Asks for further information to assist them in
Taxpayers' Association - evaluating report.
Don Christen,
Executive Vice President
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ATTACHMENT B
REQUEST FOR PROPOSAL
FEASIBILITY OF PROPOSED REPLACEMENT COUNTY HOSPITAL
I . BACKGROUND
The County of Contra Costa requires assistance in determining the feasibi-
lity of constructing a replacement to its county hospital , Merrithew
Memorial Hospital . The existing hospital plant has been determined to be
obsolete and inefficient in fundamental design, and in a deteriorating state
which will require increasing expenditures for maintenance and repair. The
Board of Supervisors, on January 14, 1986, approved in concept the Health
Services Director's proposal to replace the existing hospital and requested
verification of the proposal '.s feasibility. A memorandum from the County
Administrator summarizing the recommendations and background research is
attached as Appendix A.
The primary goal of this consulting engagement will be to determine a new
hospital 's financial feasibility in terms of availability of funding, alter-
native funding sources, evaluation of future cash flow in relation to indeb-
tedness, and impact on the County's General Fund contribution to the Health
Services Department. Other major tasks concern forecasting of service volumes
and revenues, recommending optimal configuration of service size and mix,
estimating operational and staffing costs, developing a preliminary func-
tional and space program, and estimating project costs (see Section II for a
complete task list) .
Some working assumptions which will affect the planning process include:
A. The hospital will be located in Martinez on the present campus.
B. The hospital will continue to be the major provider of services to
low-income residents of Contra Costa County.
C. The new .hospital will be one element in a continuum of services for the
elderly, forming a Geriatric Institute.
D. The emphasis on outpatient services throughout the County will continue.
E. The County will continue to provide a full spectrum of mental health
services, including acute hospitalization.
F. The County cannot afford a significant increase in General Fund -
subvention of Health Services. Net costs of operation and debt
service must be minimized and external funding obtained if necessary.
G. Wherever possible and economically justifiable, existing structures
on the hospital campus will be renovated, if necessary, and used for
outpatient services and support staff.
II . PROJECT SCOPE
The project can be divided into three planning areas corresponding to the
task lists which follow: Strategic, Architectural , and Financial . Bidders
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may address one, two, or all three of these areas. We prefer that bidders
who do not have in-house capability in one or more areas sub-contract or
joint-venture these tasks and submit a proposal for all three areas.
It should be noted that there will probably be significant interdependence
among these activities. For example, demand analysis from the strategic
planning study will feed into the architectural consultants' space planning
and cost estimation, which in turn will be used by the financial consultants
to project required financing, cash flow, etc. If more than one firm is
selected in this bid process, it is expected that they will develop a joint
work plan to ensure efficient task sequencing.
The tasks are examples of desired activities. Bidders should feel free to
add to this list activities which will aid in achieving the goals outlined
previously. The County retains the right to alter the focus of the consult- .
ing engagement following interim review of results.
A. STRATEGIC PLANNING
1. Review past studies which have been conducted on the future
of publicly-sponsored health services in Contra Costa County.
2. Assess the impact of CON requirements on location, currently and
after 1/1/87.
3. Determine the consequences, positive and negative, of locating
both the Geriatric Institute and the acute care hospital in
Martinez.
4. Determine the health needs of the anticipated population to
be served based on demographic characteristics, age-stratified
population growth, geographic origin, health status, economic
status, and other factors as appropriate.
5. Analyze and explain discrepancies, if any, between need estimates
developed under this contract and estimates developed by regula-
tory agencies.
6. Develop inventory of health services available to the anticipated
population to be served, with particular attention to restrictions
related to financial status and third-party reimbursement sources.
7. Determine the impact of other existing and proposed (e.g. , NME)
acute and long-term care facilities on utilization and revenues
of the proposed County project.
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8. Suggest additional services for which community need exists and
which are economically feasible given the existence of other
available service providers and anticipated cost and reimbur-
sement.
9. Examine the proposed service mix of the Geriatric Institute in
terms of demand, other resources available, and current program
strengths.
10. Determine optimal size of medical/surgical , psychiatric, and
geriatric components based on historical utilization, community
need, existence of other resources serving the anticipated
patient population, costs and projected revenues.
11. Assess ancillary service relationships and forecast volume under
alternative service mixes; compare with existing capacity.
12. Identify resources, in addition to new and renovated structures,
necessary to implement the proposed programs.
13. Identify factors which, in combination with a new facility, would
encourage private physicians to refer patients to the proposed
facility.
14. Determine the advantages, likelihood and feasibility of an
expanded affiliation with the University of California-Davis, .par-
ticularly with regard to the proposed Geriatric Institute.
B. ARCHITECTURAL PLANNING
1. Determine the appropriate location of the- new facility on the
existing Martinez campus.
2. Determine the appropriate locations of outpatient, ancillary, and
support services and the feasibility of retaining some combination
of these in existing structures.
3. Recommend reuse, retrofit, reconfiguration or removal of existing --
structures.
4. Estimate gross departmental square footage and develop functional
and space plan for new construction, based on volume projections,
program considerations, staffing efficiency, and other relevant
factors.
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5. Using the results of the physical plant evaluation recently con-
ducted by The NBBJ Group, indicate improvements to existing struc-
tures which would and would not be cost-effective assuming
proposed construction and renovation.
6. Determine actions necessary to convert F&G Ward to a Skilled
Nursing Facility for Alzheimer' s disease, assuming that this takes
place before other major construction or renovation.
7. Estimate the project costs of construction and remodeling,
including firm costs of F&G Ward SNF conversion.
8. Develop a phased schedule for completion of facility design,
construction, and renovation, with particular attention to
minimizing disruption of operations and revenue stream during
construction.
C. FINANCIAL PLANNING
1. Determine the staffing and other operational costs of the proposed
hospital , under several assumptions of service mix and size, and
compare these costs to current costs.
2. Develop data regarding revenue by payor class which will be
generated from the general acute portion of the proposed hospital
at various sizes and mixes of payors.
3. Develop data regarding revenue by payor class which will be
available from the acute psychiatric portion of the proposed
hospital at various sizes and mixes of payors.
4. Develop data regarding revenue by payor class which will be
available from the geriatric institute portion of the proposed,
hospital at various sizes, mix of services, and mix of payors.
5. Develop pro forma financial statements , including amount of
General Fund contribution required for debt service and opera-
tional costs.
6. Perform sensitivity analysis to evaluate a range of assumptions
used in financial forecasts.
7. Compare projected costs of continuing the status quo to impact of
a new facility, in terms of General Fund contribution.
8. Identify alternative financing mechanisms and associated short-
and long-term costs. Include evaluations of public leaseback cor-
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poration, Certificates of Participation, and California Health
Facility Authority bonds.
9. Develop information on Federal and/or State funding which is
currently in place which might be possible resources for either
grants or loans to assist in the capital cost of the proposed
hospital .
10. Develop information on sources of Federal and/or State funding
which are not now in place, but which are pending either in
Congress or the State Legislature which would assist in funding
all or a portion of the proposed hospital on either a grant or
loan basis.
11. Determine what additional information can be provided by the
Office of Statewide Health Planning and .Development, the State
Department of Health Services, the State Department of Mental
Health, the State Office on Aging, or the U. S. Department of
Health and Human Services which might be of assistance in locating
funding sources.
III .PROPOSAL REQUIREMENTS:
Bidders are requested to provide the following information, at a minimum:
A. A description of the methods to be employed.
B. An estimate of required staff hours, and total elapsed time, broken down
by major task area.
C. A list of individuals assigned, their experience in this area, and the
estimated hours each will work on the project.
D. A fee schedule for each major task area (Strategic, Architectural ,
Financial ) , with expenses separately identified.
E. Bidder' s experience with similar studies, particularly with public
hospitals.
IV. BIDDERS' CONFERENCE AND SUBMISSION DEADLINE
There will be a bidders ' conference on in
Proposals must be received by Ten copiould be mailed
to the contact person for this project:
Claude L. Van Marter,
Assistant County Administrator
County Administrator's Office
651 Pine Street, 11th Floor
Martinez, Ca. 94553
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APPENDIX A
OFFICt OF COUNTY ADMINISTRATOR
CONTRA COSTA COUNTY
Administration Building
Martinez, California
To: Board of Supervisors Date: January 14, 1986
Phil Batchelor The Future of Merrithew
From: County Administrator S"bie`t: Memorial Hospital
INTRODUCTION AND SUMMARY COMMENTS:
In April, 1985, the Board of Supervisors directed that a study be
made of the options for the future of the Merrithew Memorial
Hospital, and that recommendations be made for the Board' s
consideration. That study has been completed and is attached for
the Board' s consideration.
In preparing this report, the Department conducted the most
. extensive interviewing effort ever undertaken on this subject.
The consensus of these interviews is that a county hospital is
not only needed, but is, in fact, critical to assure the future
delivery of health care services to indigents and other medically
underserved members of the community. In reviewing all available
options, the study makes the following findings:
o Based on a new architectural study by the NBBJ Group,
who also reviewed all prior studies, continuing to
simply maintain the existing physical plant is not
possible over the long term, although with the infusion
of . sufficient funds, the facility can continue to be
serviceable for several years .
o Because of the outdated physical layout of the present
plant major remodeling of the existing hospital will
not achieve the desired goal of providing an efficient
facility of optimal size and flexibility.
o Rebuilding the existing hospital should only be
considered in conjunction with changes in its size and
function designed to better meet the needs of the
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community and take into account available financing and
revenue sources.
o Closing the hospital without making adequate
alternative resources available to meet the County' s
health care responsibilities is at least irresponsible
and is probably illegal.
o Creating a countywide hospital district is one
alternative governance mechanism which deserves further
exploration.
-o Leasing space from other hospitals in the County is not
practical.
o Transferring the hospital to a nonprofit organization
is another governance alternative which has been
suggested for further exploration.
o According to the extensive interviews conducted by the
Health Services Department staff, contracting with
other hospitals to meet the County' s statutory
responsibilities does not appear to be feasible or
workable at present.
RECOr-24ENDATIONS:
As a result of these findings, the Health Services Director has
recommended replacing the existing hospital facility by a new 120
bed, acute care hospital, including 80 medical/surgical beds and
40 psychiatric beds plus a geriatric institute which would be
able to provide a full range of services to the elderly poor and
medically-underserved citizens of the County.
The County Administrator recommends that the Board of
Supervisors :
1 . Approve in concept the Health Services Director' s
recommendation for a new facility and immediately
verify- its feasibility by obtaining the following
data, portions of which have been identified in the
Health Services Director' s report:..
• ' T
Page 3
A. Analyze the feasibility of identifying funding for
all or a portion, of any new facilities which can
be justified based on need, market analysis, and
revenue projections.
B. Determine the optimal size of the general acute,
psychiatric, and geriatric portions of the
proposed facility based on an analysis of funding
and medical care requirements.
C. Review the cost of building the proposed new
- facility in relation to the overall priorities
established by the Board of Supervisors in terms
of the ability to continue to provide for other
County-mandated services.
D. Determine the operational impacts- of building
these facilities on future County budgets, taking
into account that the operational costs of
staffing and maintaining a new facility are far
more critical in the long term than the one-time
capital costs of constructing the facility.
E. Determine the availability of Federal and. State
funding sources to finance such a facility and
investigate the possibility of proposing new State
funding sources, such as a Statewide ,
voter-approved Bond Act for county hospital
capital expenditures.
F. Explore existing or potential sburces of funding
based on information from the office of Statewide
Health Planning and Development, the State
Department of Health Services, the State
Legislature, and the U. S. Department of Health
and Human Services.
G. Examine the impact that financing the proposed new
facility would have on the County' s debt limit and
credit rating.
H. Investigate the interest of private medical
corporations in entering into a public/private
partnership with the County for the project.
I . Study the feasibility of a countywide hospital
district and explore other governance issues in
more detail concurrent with gathering the
additional information noted in A-H above.
F _.
Page 4
2. Direct the County Administrator and Health Services
Director to make a status report to the Board of
Supervisors on these issues within 90 days.
3. Direct that this report and transmittal letter be
distributed to the administrators and medical staffs. of
all hospitals in the County, all individuals who were
interviewed by the Health Services Department or were
sent questionnaires to complete, and any other
individual or organization requesting a copy of the
study, with a request for their comments.
BACKGROUND AND REASONS FOR RECOMMENDATIONS:
Prenaration of the Report
o In preparing the attached report Health Services -
Department staff conducted 36 interviews with members
of the Board of Supervisors, administrators and medical
staffs of other hospitals, 'as well as of Merrithew
Memorial Hospital, employee organizations, the
Taxpayers' Association, consumer representatives, and
staff from other counties and the State of California.
o In order to incorporate a broader segment of the
community than was possible through face-to-face
interviews alone, questionnaires were sent to 25
legislators, administrators, advisory board chairs and
physician organizations.
o In addition, an all-day retreat was held to generate
alternatives not previously identified and to examine
the strengths and weaknesses of each alternative. In
addition to senior Health Services Department and _
County Administrator' s Office staff , several
experienced and knowledgeable individuals from the
private sector volunteered their time to assist in this
endeavor.
o Finally, all studies, position papers , Board
actions and community discussion since the
issue of the future of the county hospital
was raised in 1978 were reviewed in an effort
to capitalize on past examinations of this
question.
r
Page S
A new architectural study was conducted by the NBBJ Group to
determine the present condition of the existing physical
plant and the cost of maintaining it over the next several
years. Among the conclusions of this most recent outside
architectural study are the following comments: "The
buildings and systems are almost out-of-date and at or
beyond the limits of their projected useful life.
. . .The facilities generally do not meet the standards of
current health, safety, building and engineering codes. "
The architects- estimate that over the next five years it
will require an investment of nearly $10.9 million simply to
maintain the present facility and make repairs considered
essential to eliminate safety and other serious hazards.
Identified Ootions
The attached report lists eight options which encompass the
range of suggestions made during the interviews. Each
option, and the conclusion of the County Administrator' s
Office regarding the viability of each option follows:
1. Maintain the Status Quo
This option, which includes continuing with only basic
and essential repairs for some period of years, is not
feasible in the long term, but may be essential, at
least for the near future. As has been noted, the
architects project at least an average of $2 million
per year being required over the next five years. From
the projections made it is reasonable to assume that
those costs will continue to grow each year as
additional maintenance and repairs become essential.
However, there are no indications that the hospital
cannot continue to operate at least for a reasonable
number of years as long as sufficient funds are
dedicated each year to the essential maintenance and
repairs.
This option, however, is neither cost-effective nor
possible over the long term. The buildings can be
expected to deteriorate at an increasing rate,
requiring the dedication of more and more financial
resources with less and less return on the invested
funds. While the hospital can continue to operate in
its present facilities for the time being, other
options must be explored and agreed on in the very near
1
Page 6
future.
2. Remodel Existing Structure
A prior architectural consultant commented that when
you remodel a dinosaur you are still left with a
remodeled dinosaur. That perhaps best summarizes the
prospects for a major remodeling of Merrithew Memorial
Hospital. The physical layout is outmoded and many of
the design characteristics would not be permitted in a
hospital built today--probably not even in a hospital
which is extensively remodeled today. Many millions of
dollars would have to be invested in the present
facility to make it operable for any reasonable period
of time. The physical layout is inefficient in terms
of utilization of staff, materials and energy. After
an extensive remodeling effort, many of the physical
layout problems would continue to exist and a great
deal of money would have been invested in what was an
inadequate facility to begin with.
3 . Rebuild the Hospital
It is clear that simply rebuilding the existing
hospital, whether at the present site or another site,
is unnecessary and probably impossible if what is
suggested is a hospital the size of the current
facility in terms of bed capacity. In addition, simply
rebuilding what now exists in terms of available
services does not reflect changes in current and future
medical care practices and community need. Any
rebuilding that is considered should take into account
specialized services that are available elsewhere in
the community, overall community needs and the
particular needs of the population the County serves.
There is, for instance, a demonstrated need for compre-
hensive geriatric services that are presently provided
by Merrithew Memorial Hospital on "H" Ward and are un-
available elsewhere in the community. By the same
token, Merrithew Memorial Hospital provides an
essential psychiatric inpatient service. Rebuilding
alone is not the answer. If rebuilding is to be
considered, it must be targeted to the needs of the
community, the particular skills of a public facility
and the resources available elsewhere in the community.
Page 7
It is also likely that rebuilding the hospital along
these lines would make the Contra Costa Health Plan a
more viable entity in soliciting members and would
certainly make the Plan itself a more valuable asset
for the County.
4. Close the Hospital
Simply closing the hospital without making adequate
provision for the patients that are the clear statutory
responsibility of the County would be irresponsible and
probably illegal. The following options discuss
combinations of alternatives combined with closing the
hospital which make adequate provision for the County' s
responsibilities in the health care area. No county
the size of Contra Costa has simply closed its hospital
without making provision for the indigent of the
community. Based on past Board actions, we do not
believe that the Board of Supervisors would seriously
consider such a move at this time.
5. Create a Countywide Hospital District
The possibility of forming a single, countywide
hospital district, which would combine the resources
and assets of Brookside, Mt. Diablo, and/or Los Medanos
hospitals with those of the County, has considerable
appeal in terms of better potential utilization of
resources, a reduction in unneeded capacity if
Merrithew Memorial Hospital could be closed and the
ability to better share outpatient clinic resources
than is presently possible. Because a vote of the
residents in each of the three existing hospital
districts would probably be necessary, such a proposal
would have to be carefully .thought out and planned. It
might also generate considerable opposition from the
communities and the existing district hospital
governing boards. It is, however, one alternative
governance mechanism which deserves more study and
discussion with the three district hospitals in order
to test its feasibility.
6 . Lease Soace in Other Facilities
While the idea of having an existing private or
district hospital lease its unused space to the county
initially has a certain appeal, there are practical
problems which probably make it not a feasible
alternative. Few hospitals have large blocks of
,
Page 8
6. (continued)
unused space. Most underutilized space is represented
by a few beds on one ward or service and a few on
another. However, it is clear from the results of the
interviews that such an alternative is not viewed with
much favor by the administrations and medical staffs of
the other facilities. There would be considerable
logistical problems if county patients were to be
staffed by county physicians and a number of issues of
medical practice would have to be addressed. such an
alternative would also only be feasible while the other
hospitals had available space. If the hospital' s
census were high, there would be a natural desire to
displace a lower paying county or Medi-Cal patient with
a higher paying private patient. The results of the
interviews and historical practice indicate that this
does not seem to be a feasible alternative.
7. Transfer to a Nonprofit Organization
This, again,. is primarily a governance issue, although
it is possible that there may be some financing
alternatives which would be more available or more
attractive if Merrithew Memorial Hospital were
transferred to a nonprofit organization. Such an
arrangement removes the hospital from the immediate
control of the County, but leaves the County with the
same responsibility to provide care for indigents.
This presumably would be provided through a contract
with the nonprofit organization in return for the
transfer of the assets of the hospital. Whether this
alternative actually provides substantial benefits to
the County deserves further exploration.
8 . Contract for Services with Other Hospitals
While this alternative, similar to the lease of space
in a private or district hospital, seems on the surface
to have obvious benefits, particularly when many
hospitals are operating at relatively low censuses ,
there are major administrative, medical and attitudinal
problems. Medical staffs who were interviewed
expressed strong support for a county hospital as a
separate institution and strong opposition to caring
for county patients in their facilities. While it is
Page 9
possible that favorable terms could be negotiated over
the short term, the County would be in a very poor
negotiating posture once Merrithew Memorial Hospital
was closed because the County would have no alternative
to contracting with other facilities, probably- at
unfavorable rates. There are major and very real
problems with medical practice differences among
facilities which, from past experience, are difficult
to resolve. Ample opportunities have been given to the
private and district hospitals to enter into meaningful
negotiations with the County to care for indigent
patients and none has yet progressed to the point of
reality, with one or two specialized exceptions. This,
unfortunately, does not appear to be an alternative
worth pursuing at this time, beyond arrangements for
overflow activity at the County' s hospital.
CONCLUSIONS:
Given the content of the interviews, past experience, a great
deal of study by many professionals in the field, and the reality
of the County' s responsibilities to provide medical care for the
indigents in the community, my office is drawn to the conclusion
that the recommendation made by the Health Services Director is
a viable alternative available to the County. As we have
indicated above in our recommendations, and as is obvious to
anyone who has followed the financial problems of the County over
the past few years, the recommendation to rebuild even a portion
of the hospital at a projected cost of $250,000 to $300, 000 per
bed presents a significant challenge.
Whether this is truly a feasible alternative must, in our view,
await the answers to the additional information we have suggested
obtaining in our recommendations . It should also be noted that
this additional information is not suggested because we believe
the Health Services Department should have provided it before
forwarding their recommendations to the Board of Supervisors.
Most of the areas touched on in our recommendations involve
overall County impacts from the recommendation to rebuild even a
portion of the hospital and are thus more properly the concern of
this office and the Board than of any individual department. We
raise these questions because we believe that the next logical
step is to examine these questions and determine whether we can
arrive at a funding plan, and specific parameters for a hospital,
which meets the needs identified by the Health Services
Department and is still fiscally sound.
r
Page 10
I would like to express my appreciation to Mark Finucane, and all
the members of his staff , as well as all members of the community
who participated in this study.
PJB:clg-
ATTACHMENT C
CAPITAL PROJECTS
Current Projects
1. Superior Court Annex $ 9, 000,000
Project out-to-bid during April 1986.. Construction should
commence summer of 1986. Financing will be by sale of tax-exempt
securities funded through special court fine surcharges.
2. East County Social Service Building $ 7,000,000
Project is on the same schedule as the Superior Court Annex
and the financing is part of combined securities issue. Social
Service space costs are mostly reimbursed by the State.
3. Patrol and Investigation Building $ 2,800,000
Project under design and will be bid during 1986. Funding
source is General Fund. The project provides parking relief for
the Superior Court Annex by relocating patrol units from the
Civic Center.
4. Emergency Services Center and Dispatch $ 1,200,000
Facility
Project will be bid in July. Funding is available from
Court fines, General Fund and Federal Grant. Project is now
fully funded.
5. Detention Center $48,000,000
Project in early design stages. Site has been selected but
not acquired. State grant funds of approximately $36,000,000 are
available. Local match of $12,000,000 is required. Available
funding of local share is $3 ,000,000 and an additional $4,500,000
is being considered for 1986-1987 from the General Fund.
Deferred financing is being considered for the remainder of the
local share.
Mid to Long Range Projects
1. Central County Courts $25, 000, 000
The consolidation of the Mt. Diablo and Walnut
Creek-Danville Municipal Courts into a new facility on
County-owned land in Pleasant Hill has been proposed as the
Diablo Valley Justice Center for several years. Funding for the
project will be' from a combination of sale of existing Court
facilities, cost offsets from giving up leased facilities and the
Redevelopment Agency. The estimated cost of the project exceeds
the funding capacity from all of the planned sources. The
project has been deferred until adequate funding is assured.
2. Community Development Building $12, 000, 000
The reorganization of the Community Development, Public
Works and General Services Departments has increased the need for
a consolidated facility to improve services to the public. The
County-owned property on Glacier Drive has been proposed as the
site for a new building. Funding is proposed from a combination
of revenues from leasing a portion .of the site for private
development and rental 'offsets from reducing leased space. The
development plan for the site will take some time to implement
and no actions can be taken on this project until development
revenues are more firmly determined.
3. Central Corporation Yard $ 8,000,000
Replacement of the Shell Avenue and Lafayette Corporation
Yards is necessary to improve operations and to avoid large
expenditures for updating the hopelessly outdated present
facilities. The new facility is proposed for County-owned
property in Pacheco. Funding is proposed from a combination of
proceeds from selling a portion of the site, Road Funds and
deferred financing. The project will likely be phased to match
the revenues as they become available.
4. East County Courts Building $ 5,000,000
The, Delta Municipal Court' s projected growth will outgrow
the court development potential within the present building
within five years. Plans need to be initiated now to provide for
the necessary long-range space needs. Future legislative actions
may increase revenues available for courthouse construction which
would allow this project to proceed.
5. Relocate Central Morgue $ 1, 000 ,000
The present morgue is on the grounds of the Kaiser Martinez
Hospital facility. Kaiser has proposed that they purchase the
morgue and the County move elsewhere. Placement of the morgue in
community is sensitive and replacement is costly. The present
facility is not worth what it would cost to replace it. Kaiser
has not been willing to pay replacement cost. The County has no
obligation to relocate except as an accommodation to Kaiser.
6 Relocate Animal Services Martinez $1, 000, 000
The Central Sanitary District has proposed that they
purchase the present facility due to its location adjacent to the
District headquarters. Like the morgue project, the potential
purchaser is not willing to pay replacement cost. It would be
desirable to, update the facilities but until adequate revenues
are available the project is unlikely to proceed.
7 . Central County Probation $ 4 ,000, 000
Probation services in central county are presently in leased
space in Concord. Probation was one component of the Diablo
Valley Justice Center. The services need to be either located
with the Consolidated Courts or at an easily accessible location
such as the County-owned property on Glacier Drive. No funding
source other than the rental off-set savings are identified for
this project.
8. ' Data Processing Center $ 2,000, 000
The data processing staff and equipment are presently housed
in multiple locations. The computer facility in the basement of
the 1901 Finance Building is not adequate to meet the needs of
the County. A new building to properly house the equipment as
well as to bring all of the staff to one location is badly
needed. The only source of funding identified for this project
is rental off-set savings and increased user fees.
•µ
9. Consolidated Sheriff' s Facility $ 3 ,000,000
Elements of the Sheriff ' s Department are housed in several
locations. The currently planned project to relocate Patrol and
Investigation to Glacier Drive will further fragment the
department. The master plan which was due on the Glacier Drive
site included long-range plans for an additional building to
house the remainder of the Sheriff ' s Administration. The Crime
Lab should also be considered in the planning for the project.
No source of funds has been identified for the project.
ATTACHMENT D
Medical Center 150 Muir Road
Martinez CA 94553
Veterans
Administrati®n
APR i' 4: 1986
In Reply Refer To: 612/00
Mr. Mark Finucane, Director
Contra Costa County
Health Services Department
2500 Alhambra Avenue
Martinez, CA 94553
Dear Mr. Finucane:
This is in response to your March 31 , 1986 letter requesting my advice
and comments on the proposed joint venture of Contra Costa County' s
Merrithew Memorial Hospital and the Veterans Administration Medical
Center.
As I understand the proposal , there are two possible approaches which I
shall respond to in separate comments.
1 . One proposal is that the Veterans Administration' s plans for a
clinic addition to the current facility be joined by the County in a
joint venture wherein both County and the Veterans Administration
Medical Center patients would be cared for in an expanded facility.
There are both legal and policy obstacles that would have to be overcome
before there could be any planning for such a joint venture . After
policy debate within the Executive Branch, extensive hearings in the
legislative process would be necessary as a forerunner to major
legislative changes necessary to enable the Veterans Administration to
enter into joint venture planning. Currently, legislation which forms
the basis for the Veterans Administration' s sharing arrangements is
limited to specialized medical services of an episodic nature . There
has been no enabling legislation that would permit the Veterans
Administration to provide continuing primary and nonspecialized
secondary health care services to non-VA beneficiaries.
In the current environment, an effort to overcome the legal barriers
would be slow and laborious with the outcome highly doubtful . If the
effort was successful , we would then face the problem of the very
serious existing deficit in the adequacy of our physical plant. The VA
facility has approximately 50 percent of the space required under
Federal criteria to support its present mission . Our Operating Rooms
are so small that they are inadequate by reasonable standards for
complex surgical procedures. Our radiological facilities , clinical
laboratory, and most specialized diagnostic facilities are too small and
overcrowded now and would be totally inadequate to support an expanded
mission. We have had serious citations by the JCAH during the last
decade for patient privacy (we have a few private and semi-private
bedrooms accompanied by 16-bed wards on every floor in our bed tower) ,
life safety code deficiencies as well as seismic deficiencies.
"America is #1—Thanks to our Veterans"
4 _�
2.
Mr. Mark Finucane
Plans for correcting all of these deficiencies have provided for an
approximate $70,000,000 construction.program originally proposed in the
late 1970's. It has been continually delayed each year and was most
recently proposed for FY 1988. With the onset of Gramm-Rudman , we were
advised to develop concepts for less expensive alternatives . On
February 10, 1986, we were visited by the Project Control Staff from our
Washington office. As a result of that visit, we submitted a revised
construction planning document that provides for four small expansion
projects, each costing just over $2,000,000, and eight small projects to
correct patient privacy deficiencies, life safety code violations in our
current facility, and a small clinic addition to replace those beds lost
in the projects to correct those deficiencies. The cumm ulative effect
of all of the smaller projects when completed in the mid 1990 ' s would
provide us with facilities necessary to support our mission as it is
presently established.
2. The other approach would involve the development of a new County
Hospital located adjacent to the Veterans Administration facility for
the expressed purpose of maximizing the sharing of highly specialized
expensive health care resources between the two public , tax supported
facilities. This would provide two separate independent facilities
under separate management, each with their own identity, with joint
planning to eliminate the duplication of diagnostic , supporting ,
tertiary and emergency treatment facilities. There is, however, one
serious obstacle. The only vacant adjacent land is a four-acre plot
across the street which the Veterans Administration has under a
long-term lease for employee and client parking. Our Medical Center is
otherwise landlocked by rapidly developing residential and office park
construction on the remaining three sides. While I view this option as
highly advantageous to both organizations, required condemnation
proceedings under the right of emminent domain would engender strong
resistance making it politically unpalatable and given the newness and
assessed value of the adjacent residential and commercial developments
prohibitively expensive.
In summary, the absence of legal authority and adequate adjacent land
represent insurmountable obstacles to an otherwise novel and innovative
approach to a difficult problem. This study has increased understanding
between the two organizations and should help in continued joint
exploration and expansion of ongoing sharing agreements. As you know,
members of our respective medical staffs met as recently as yesterday to
explore the feasibility of expanding our sharing agreement in Neurology
to include Neurosurgery. My staff and I will continue strong support
for these efforts.
Si n�erel
C. H. NI N
Director'
Enclosure
4
Administration m ovandum
r,1 P NOV 21 1985
F,nm General Counsel ( 023)
S,,h, Proposal for "Joint Venture" at VAMC Martinez
To Chief Medical Director (10)
1. We have reviewed Contra Costa County' s health care plans which
you forwarded for our legal opinion. These plans raise the
possibility of a "joint venture" with the Martinez VA Medical
Center under which the County would essentially contract with the
VAMC to add beds in excess of veterans ' needs . The County
would pay the VA to provide health care to its patients in these
beds .
2. The County's proposal is a relatively novel approach to a
difficult problem. The VA, however, has no authority to enter
into a contract to construct health care facilities for other
organizations . In addition, the VA' s authority to accept contri-
butions to be used for specific purposes like this is restricted .
Under 38 U.S.C. § 5004(f) , the VA may only accept gifts and
donations for purposes related to acquiring and operating VA
medical facilities for veterans . 38 U .S.C. §§ 5002(a) , 5010(a) (1) .
Under this proposal, however, the beds which the VA would acquire
with the County's money would be used for patients of the County
rather than the VA (who would not necessarily be eligible veterans )'.-,--___
VA's other authority to accept gifts, 38 U.S.C. § 5101, only
permits VA to accept gifts which will benefit current or future
VA patients . 38 U.S.C. §§ 5101, 5223 . We are uncertain whether .
an arrangement could be negotiated with the County so that its
gift would benefit current or future VA patients .
3. Even if VA could accept the County' s funds to build beds for
County patients under 38 U.S.C. § 5101, the VA could not provide
all the health care services to County patients as proposed under
this arrangement. VA' s authority to provide health care services
to non-Federal institutions is limited. In general, the VA may
only sell health care resources to non-Federal institutions if
they are specialized medical resources as defined at 38 U.S .C.
§ 5052(b ) . The VA would thus be unable to provide routine health
care services to the , County as proposed. If our authority to
share were broader, we could be more responsive to the County's
needs .
DONALD L. IVERS
VA FORM 21 05
SEP 1984 4