HomeMy WebLinkAboutMINUTES - 05241994 - H.3 H.3
The Board of Supervisors of Contra Costa County, California
Adopted this Order on_May 24, 1994 by the following vote:
AYES:
See Below for Vote
NOES:
ABSENT:
ABSTAIN:
SUBJECT: Report on Health Services in Contra Costa County
The Board received the report of Phil Batchelor, County Administrator,on the role of
Contra Costa County in assuring the health of its most vulnerable population—the 1994 update.
Mr. Batchelor gave an overview of the number of studies completed on the County Hospital with
recommendations presented on the need for a new hospital. Mr. Batchelor noted that in 1992 the
Board took action to initiate,the construction of a new County Hospital. He explained that the
financial situation of the Los'Medanos.Hospital added another dimension to the crises confronting
health care in East County. Mr. Batchelor called attention to the fact that the Board Committee
looked at the administration of the District Hospitals and County staff to determine if the County
should downsize its delivery of health services and rely more on the district hospitals to provide
health care to its most vulnerable population. Issues reviewed were patient care, physician
privileges, legal concerns, governance, labor employee concerns, defeasance, and a business
decision. In conclusion, Mr. Batchelor urged the Board to make a decision today as to whether
the hospital project should be terminated,to defease the costs, to develop contracts with the
district hospitals and to layoff the staff and close the County Hospital. A copy of Mr. Batchelor's
report is attached and included as a part of this Board Order.
The following persons spoke with respect to the needs of the County's vulnerable
population with respect to health care;cooperation of the district hospitals and their commitments
to providing health care for all people in the area including those designated as the County's
responsibility; recommendations that the Board continue and/or abandon the construction of the
replacement County Hospital; potential layoff of staffs depending on the decision rendered;
district consolidations and financial impact; insurance of the quality of care for the medically
indigent,the working poor,the homeless, the jail patients, the HIV and Aids patients, etc., as well
as recipients of Medi-Cal and Medicare;the commitment of all nurses in the delivery of quality
patient care, and the need to be amendable to the changes in health care projected for the future:
Randy Clarke, Director, Los Medanos District Board of Directors;
R. Isabelle Chenoweth, R.N., Board of Directors, Mt. Diablo Hospital, 3186 Baker
Drive, Concord;
Mike Wall, Mt. Diablo Medical Center, Concord;
Michael Lawson, Brookside Hospital, 2000 Vale Road, San Pablo;
Henry L. Clarke, Local 1, P. O. BOX 222, Martinez;
Johanna Meyer-Mitchell, M.D., President Elect of the Mr. Diablo Hospital Medical Staff,
2485 High School Avenue, Concord;
Rev. Curtis A.Timmons, P. O. Box 8213, Pittsburg;
Evelyn Ruizler, Contra Costa Legal Services, 3523 Freeman Road,Walnut Creek;
Paul Katz, Local 1, Martinez;
Karen Kennedy, CNA, 7700 Edgewater Drive, Oakland;
Bill Schlani, Local 1;
Roseanne Lazio, Director, Los Medanos District Board of Directors;
Kevin Degnan, 5355 Alhambra Valley Road, Martinez;
Jim Busby, (no street address given), Martinez;,
Phyllis Roff;2893 San Carlos Drive,-Walnut Creek;
Jason Appel, M.D., 3694.Gainsborough Drive, Concord;
Marie Goodman, 3331 Brookside Drive, Martinez;
Bonnie Wolfe, Local 1, P. O. Box 1452, Bethel Island;
John Wolfe, Contra Costa Taxpayers Association, 820 Main Street, Martinez;
Billie Jo Wilson, Local 1;
Elaine Swenson, MPH, RN, Public Health Nurses;
Claire Bauer, Public Health Nurse, Contra Costa County;
William Swenson, PHN, 106 Songbird Court, Vacaville;
Susan Bateman Ketcham, Mt. Diablo Hospital District,4875 Thiessen Court, Concord;
Fran Ehler, 1178 Temple Drive, Pacheco;
John Lee, 520 Lakewood Circle,Walnut Creek;
Health Services Report
May 24, 1992, H.3
Page 2
Ethel Dotson, International Wholistic Health Institute, Richmond;
Ralph McClain, 376 South Street, Richmond;
Karen Jester, Patient Care, Los Medanos Hospital,4591 Teakwood Court, Oakley;
Jim Rogers, 1205 Melville Square,#404, Richmond; and
Nancy McKim, RN, CNA, 2664 Trafalgar Circle, Clyde.
All persons desiring to speak were heard.
There was consensus among Board Members to vote on the recommendations of the
County Administrator in blocks. Should there be a request from a Board Members)to vote on a
recommendation separately the Chair was agreeable to honoring that request.
Supervisor Jeff Smith advised that since he is a physician at the County Hospital he
would only be participating in Sections A, B, and C(Nos. 1 to 18), and that he would be recusing
himself from voting on D. and E.
IT IS BY THE BOARD ORDERED THAT Sections A, B, and C of the County
Administrator's Report are APPROVED as presented. The Vote was as follows:!
AYES: Supervisors Smith, Bishop, DeSaulnier, Torlakson, Powers
NOES: none I
ABSENT/ABSTAIN: none
IT IS BY THE BOARD ORDERED that Section D(Nos. 19 and 20) is APPROVED. The
vote was as follos:
I
AYES: Supervisors Bishop, DeSaulnier, Torlakson, Powers
NOES: none
ABSENT: Supervisor Smith
ABSTAIN: none
Chairman Powers called for the Board to consider Critical Issue#1 (Nos. 21 through 27).
Supervisor Bishop requested that No. 24 be amended as it is written by the inclusion of
the following phase at the end of the sentence, "at district hospitals." Board members concurred.
Supervisor Bishop advised that she had some reservations with voting on No. 22.
Therefore, IT IS BY THE BOARD ORDERED that Nos. 21, 23, 24 as amended, and 27
are approved . The vote was as follows:
AYES: Supervisors Bishop, DeSaulnier, Toriakson, Powers
NOES: none
ABSENT: Supervisor Smith
ABSTAIN: none
Thereupon, the Chair called for the vote on No. 22. IT IS BY THE BOARD ORDERED
that No. 22 is APPROVED. The vote was as follows:
AYES: Supervisors DeSaulnier,Torlakson, Powers
NOES: Supervisor Bishop
ABSENT: Supervisor Smith
ABSTAIN: none
IT IS BY THE BOARD ORDERED that Critical Issue#2(Nos. 28 through 31) is
APPROVED. The vote was as follows:
AYES: Supervisors Bishop, DeSaulnier, Toriakson, Powers
NOES: none
ABSENT: Supervisor Smith
ABSTAIN: none
r
Health Services Report
May 24, 1992, H.3
Page 3
In its discussion on No. 33, there was consensus among Board Members to amend it to
read, "Acknowledge that the closure of Merrithew Memorial Hospital may result..."
Therefore, IT IS BY THE BOARD ORDERED that Nos. 32, 33 as amended, and 35 are
APPROVED. The vote was as follows:
AYES: Supervisors DeSaulnier, Torlakson, Powers
NOES: Supervisor Bishop
ABSENT: Supervisor Smith
ABSTAIN: none
IT IS BY THE BOARD ORDERED that Critical Issue#4(Nos. 37 through 47) is
APPROVED. The Vote was as follows:
AYES: Supervisors, DeSaulnier, Torlakson, Powers
NOES: Supervisor Bishop
ABSENT: Supervisor Smith
ABSTAIN: none
The Board then considered Critical Issue#5 (Nos. 48 through 55). Supervisor
Torlakson requested and Board Members concurred to amend the text of No. 49 at the end of
the paragraph to read"...and agree to continue discussions with the district hospitals regarding
these issues." In presenting this amendment Supervisor Toriakson explained that he favored
keeping this matter open for discussion with the district hospitals.
Supervisor Bishop advised that she would like to leave out for voting purposes Nos. 48,
52, and 55. Board Members concurred.
Therefore, IT IS BY THE BOARD ORDERED that Nos. 49 as amended, 50, 51, 53, and
54 are APPROVED. The vote was as follows:
AYES: Supervisors Bishop, DeSaulnier,Toriakson, Powers
NOES: none
ABSENT: Supervisor Smith
ABSTAIN: none
IT IS BY THE BOARD ORDERED THAT Nos. 59,60, and 61 (of Critical Issue No. 6)are
APPROVED. The vote was as follows:
AYES: Supervisors Bishop, DeSaulnier, Torlakson, Powers
NOES: none
ABSENT: Supervisor Smith
ABSTAIN: none
The vote on the motion to approved Nos. 56, 57, 59, and 62(of Critical Issue No.6)was
as follows:
AYES: -Supervisors Torlakson, Powers
NOES: Supervisors Bishop, DeSaulnier
ABSENT: Supervisor Smith
ABSTAIN: none
IT IS BY THE BOARD ORDERED that Critical Issue#7(Items Nos. 63 through 67) is
APPROVED. The vote was as follows:
AYES: Supervisors Bishop, DeSaulnier, Toriakson, Powers
NOES: none
ABSENT: Supervisor Smith
ABSTAIN: none
IT IS BY THE BOARD ORDERED that Critical Issue No. 8(Items Nos. 67 through 70) is
APPROVED. The vote was as follows:
AYES: Supervisors DeSaulnier, Toriakson, Powers
NOES: Supervisor Bishop
ABSENT: Supervisor Smith
ABSTAIN: none
Health Services Report
May 24, 1992, H.3
Page 4
IT IS BY THE BOARD ORDERED that Critical Issue#9(Items Nos. 71 through 77) is
APPROVED. The vote was as follows:
AYES: Supervisors DeSaulnier,Toriakson, Powers
NOES: Supervisor Bishop
ABSENT: Supervisor Smith
ABSTAIN: none
The Chair then directed the Board's attention to the concluding recommendation (E)and
Issue No. 78.
Supervisor Bishop advised that she would prefer waiting 30 days prior to making a
motion to consider this issue for the reason that it would provide additional time to look at all the
alternatives. Supervisor Bishop therefor moved that staff be directed to work with the districts to
get a consultant to do an independent study and financial analysis, to meet with the district
hospitals on collaboration, and to present a report to the Board in 30 days. The motion was
seconded by Supervisor DeSaulnier. The vote on the motion was as follows:
AYES: Supervisors Bishop, DeSaulnier
NOES: Supervisors Todakson, Powers
ABSENT: Supervisor Smith
ABSTAIN: none
Chairman Powers announced that since the motion failed to carry, the construction of the
County Hospital will continue to go forward since there were not three votes to overtum a
previous decision of the Board of Supervisors
I hereby certify that this is a true and correct copy of
an action taken and entered on the minutes of the
Board of Supervisors on the date shown.
ATTESTED: 2L2!4a' /9 9a
PHIL BATCHELOR,CLERK OF THE Board of
Supervisors and County Administrator
By
Deputy Clerl
CC: County Administrator
Health Services Director
Auditor-Controller
cep.;
TO: BOARD OF SUPERVISORS .. Contra
r'
j Costa osta'
Phil Batchelor, County Administrator
County
DATE: May 24, 1994
SUBJECT: PORT ON-THE ROLE OF CONTRA COSTA COUNTY IN ASSURING THE HEALTH OF
ITS MOST VULNERABLE POPULATION - 1994 UPDATE
SPECIFIC REOUEST(S)OR RECOMMENDATION(S)&BACKGROUND AND JUSTIFICATION
RECOMMENDATIONS:
A. RECOMMENDATIONS REGARDING LOS MEDANOS COMMUNITY HOSPITAL AND
THE REGENCY HILLS CONVALESCENT HOSPITAL:
1 . APPROVE and AUTHORIZE the .County Administrator and .Health
Services Director to submit the attached letter of intent [See
Attachment # 7] to the receiver (or his successor) for the Los
Medanos Health Care Corporation, and to the Los Medanos
Community Hospital District (Pittsburg Area) Hospital Building
Corporation and the Los Medanos Community Hospital District,
indicating the County's interest in . negotiating with the
receiver for the acquisition of Los Medanos Community Hospital
and its assets on terms and conditions acceptable to the Board
of Supervisors and the Bankruptcy Court, and to negotiate with
the District and Building Corporation for any assets which
those entities may hold separate from the assets. which are
involved in the bankruptcy case.
2 . AUTHORIZE the County Administrator and Health Services
Director to negotiate a lease-purchase or other, form of
agreement for the acquisition of Los Medanos . Community
Hospital and its assets and return any such agreement to the
Board of Supervisors for the Board' s further consideration.
CONTINUED ON ATTACHMENT: YES SIGNATURE:
RECOMMENDATION OF COUNTY ADMINISTRATOR RECOMMENDATION OF BOARD COMMITTEE
APPROVE OTHER
SIGNATURE(S):
ACTION OF BOARD ON APPROVED AS RECOMMENDED OTHER
VOTE OF SUPERVISORS .
.I HE Y CERTIFY THAT THIS IS A TRUE
UNANIMOUS(ABSENT ) AND CORR COPY OF AN ACTION TAKEN
AYES: NOES: AND ENTERED O E MINUTES OF THE BOARD
ABSENT: ABSTAIN: OF SUPERVISORS ON T DATE SHOWN.
ATTESTED
Contact: PHIL BATCHELOR,CLERK OF T BOARD OF .
Cc: SUPERVISORS AND COUNTY ADMINI ATOR
BY ID TY
l
3 . AUTHORIZE the County Administrator and Health Services
Director to request the receiver to determine the legal owner
of each asset of the Los Medanos Community Hospital that the
County wishes to acquire.
4 . AUTHORIZE the County Administrator to negotiate with the
receiver regarding the acquisition of those personal property
assets which are the property of the Los Medanos Health Care
Corporation.
5. AUTHORIZE the County Administrator to negotiate with the Los
Medanos Community Hospital District (Pittsburg Area) Hospital
Building Corporation and the Los Medanos Community Hospital
District regarding the acquisition of those personal property
assets which may be the property of the Los Medanos Community
Hospital District (Pittsburg Area) Hospital Building
Corporation or the Los Medanos Community Hospital District.
6 . AUTHORIZE the County Administrator to obtain a title search on
the real property used by the Los Medanos Community Hospital
to determine the extent of liens which have been recorded
against any such real property.
7 . AUTHORIZE the County Administrator to negotiate a contract
with the firm of Orrick, Herrington & Sutcliffe to provide
legal consultation to the County on the acquisition of the
assets of Los Medanos Community Hospital and to return any
contract to the Board of Supervisors for its consideration.
8 . AUTHORIZE the County Administrator to explore the need for
contracting with additional specialized expert legal counsel,
accounting professionals, and health care consultants to
assist the County in evaluating and acquiring the assets of
Los Medanos Community Hospital and to make further
recommendations to the Board of Supervisors on any proposed
contracts .
9. AUTHORIZE the County Administrator to explore the desirability
of refunding, defeasing, or restructuring the 1977 Bonds or
the 1990 Bonds, and to negotiate with the issuer, the
borrower, the lessee, the trustee, or the insurer of such
bonds, all in connection with the acquisition by the County of
the assets of Los Medanos Community Hospital .
10 . AUTHORIZE the County Administrator to explore the appropriate
uses of the Los Medanos Community Hospital District property
tax override approved in connection with the 1977 Bonds and to
take necessary action concerning such uses in connection with
the acquisition by the County of the assets of the Los Medanos
Community Hospital .
11 . AUTHORIZE the County Administrator and Health Services
Director to negotiate with the receiver and trustee in
bankruptcy for the removal of liens on any assets of the Los
Medanos Community Hospital the County wishes to receive.
12 . DIRECT the County Administrator to investigate the feasibility
of alternative governance mechanisms for the Los Medanos
Community Hospital District and provide a subsequent report to
the Board of Supervisors on this subject.
13 . AUTHORIZE the County Administrator and Health Services
Director to negotiate a short-term lease with the receiver for
the Los Medanos Health Care Corporation for the operation of
the 120-bed skilled nursing facility (Regency Hills
A-2
Convalescent Hospital) under the acute care hospital license
of the County' s Merrithew Memorial Hospital, for approval by
the Bankruptcy Court and the Board of Supervisors, recognizing
that such a lease has been requested by the receiver in order
to protect the revenue stream of the skilled nursing facility
as a distinct part facility and because of the County' s
concern that the residents of the skilled nursing facility
have an adequate and appropriate place to reside and be cared
for.
14 . AUTHORIZE the County Administrator and Health Services
Director to obtain any necessary approvals of the Bankruptcy
Court for any of the agreements described above.
B. RECOMMENDATIONS REGARDING OFFICE FOR CIVIL RIGHTS REPORT:
15. ACKNOWLEDGE the findings of OCR in response to the complaint
that was filed, indicating that there were na violations of
Title VI of the Federal Civil Rights Act.
16. ACKNOWLEDGE the steps which have been taken to mitigate the
disparity in clinic hours which was noted by OCR.
17 . DIRECT County Counsel to advise the Board of Supervisors as
soon as there is any decision from the Federal District Court
regarding the request for a temporary injunction to prevent
the project for the partial replacement of Merrithew Memorial
Hospital from proceeding.
C. RECOMMENDATIONS FOR EXPANSION OF THE RELATIONSHIP WITH
BROOKSIDE HOSPITAL:
18 . ACKNOWLEDGE the excellent cooperative relationship which has
been forged between Merrithew Memorial Hospital and Brookside
Hospital and encourage staff to continue to develop and expand
this relationship.
D. RECOMMENDATIONS REGARDING CRITICAL ISSUES :
Introductory Recommendations:
19. AGREE that the nine "critical issues" identified in this
Report are, in fact, critical issues which must be resolved to
the satisfaction of the Board of Supervisors in order to
provide the Board of Supervisors with realistic alternatives
to the partial replacement project, thereby allowing the
closure of Merrithew Memorial Hospital and contracting for the
Board' s statutory responsibilities to provide health care to
defined populations.
20. AGREE that, because of the physical condition of the current
hospital, "abandoning the partial replacement of Merrithew
Memorial Hospital", the goal sought by the opponents of the
partial replacement project, is tantamount to closing
Merrithew Memorial Hospital. Therefore, when in the attached
report we refer to "closing Merrithew Memorial Hospital" or
"terminating the partial replacement project", we are, in
fact, referring to the same thing: abandoning the partial
replacement project will result in the closure of Merrithew
Memorial Hospital .
Recommendations reaardina Critical Issue # 1 :
Medical Staff Integration and Credentials
A-3
21 . ACKNOWLEDGE the problems which have existed in the recent
past, and which in some cases still exist today, for family
practice physicians to obtain privileges at district
hospitals, particular for family practice physicians from
Merrithew Memorial Hospital, who are generally used to a
broader pattern of privileges than they tend to be granted at
district hospitals .
22 . ACKNOWLEDGE that restricting privileges for family practice
physicians at district hospitals under the scenario proposed
by Mt. Diablo Medical Center where the County' s physicians
would admit patients to the district hospitals and follow them
as inpatients would tend to require increased use of
specialists and drive up the cost of medical care to indigents
for the County.
23 . ACKNOWLEDGE that Merrithew Memorial Hospital operates on a
ratio of about 70% family practice physicians to about 300
.specialists, roughly the opposite of what exists in the
private sector and district hospitals and that it is important
for the system of medicine practiced at Merrithew Memorial
Hospital for this general ratio to be maintained, even if
Merrithew Memorial Hospital is closed and all County patients
are admitted to district hospitals in the future.
24 . ACKNOWLEDGE the hard work of many family practice physicians,
including Dr. Kate Bennett and Dr. Ravinder Hundal of
Merrithew Memorial Hospital, in pressing for broader
privileges for family practice physicians .
25. ACKNOWLEDGE that the medical staffs of the district hospitals
appear to be willing to begin to shift their thinking about
the whole subject of privileges for family practice
physicians, an issue which has troubled private sector family
practice physicians as well as County-employed family practice
physicians and EXPRESS the Board of Supervisors ' appreciation
for this apparent shift in the position of the medical staffs .
26. EXPRESS the Board' s appreciation to the staffs of Merrithew
Memorial Hospital, Mt. Diablo Medical Center, Brookside
Hospital, and Los Medanos Community Hospital for their
cooperation, candor and responsiveness to the issues which are
discussed in this Report.
27 . RECOGNIZE the substantial movement which has been made,
particularly by the medical staff of Mt. Diablo Medical
Center, in reviewing its entire policy toward the
credentialing of family practice physicians, which appears to
make it possible for many of Merrithew Memorial Hospital' s
family practice physicians to apply for and obtain privileges
at Mt . Diablo Medical Center which are substantially
equivalent to those they hold at Merrithew Memorial Hospital .
Recommendations recardina Critical Issue # 2 •
Patient Care Issues
28 . ACKNOWLEDGE that there has been a problem in the past with the
level of Medi-Cal and indigent patients who have been served
- by the district hospitals. This is, of course, not so much a
problem caused by the hospitals themselves as by the private
sector physicians, to the extent that physicians have chosen
not to serve Medi-Cal patients because of the level of
reimbursement they receive.
A-4
29. ACKNOWLEDGE that it is possible for the County and the
district hospitals to negotiate most of these issues as has
been done successfully at Brookside Hospital .
30 . Also ACKNOWLEDGE that there has been an apparent turnaround in
the attitude of the medical staff at Mt. Diablo which has been
more fully explored in Critical Issue # 1 and that the Board
of Supervisors hopes that this will result in a permanent
change in the willingness of physicians at Mt. Diablo Medical
Center to treat Medi-Cal patients .
31 . CONCLUDE that it is necessary to maintain a continuum of
professions and services in order to insure quality patient
care for those patients for whom the County is responsible.
AGREE that many parts of this continuum are in place at
Brookside Hospital . NOTE that there appears to be a sincere
interest at Mt. Diablo Medical Center to insure that such a
continuum is implemented there in the near future.
Recommendations reaardina Critical Issue # 3 •
Definition of Patients for whom the County is Responsible
32 . ACKNOWLEDGE that there appears to be complete agreement on the
part of the County and the district hospitals that the County
is only willing to subsidize the cost of the care provided to
patients who are legally the County' s responsibility and that
this does not include Medi-Cal and Medicare patients .
33 . ACKNOWLEDGE that the closure of Merrithew Memorial Hospital
will result in the removal of all disproportionate share
funding, or its eventual successor, from the County' s medical
care system without necessarily having reduced or eliminated
any of the costs of providing that care. This will present a
significant challenge to all parties in terms of trying to
continue to provide the same level of service with
substantially fewer dollars .
34 . ACKNOWLEDGE that the County will receive $16. 1 million in
disproportionate share funding in the 1993-94 fiscal year. If
even $13 million were lost each year for 30 years, more than
1/3 of a billion dollars will have been eliminated from the
revenue stream supporting health care in this County.
35. ACKNOWLEDGE that, with the loss of the disproportionate share
funding, the Health Services Department staff believe that the
County will likely be unable to financially support the level
of patient care which is provided currently, resulting in the
loss of some physician support and that, therefore, there will
be an adverse impact on those patients for whom the County is
responsible.
36. In view of the fact that the County will lose millions of
dollars annually (and 1/3 of a billion dollars over 30 years)
with the loss' of the disproportionate share funding and that
this will inevitably lead to a reduction in the quality of
care which is available to the County' s patients, DETERMINE
whether it seems prudent to abandon the partial replacement
project for Merrithew Memorial Hospital and, instead, contract
with the district hospitals .
Recommendations regarding Critical Issue # 4 :
Ability to Depend on the Existence of the District Hospitals
A-5
37 . ACKNOWLEDGE that in view of the fact that Los Medanos
Community Hospital' s auditors issued a "going concern" finding
in 1991 and three years later Los Medanos Community Hospital
filed for bankruptcy, questions might well be raised about the
long-term financial stability of Brookside Hospital, which
received a "going concern" finding in 1993 .
38 . ACKNOWLEDGE that the comments made by the Auditor-Controller
are disturbing, and that the County' s ability to depend on
Brookside Hospital as a substitute for Merrithew Memorial
Hospital over the long-term may be more problematic.
39. ACKNOWLEDGE that if Brookside Hospital were to follow Los
Medanos into bankruptcy and be forced to close, and if the
County had in the meantime closed Merrithew Memorial Hospital,
relying on Brookside to provide care to the indigents in West
County, the Board of Supervisors could well be left with few,
if any, alternative means of meeting its statutory
responsibilities to care for the indigent in West County.
40 . ACKNOWLEDGE that Mt. Diablo Medical Center appears to be in
sufficiently strong financial condition that the County may be
able to rely on the future availability of Mt. Diablo Medical
Center as a resource for meeting its statutory
responsibilities to the indigent in Central County.
41 . CONCLUDE that, based on the professional conclusions of the
architects, geologists and structural engineers consulted by
the County staff, hospitals which were constructed prior to
1972 and have not undergone substantial seismic retrofitting
are at considerable risk in case of an earthquake .
42 . ACKNOWLEDGE that, based on the above conclusion, in case of a
substantial earthquake on the Hayward fault it is likely that
most, if not all, patient rooms at Brookside Hospital would be
unusable, even though the Emergency Room, Surgery, Radiology
and Laboratory services might remain available.
43 . CONCLUDE that, in case of a substantial earthquake impacting
Central County, the older wings of Mt. Diablo Medical Center
(Buildings "C" and "D") may be unusable, even though they may
not "pancake" and that the damage to Building "B" is difficult
to predict on the basis of the survey which has been
conducted.
44 . ACKNOWLEDGE that Brookside Hospital, at least, will have to
undergo major replacement in the near future and that if the
County were contracting with Brookside for the major portion
of indigent patients in West County, it would seem that
contract would have to reflect Brookside ' s long-term capital
costs .
45. ACKNOWLEDGE further, that any future construction by Brookside
Hospital will likely have to be financed at higher interest
costs than the County was able to obtain at the time the bonds
for the partial replacement project were sold and that, in
addition, Brookside would not have the SB 1732 and SB 855
funding available to help offset some or all of the local
costs of such a capital project.
46. CONCLUDE that there is substantial evidence that the County
may not be able to depend on Brookside over the long-term- as
a viable inpatient resource.
A-6
47 . In light of the above conclusions and comments regarding the
County' s ability to depend on the district hospitals both
financially and physically, EXPRESS the Board' s concern about
the ability of Brookside Hospital to care for the County' s
patients over the long term, NOTING that it would not be
prudent for the County to depend exclusively on Brookside
Hospital in lieu of the partial replacement project.
Recommendations regarding Critical Issue # 5:
Governance, including supplemental Referral from Supervisors
Torlakson and Smith
48 . ACKNOWLEDGE the opposition of the district hospitals to any
type of district-County relationship that would allow the
County to have sufficient control over the activities of the
district hospital to insure that the County' s Welfare and
Institutions Code § 17000 obligations are met.
49. ACKNOWLEDGE the difficulties involved in abolishing the three
hospital districts without the agreement of the district
hospitals ' boards of directors, RECOGNIZE there may be legal
advantages to retaining the hospital districts as long as
property tax revenue is needed to maintain the operation of
the districts or retire bonds and AGREE not to pursue this
option at this time.
50 . ACKNOWLEDGE the difficulties involved in obtaining special
legislation which would allow the Board of Supervisors to
become the governing board of the three hospital districts,
and the divisiveness which would be created by seeking such
legislation and AGREE not to pursue this option at this time.
51 . AFFIRM the Board of Supervisors' commitment to functional
integration of the hospital districts with Merrithew Memorial
Hospital in an effort to eliminate duplication, streamline
administration of the hospitals, reduce overhead costs, and
improve the quality of medical care available to all residents
of this County.
52 . ACKNOWLEDGE the difficulty of making functional integration
work where there are multiple, independently elected governing
bodies who do not concur with the concept of consolidation,
and AGREE to postpone functional integration as a viable
option at this time until more fundamental governance actions
are implemented which make functional integration a more
likely possibility.
53 . ACKNOWLEDGE that the Board of Supervisors has a much broader
policy view for the health care of the general public than do
the district hospitals and that the Board should do nothing
which would prevent positive changes to the health care system
in the future, or which would intrude on the Board' s ability
to control its own destiny in the health care arena, or which
would jeopardize the Board' s policy options in the future.
54 . DIRECT the Health Services Director and Executive Director,
Contra Costa Health Plan, to continue to explore with the
district hospitals and other providers in the community
opportunities for contracting where such contracting is to the
mutual benefit of the contracting parties and will allow the
County to be a prudent buyer in the market.
55. In view of the unwillingness of the district hospitals to make
any governance adjustments which would satisfy the County' s
desire to have a voice in the quality and variety of programs
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which are provided to the patients for whom it is responsible,
and to insure that the County' s W' & I Code § 17000 obligations
are carried out, DETERMINE whether it would be prudent to move
ahead with any contract with the district hospitals which
would result in the closing of Merrithew Memorial Hospital .
Recommendations regarding Critical Issue # 6•
Defeasing the Bonds for the County Hospital
56. ACKNOWLEDGE that defeasing the COP' s for Merrithew Memorial
Hospital will cost in excess of $22 million and that the
County has no resources to pay for any of these costs . The
cost would approach $30 million with construction costs .
57 . ACKNOWLEDGE that, based on comments of the County' s financial
advisor, there is a substantial risk of having the County' s
credit ratings downgraded or suspended if the partial
replacement project is suspended or abandoned.
58 . Based on the statements of the County' s financial advisor,
ACKNOWLEDGE that there are significant legal impediments to
borrowing or otherwise obtaining the funds to pay for the
defeasance.
59. Based on the advice of the County Counsel, CONCLUDE that there
may be serious legal impediments to the hospital districts'
ability to contribute to the County' s defeasance costs .
60 . ACKNOWLEDGE that there are very real practical concerns about
the ability of Brookside Hospital to contribute to the costs
of defeasance and, of course, no possibility that Los Medanos
will be able to make any contribution. .
61 . Based on the statement of the Auditor-Controller, ACKNOWLEDGE
that there is a significant question about the financial
ability of Brookside Hospital to contribute to the County' s
defeasance costs, even if it were willing to do so and, of
course, no possibility that Los Medanos will be able to make
any contribution.
62 . RECOGNIZE that any indecision on the part of the Board of
Supervisors about reaffirming its decision to proceed with the
partial replacement project may be interpreted by the ratings
agencies and those who have bought the County' s COP' s as an
indication that the County may technically be in default on
the COP' s, thereby making it very difficult and prohibitively
expensive for the County to borrow any funds in the financial
markets in the foreseeable future.
Recommendations regarding Critical Issue # 7 •
Legal and "Beilenson" Hearing Issues
63 . ACKNOWLEDGE that Health and Safety Code § 1442 .5 requires that
"where this duty [to provide care to indigentsl is fulfilled
by a contractual arrangement with a private facility or
individual, the facility or individual shall assume the
county' s full obligation to provide care to those who cannot
afford it, and make their services available to Medi-Cal and
Medicare recipients. " and that the district hospitals have not
made such a commitment.
64 . ACKNOWLEDGE that even if the commitments required by the
"Beilenson" provisions were undertaken by the district
hospitals and even if the County could effectively design a
contract which required the district hospitals to provide a
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long-term commitment to serve Medi-Cal and Medicare patients,
the County would remain responsible for its underlying
responsibilities to the indigent pursuant to Welfare &
Institutions Code § 17000, which places squarely and solely on
the County the responsibility to relieve and support all
incompetent, poor, indigent persons and those incapacitated
by acae disease or accident lawfully resident therein, when
such persons are not supported and relieved by their relatives
or friends by their own means, or by state hospitals or other
state or private institutions . "
65. ACKNOWLEDGE that the district hospitals are, perhaps
rightfully, unwilling to pay for the cost of defending the
County for any and all lawsuits that might be filed against
the County in case the County closes Merrithew Memorial
Hospital but are willing to join the County in defending
against any such lawsuits if they are also named as a
defendant.
66. In light of the fact that we cannot depend on the District
Hospitals to defend the County in areas which are the
statutory responsibility of the County, in view of the fact
that the County will have to assume the financial burden of
defending the County, and in light of the statutory obligation
the County has pursuant to Welfare and Institutions Code §
17000, DETERMINE whether Critical Issue # 7 has been resolved
to the satisfaction of the Board of Supervisors .
Recommendations regarding Critical Issue # 8 :
Labor and Employee Rights Issues
67 . ACKNOWLEDGE that what the district hospitals expect that the
County will do is to close Merrithew Memorial Hospital, cancel
1174 positions, lay off the employees occupying those
positions, and after the district hospitals rehire their own
laid off employees consider hiring a portion of the laid off
County employees .
68 . Due to the requirements of collective bargaining agreements,
ACKNOWLEDGE that the district hospitals indicate that those
County employees who might be hired would come to work under
the salary, benefits and working conditions of the hospital
which hires them, regardless of any differences between those
benefits and what the employee was receiving at the County.
69. ACKNOWLEDGE that laid off County employees who are later hired
by one of the district hospitals are unable to receive the
reciprocal rights which they might otherwise have had if they
had transferred to another County' s pension program, thereby
severely penalizing many senior employees who are nearing
retirement age.
70. RECOGNIZE the dramatic, detrimental impact on employees due to
the loss of jobs and variations in salary and benefits which
employees are likely to encounter if the County closes
Merrithew Memorial Hospitals and contracts with the district
hospitals for all services now provided by Merrithew Memorial
Hospital .
Recommendations reaardina Critical Issue # 9•
Layoff and Transfer of County Employees
71 . ACKNOWLEDGE that there is only the most remote possibility
that any significant number of laid off County employees would
be hired by the district hospitals after the district
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hospitals have rehired their own 120 laid off employees and
after the County' s laid off employees had to compete with Los
Medanos ' 450 laid off employees.
72 . ACKNOWLEDGE that the bumping and seniority rules mean that
nearly every employee in the Health Services Department would
be impacted by the closing of Merrithew Memorial Hospital .
73 . ACKNOWLEDGE that there would also be a substantial impact on
most service departments like Personnel, General Services,
Purchasing, County Counsel, Auditor-Controller and other
departments which rely on revenue from the Health Services
Department for significant, amounts of their budget.
74 . ACKNOWLEDGE that paying even a '/s share of the defeasance
costs would result in the layoff of hundreds of additional
employees in order to offset as much as a $10 million
defeasance share of cost for the County and that the bulk of
these additional layoffs would probably have to come from the
Health Services Department, thereby decimating Public Health,
Mental Health outpatient services and the outpatient medical
clinics .
75. ACKNOWLEDGE that in light of Los Medanos ' bankruptcy,
financial problems at Brookside Hospital and at least
temporary financial problems at Mt. Diablo Medical Center, the
acceptance and implementation of the Joint District Hospital
Proposal would result in an inherent inequity for County
employees, apparently solely to benefit the "bottom line" of
the district hospitals .
76. ACKNOWLEDGE that neither district hospital has indicated any
ability to support the concept of fairness represented by the
proposal that the district hospitals hire County employees in
proportion to the number of County patients who are admitted
to the district hospitals .
77 . Given that . Merrithew Memorial Hospital is operating at a
higher occupancy level than the district hospital and is one
of the busiest hospitals in the County, and given the
commitment, dedication, and professionalism of the employees
at Merrithew Memorial Hospital, and given the lack of any
sense of fairness in what is being proposed to the County,
DETERMINE whether the Board of Supervisors is satisfied with
the responses from the district hospitals on this issue.
E. CONCLUDING RECOMMENDATION:
78 . Following the review of the above "Critical Issues" and an
examination of all of the testimony which is presented in this
Report, DETERMINE whether the Board of Supervisors wishes to:
✓ Terminate the Merrithew Memorial Hospital partial
replacement project, and
✓ Direct staff to immediately undertake those actions which
are necessary to defease the Certificates of
Participation for the Merrithew Memorial Hospital partial
replacement project, and
V. Direct staff to immediately take those actions which are
necessary to abandon the Merrithew Memorial Hospital
partial . replacement project, including terminating all
existing construction contracts, and
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1
✓ Direct staff to outline the additional steps which will
need to be taken in the near future to eliminate the 1174
positions which are held by the employees presently
working at Merrithew Memorial Hospital, close the
hospital as an inpatient facility, and develop contracts
with the district hospitals to care for those patients
who are the statutory responsibility of the County.
BACKGROUND:
Over the last two decades, the Board of Supervisors and County
staff have actively pursued the possibility of contracting with the
three district hospitals in the County for the inpatient care
component of the County' s obligation to provide medical care to
those unable to afford to obtain such services from their own
resources . The Board of Supervisors has consistently indicated
that it was not interested in duplicating services which were
available from the private sector or the district hospitals. Until
recently, these efforts have run into a variety of philosophical,
programmatic or financial barriers which have made effective
dialogue more difficult .
However, during the past several months, a number of circumstances
have occurred which have caused a reexamination of the potential
for such relationships. These have included the financial problems
which were faced by Los Medanos Hospital which have recently
resulted in a bankruptcy filing, a request by the hospital district
that the County consider taking over Los Medanos Community
Hospital, and a great deal of effort on the part of County staff to
undertake a "due diligence" investigation in an effort to determine
whether Los Medanos could be maintained as an acute inpatient
facility. This activity has included numerous meetings with
district hospital staff and several pieces of correspondence. Some
of this correspondence is included as Attachments # 1 through # 5
to this Report.
This activity, much of which has been initiated by the Board of
Supervisors, has included actions directing staff to prepare
reports responding to the following questions :
• What options does the County have available to utilize Los
Medanos Hospital and/or its skilled nursing facility in some
manner and what actions should the Board of Supervisors take
in regard to those options?
• What are the consequences for the County of the Report of the
Office for Civil Rights of the U.S . Department of Health and
Human Services?
• What options does the County have in terms of encouraging
closer cooperative relationships with the district hospitals,
ranging from functional integration through acquisition of the
district hospitals by the County, and which options should the
Board of Supervisors explore?
• What options does the County have in terms of restructuring
the relationship with the district hospitals from. contracting
for specific services for specific patients to having the
district hospitals provide for all of the County' s statutory
responsibilities and what actions should the Board of
Supervisors take in regard to those options?
• What opportunities are there to expand the relationship with
Brookside Hospital?
A-11
The attached report is not intended to argue for or against
replacing some or all of Merrithew Memorial Hospital nor to argue
for or against contracting with one or more of the district
hospitals for any or all services currently provided by the County.
What this report does attempt to do is to identify, in a
dispassionate and rational fashion, each of the major issues which,
in the view of staff, must be resolved with the district hospitals
in order for the Board of Supervisors to consider contracting and
closure of Merrithew Memorial Hospital as an alternative to a
partial replacement of the existing Merrithew Memorial Hospital .
PART 1 - LOS MEDANOS COMMUNITY HOSPITAL AND REGENCY HILLS CONVALESCENT HOSPITAL
In the first part of the report we provide some background
information on the Los Medanos Community Hospital District, the
Regency Hills Convalescent Hospital which is on the grounds of the
Los Medanos Community Hospital, and the status of the pending
bankruptcy case. We also provide a number of recommendations for
the Board' s consideration. We believe that these recommendations
can be addressed and acted on independent of the recommendations in
the following sections of the report.
PART 2 - REPORT FROM THE OFFICE FOR CIVIL RIGHTS
In the second part of the report we have summarized the findings of
the Office for Civil Rights of the U.S . Department of Health &
Human Services following their exhaustive investigation of
allegations against the County. We are adding this information
since it bears heavily on the decision to either proceed with or
terminate the partial replacement project for Merrithew Memorial
Hospital and will weigh heavily on the Federal lawsuit brought by
some of the same opponents to the partial replacement project for
Merrithew Memorial Hospital .
PART 3 - EXPANSION OF THE RELATIONSHIP WITH BROOKSIDE HOSPITAL
In the third part of the report, we address a specific relationship
with Brookside Hospital . The County has had a contract with
Brookside Hospital since February, 1991 whereby pregnant women in
West County can obtain their prenatal care in the County' s clinic
in Richmond and then deliver at Brookside Hospital in San Pablo,
instead of Merrithew Memorial Hospital in Martinez . Discussions
have been underway to expand this relationship and we believe we
are at the point where we can now provide some additional
information regarding the expansion of this relationship.
PART 4 - EXAMINATION OF NINE CRITICAL ISSUES
In the fourth part of the report we have identified nine critical
issues . We believe that each of these issues has a critical
bearing on whether it is feasible to seriously consider as an
alternative to a partial replacement of the existing Merrithew
Memorial Hospital, contracting with the district hospitals for all
services, thereby closing Merrithew Memorial Hospital . If each of
these issues can be resolved to the satisfaction of the Board of
Supervisors, then the Board of Supervisors may have available a
reasonable alternative to the partial replacement of Merrithew
Memorial Hospital . However, if it becomes clear that these
critical issues cannot be resolved, then the Board of Supervisors
should proceed with the decision made by the Board of Supervisors
on March 3, 1992 to continue with the partial replacement project.
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M
We include in this portion of the report the questions which have
been explored with the district hospitals over the past month by
the subcommittee which the Board of Supervisors appointed for this
purpose. There have been four meetings with representatives of the
district hospitals: April 29, 1994, May 6, 1994, May 13, 1994 and
May 19, 1994 . The transcript of the district hospitals ' written
responses and the nature of additional discussions which have been
held with the district hospitals are also included.
Finally, in this section of the report we have included a
discussion of each issue and have provided staff recommendations on
each issue. It is important to emphasize that the responses from
the district hospitals which are included in quotation marks are
just that - the written responses from the district hospitals . The
fact that these responses are quoted in this Report is intended to
present the complete factual record for the Board' s consideration.
These responses are not necessarily endorsed by County staff - nor
is staff necessarily disagreeing with these statements, except as
separate comments are included which are attributed to staff.
Finally, the "governance" issue which was referred separately to
staff by the Board of Supervisors at the request of Supervisors
Jeff Smith and Tom Torlakson, is covered as a part of Critical
Issue # 5 in Part 4 of the Report.
PART 5 - SummARY RECOMMENDATION
In this final part of the Report we provide some additional
background information and one over-riding recommendation
addressing the basic issue of whether to close Merrithew Memorial
Hospital .
The County Administrator and Health Services Director would like to
take this opportunity to express their sincere thanks, and that of
their staffs, for the cooperation which has been demonstrated by
the staff of all of the district hospitals during the past several
weeks as we have attempted to respond to the Board of Supervisors '
requests for information within a very tight timeframe.
County staff was asked to provide a detailed and comprehensive
report on a very complex series of issues within 30 days from April
26, 1994 . The Board of Supervisors appointed a Committee of its
members to provide a forum for the exploration and discussion of
these issues. The district hospital board members, administrative,
and medical staff have been most cooperative in supplying data,
information, and opinions within very short deadlines . We
appreciate and would like to publicly acknowledge the cooperative
spirit which has been shown by the board members, administrative,
and medical staffs of all three district hospitals during this
period of time.
May 24, 1994
cc: County Administrator
Health Services Director
County Counsel
CEO, Mt. Diablo Medical Center
CEO, Brookside Hospital
Chair, Los Medanos Community Hospital District
A-13
REPORT ON THE ROLE OF
CONTRA COSTA COUNTY
IN ASSURING THE HEALTH OF ITS
MOST VULNERABLE POPULATION
1994 Update
Contra Costa County Board of Supervisors
Supervisor Tom Powers, Chairman
Supervisor Jeff Smith
Supervisor Gayle Bishop
Supervisor Mark DeSaulnier
Supervisor Tom Torlakson
Prepared by the Office of the County Administrator
Phil Batchelor, County Administrator
May 24, 1994 .
TABLE OF CONTENTS
SECTION PAGE NUMBER
PART 1 - LOS MEDANOS HOSPITAL AND
REGENCY HILLS CONVALESCENT HOSPITAL (SNF) 2
PART 2 - OFFICE FOR CIVIL RIGHTS REPORT/LAWSUIT 8
PART 3 - EXPANSION OF RELATIONSHIP WITH
BROOKSIDE 'HOSPITAL 11
PART 4 - CRITICAL ISSUES 13
CRITICAL ISSUE # .1
Medical Staff Integration and Credentials 15
CRITICAL ISSUE # 2
Patient Care Issues 28
CRITICAL ISSUE # 3
Definition of Patients for whom the
County is Responsible 33
CRITICAL ISSUE # 4
Ability to Depend on the Existence of
the District Hospitals 41
CRITICAL ISSUE # 5
Governance 53
CRITICAL ISSUE # 6
Defeasing. .the Bonds for the County Hospital 66
CRITICAL ISSUE # 7
Legal and "Beilenson" Hearing Issues 74
CRITICAL ISSUE # 8
Labor and Employee Rights Issues 80
CRITICAL ISSUE # 9
-Layoff and Transfer of County Employees 86
PART 5 SUMMARY CONCLUSIONS 93
LIST OF ATTACHMENTS 95
-i- ,
■ PART 1 - LOS MEDANOS HOSPITAL AND. REGENCY HILLS CONVALESCENT
HOSPITAL
INTRODUCTORY COMMENTS
On December 10, 1993, representatives from the Los Medanos
Community Hospital District approached Supervisor Torlakson and
asked whether the- County would be willing to take over the
operation of Los Medanos Community Hospital . County staff, in
cooperations with Sutter Health Corporation, undertook a "due
diligence" investigation and eventually concluded that the County
and Sutter could not operate Los Medanos Community Hospital as an
Acute inpatient facility. As an alternative, Health Services
Department staff proposed examining the feasibility of acquiring
Los Medanos Community Hospital for the purpose of operating it as
an acute psychiatric facility, an urgent care center, and
primary, specialty and dental services from the Pittsburg Health
Clinic and an ambulatory surgery center.
Shortly thereafter, Los Medanos Community Hospital closed and the
corporation operating Los Medanos Community Hospital filed for
bankruptcy. County health and legal staff and legal and
financial consultants to the County have talked with the receiver
currently managing Los Medanos Community Hospital (who is also
the bankruptcy trustee) and have received and reviewed relevant
documents relating to the construction and financing of Los
Medanos Community Hospital . The County's construction management
consultant and outside structural engineers have examined Los
Medanos Community Hospital . Based on the following discussion,
staff is prepared to make the following recommendations regarding
Los Medanos Community Hospital and the skilled nursing facility
(Regency Hills Convalescent Hospital).
Discussion:
While the Los Medanos Community Hospital District is generally
thought of., and is frequently referred to, as a single legal
entity, it is important to recognize that' there are actually
three entities involved. Only one of these entities, the Los
Medanos Health Care Corporation, is currently in bankruptcy.
First, there is the Los Medanos Community Hospital District-,
which is the independent special district governed by a
2
separately-elected Board of Directors and which is ultimately
responsible to the residents of the District for the operation of
the Los Medanos Community Hospital .
Second, there is the_ Los Medanos Community Hospital District
(Pittsburg. Area) Hospital Building Corporation, which is the non-
profit corporation which owns the Los Medanos Community Hospital
and leases it to the District. The Hospital was built in 1978 with
the proceeds of a bond issue (the 1977 bond issue) . This bond
issue is being paid for through lease rental payments paid from a
property tax override of $ . 075 per $100 of assessed value on all
taxable real property within the Los Medanos Community Hospital
District. This property tax surcharge generates between $900,000
and $1,000,000 of revenue each year ($977,000 in the 1993-94 fiscal
year) . The original 1977 bond issue was for $12 . 6 million. As of
March 1, 1994, $7.525 million remained to be repaid to fully retire
this debt
Third, there is the Los Medanos Health Care Corporation, to which
the Hospital District subleased its assets in 1985 and which
operates ' the Hospital. In 1990, additional bonds in the amount of
$11 . 08 million were sold and were guaranteed by the California
Health Facilities Financing Authority. This bond issue (Series 2,
1990) is repaid by the Los Medanos Health Care Corporation's making
annual payments to the California Health Facilities Financing
Authority in the amount of approximately $900,000 which are used by
the Authority to pay debt service on the bonds . The 1990 bond
issue is insured by Cal-Mortgage. The .Los Medanos Health Care
Corporation pays. an annual fee equal to 0 .5% of outstanding
principal as a bond insurance premium to Cal-Mortgage. A total of
$10,075,000 of principal and a $934,995 debt service reserve fund
remained outstanding as of March 15, 1994 . It is these payments to
the California Health Facilities Financing Authority that are
currently in default, and which have, therefore, caused the Los
Medanos Health Care Corporation to file for bankruptcy protection.
It is important to point out that at this time neither the Los
Medanos Community Hospital District nor the Los Medanos Community
Hospital District (Pittsburg Area) Hospital Building Corporation
are involved in the bankruptcy action. Only the Los Medanos Health
3
Care Corporation and its assets are affected by the current
bankruptcy action.
While the 1977 bond issue built the original Los Medanos Hospital,
the 1990 bond issue was used to- finish the top (5th) floor of the
Hospital, retire prior .debt associated with the Regency Hills
Convalescent Hospital skilled nursing facility (SNF) , which is
located on the grounds of the Hospital, complete various capital
projects, fund a debt service reserve, and pay the costs of
issuance. The bondholders of the 1977 bond issue have a first lien
on the assets of the Hospital . The California Health Facilities
Financing Authority and Cal-Mortgage have a second lien on the
assets of the Hospital in connection with the Series . 2 ( 1990) bond
issue. [See Attachment # 6 ]
In the bankruptcy case, it is necessary for_ all of the creditors
who have a lien on the assets of the Los Medanos Health Care
Corporation to be 'notified of the pending sale of those assets and
to, be provided an opportunity to provide their input to the
Bankruptcy Court. If a creditor is notified of the pending sale
and does not appear, the Bankruptcy Court has the power to alter
the creditor' s claim on the assets of the Los Medanos Health Care
Corporation. However, if there is a legitimate creditor with a
lien on assets who, for whatever reason, is not notified of the
•pending sale of the assets of the Los Medanos Health Care
Corporation and thereby is unable to appear in court, such a
creditor could create a substantial problem for the party who
purchases the assets of the Los Medanos Health Care Corporation in
the future.
The County could, if it decides that it wishes to acquire the
assets of the Los Medanos Health Care Corporation, either attempt
to purchase the Hospital and other assets outright, or enter into
a long-term lease-purchase agreement where annual lease payments
would be made to the retire the Series 2 ( 1990) bonds and at some
predetermined date in the future the County could take title to the
Hospital and other assets. At the same time, it would be important
that the property tax override which was authorized by the voters
continue to be levied.
Additional work will need to be undertaken to determine whether it
will be necessary or prudent to have the Hospital District or
Building Corporation file bankruptcy cases. Substantial
. 4
negotiations, with a variety of parties are clearly required in
order, to properly evaluate whether acquiring the Los Medanos
Hospital and/or skilled nursing facility are in the best interests
of the County and, if so, how such a transfer of assets could be
d
accomplishe -in a way, which._ protects the County to the maximum
extent possible from future lawsuits from taxpayers, . bondholders,
former employees, 'retirees, and creditors .
We are 'suggesting that the recommendations outlined below can and
should be carried out independent of any decisions which are made
regarding . approval of any other recommendations in this report
dealing with additional contracting with the other district
hospitals and independent of the decisions regarding the partial
replacement of Merrithew Memorial Hospital .
Staff Recommendations :
1 . APPROVE. and AUTHORIZE the County Administrator and Health
Services Director to submit the attached letter of,''intent [See
Attachment # 7 ] to the receiver (or his successor) for the Los
Medanos Health Care Corporation, and to the Los Medanos
Community Hospital District (Pittsburg Area) Hospital Building
Corporation and the Los Medanos Community Hospital District,
indicating- the County' s interest in negotiating with the
receiver for the acquisition of Los Medanos Community Hospital
and its assets on terms and conditions acceptable to the Board
of Supervisors and the Bankruptcy Court, and to negotiate with
the District and Building Corporation for any assets which
those entities may hold separate from the assets which are
involved in the bankruptcy case.
2 . AUTHORIZE the County Administrator and Health Services
Director to negotiate a lease-purchase or other form of
agreement for the acquisition of Los Medanos Community
Hospital and its assets and return any such agreement to the
Board of Supervisors for the Board' s further consideration.
3 . AUTHORIZE the County Administrator. . and Health Services
Director to request the receiver .to determine the legal owner
of each asset of the Los Medanos Community Hospital that the
County wishes to acquire.
5
4 . AUTHORIZE the County Administrator to negotiate with the
receiver regarding the acquisition of those personal property
assets which are the property of the Los Medanos Health Care
Corporation..
5 . AUTHORIZE the County Administrator to negotiate with the Los
Medanos Community Hospital District (Pittsburg Area) Hospital
Building Corporation and the Los Medanos Community Hospital
District regarding the acquisition of those personal property
assets which may be the property of the Los Medanos Community
Hospital District (Pittsburg Area) Hospital Building
Corporation or the Los Medanos Community Hospital District.
-6 . AUTHORIZE the County Administrator to obtain a title search on
_the real property used by the Los Medanos Community Hospital
to determine the extent of liens which have been recorded
against any 'such real property.
7 . AUTHORIZE the County Administrator to negotiate a contract
with the firm of Orrick, Herrington & Sutcliffe to provide
legal consultation to the County on the acquisition of the
assets , of Los Medanos Community Hospital and to return any
contract to the Board of Supervisors for its consideration.
8 . AUTHORIZE the County Administrator to explore the need for
contracting with additional specialized expert legal counsel,
accounting professionals, and health care consultants to
assist the County in evaluating and acquiring the assets of
Los Medanos Community Hospital and to make further
recommendations to the Board of Supervisors on any proposed
contracts .
9 . AUTHORIZE .the County Administrator to explore the desirability
of refunding, . defeasing, or restructuring the 1977 Bonds or
the 1990 Bonds, and to negotiate with the issuer, the
borrower, the lessee, the trustee, or the insurer of such
bonds.; all in connection with the acquisition. by the County of
the assets of Los Medanos Community Hospital .
10 . AUTHORIZE the County Administrator to explore the appropriate
uses o.f the Los Medanos Community Hospital District property
tax override approved in connection with the 1977 Bonds and to
take necessary action concerning such uses in connection with *
6
the acquisition by the County of the assets ' of the Los Medanos
Community Hospital.
11. AUTHORIZE the County ' Administrator and Health Services
Director to negotiate with the receiver and trustee in
bankruptcy for the removal. of liens on any assets of the Las
'Medanos Community Hospital the County wishes to receive.
12 . DIRECT the County Administrator to investigate the -feasibility
of alternative governance mechanisms for -the Los Medanos
Community ,,Hospital District and provide a subsequent report to
the Board of Supervisors on this subject.
13 . • ' AUTHORIZE , the County * Administrator and Health' Services
Director to negotiate ,a short-term lease' with the receiver for
the Los Medanos Health Care Corporation for the operation of
the, 120-bed . skilled nursing facility (Regency Hills
Convalescent Hospital) under the acute care hospital license
of' the County's Merrithew Memorial Hospital, for approval by
the Bankruptcy Court and the Board of Supervisors, recognizing
that such .a lease has been requested by the receiver in order
to protect the revenue stream of the. skilled nursing- facility
. as a distinct part facility and because of the County's
concern that the residents of the skilled nursing facility
have an adequate and appropriate place to reside and be cared
for'.
14 . AUTHORIZE the County. Administrator and Health Services
Director to ,obtain .any. necessary approvals of the Bankruptcy
Court. for any of the agreements described above.
■ PART 2 - OFFICE FOR CIVIL RIGHTS:
INTRODUCTORY COMMENTS
The NAACP Legal Defense & Educational Fund, Inc. filed a
complaint with the Office for Civil Rights, U.S. Department of
Health and Human Services (OCR) on April 13, 1993, charging
Contra Costa County with both intentional discrimination and with
actions that have a disproportionate adverse impact against
Blacks, Asians, and Hispanics surrounding a decision by the Board
of Supervisors to rebuild a portion of the existing public
hospital at its present location in Martinez . The County
provided OCR with all of the data that was requested to assist
OCR in its investigation. [See Attachment # 8]
Discussion:
OCR translated the allegations into six legal issues,
investigated these allegations for over a year and issued written
findings on Apri1 ,25,, 1994 . Following are some excerpts from the
OCR letter of findings. The complete letter of findings is
attached. [See Attachment # 91
On the prudence of replacing Merrithew Memorial Hospital:
"OCR has examined the county' s proffered reasons for rebuilding
its public hospital at its present location, and we conclude that
they are designed . to achieve the legitimate, nondiscriminatory
objectives of providing . the population of the county with a
comprehensive health care system and, meeting its obligations
under state law to provide indigent care and to promote the
health and safety of the public. "
"OCR' s investigation revealed that the county adheres to the
common health care practice in the United States to centralize
specialty services for both improved efficiency and improved
medical outcomes . It would be far costlier to offer specialty
services in more than one location, due to the need for expensive
equipment and increased physician costs . . . .00R finds that the
county' s proffered reasons for centralizing certain specialty
services serve legitimate and nondiscriminatory objectives . "
8
On negotiating with the district hospitals:
"These facts demonstrate that the county has not failed to
negotiate for services with district hospitals in good faith. "
"Even if district hospitals are now amenable to providing the full
range of services required by the county, OCR found that, based on
the experience of other counties that have relied solely on.
contracts, complete dependence on contracted arrangements - could be
imprudent. "
On the district hospitals' commitment to serving the poor:
"OCR interviews with community service and public health
professionals and governmental agencies showed a widespread
perception of the district hospitals as having a long history of
not serving the poor. "
"District hospitals serve only portions of the county, so they do
not have the same commitment to serving all county patients as does
the county. "
"OCR found that at least two of the three district hospitals in
Contra Costa County are in financial jeopardy and their continued
existence is open to question. One of the district hospitals was
cited by a grand jury investigation for fiscal mismanagement and
currently is in receivership. All three district hospitals have,
in the past, attempted to reorganize as private entities . If the
county hospital closed down, it is possible that some county
patients would cease to have access to any care at all . "
."It cannot be said with any certainty that the complainant's
proposal is a feasible alternative that would meet the county' s
legitimate objectives. "
On the County's - demonstrated commitment to serving the poor:
"Evidence shows that the county receives higher levels of
reimbursement from Medi-Cal (SB-855 funds) because of its .
disproportionate share status and that the county receives
operating subsidies to defray the cost of providing indigent care.
9
District hospitals. have not admitted- 'a sufficient number of ,Medi-
Cal patients to qualify for disproportionate share status, which
would have increased their reimbursement rate from the state under
the Medi-Cal program.
"OCR' s investigation established that these sources of revenue
cannot be transferred to the district hospitals. The hospitals
must earn disproportionate_ share status on their own by serving a
sufficient number 'of Medi-Cal patients and must obtain their own
capital projects funding.
"These actions show that the county is providing considerable
financial resources toward expanding. the sc�ope ..of services in west
and east county. "
Staff Recommendations : .
15 . ACKNOWLEDGE the findings of OCR in response to the complaint
that was filed, indicating. that there were no violations of
'Title VI of the Federal Civil Rights .Act.
16 . ACKNOWLEDGE -the steps which have been taken to mitigate the
disparity in clinic. hours which was noted by OCR.
17 . DIRECT County Counsel to . advise the Board of Supervisors as
soon as there is any decision from the Federal District Court
regarding the request for a temporary injunction to prevent
.the project for the partial replacement of Merrithew Memorial
Hospital from proceeding.
10
■ PART 3 - EXPANSION OF CONTRACT WITH BROOKSIDE HOSPITAL:
INTRODUCTORY COMMENTS
The County and Brookside Hospital have been operating .a joint
venture in obstetrics since February, 1991. This agreement has
. allowed pregnant women receiving their prenatal care at the
Richmond Health Center to be delivered by County family practice
physicians at Brookside Hospital . The obstetrics joint venture
is judged a success by all parties .
Discussion•
As a result of the success of the obstetrics joint venture, the
County and Brookside Hospital have been discussing an expansion
of this relationship to include other services and types of care.
The details of this possible expansion of services to residents.
of West County are currently in the final stages of discussion,
but are outlined in the attached proposed expanded operating
agreement between the County and Brookside : Hospital . [See
Attachment # 10]
This expanded relationship is proposed to include, among numerous
elements, the following:
• A 24-hour urgent care center.
• A van shuttle service for West County residents . .
• Exploring' the coordinated use of mobile medical vans for
public health services .
• Exploring the development of a new inpatient psychiatric unit
at Brookside Hospital .
• Exploring the creation of an .AIDS unit at Brookside Hospital .
• Exploring the extension of the CCHP to unrepresented Brookside
Hospital employees .
11
e Continuing the work together which has contributed to improved
African American infant mortality in West County.
Staff Recommendations :
18 . ACKNOWLEDGE the excellent cooperative relationship which has
been forged between Merrithew Memorial .Hospital and Brookside
Hospital and encourage staff to continue to develop and expand
this relationship.
12
■ PART 4 - CRITICAL ISSUES:
INTRODUCTORY COMMENTS
The following nine issues are ones which are' considered critical
to the future of the County' s . health care delivery system. All
nine critical issues must be resolved satisfactorily in order to
eliminate the need for the partial replacement project for the
County Hospital and permit the closure of the current Merrithew
Memorial Hospital . At any point where it is not possible to
reach a satisfactory agreement on these critical issues, the
County will have no choice but to continue with plans for the
partial replacement of the County Hospital, although that does
not necessarily preclude contracting, as has been proposed in
order to provide geographic proximity for some services .
[See Attachment # 11 for the original presentation of these
questions to the district hospitals, Attachment # 12 for the
response of Mt. Diablo Medical Center, Attachment # 13 for the
response of Brookside Hospital, and Attachment # 14 for the
response of Los Medanos Community Hospital].
Introductory Recommendations :
19 . AGREE that, the nine "critical issues" identified in this
Report are, in fact, critical issues which must be .resolved to
the satisfaction of the Board of Supervisors in order to
provide the Board of Supervisors with realistic alternatives
to the partial replacement project, thereby allowing the
closure of Merrithew Memorial Hospital and contracting for the
Board' s statutory responsibilities to provide health care to
defined populations .
20 . AGREE that, because of the physical condition of -the current
hospital, "abandoning the partial, replacement of Merrithew
Memorial Hospital" , the goal sought by the opponents of the
partial replacement project, is tantamount to closing
Merrithew Memorial Hospital. Therefore, when in the attached
report we refer to "closing Merrithew Memorial Hospital" or
"terminating the partial replacement project", we are, in
fact, referring to the same thing:. abandoning the partial
13
replacement project will result in the closure of Merrithew -
Memorial Hospital .
14
1 MEDICAL STAFF INTEGRATION AND CREDENTIALS
As has been repeatedly pointed 'out in numerous forums, neither
elected officials nor hospital administrators admit patients to
hospitals - physicians do. There are two possible models for
handling contracting between the County and the district hospitals:
Two scenarios have been discussed. Scenario A would have the
County continue to employ its inpatient physician staff and would
simply deploy them to various district hospitals to take care of
"County" patients . Scenario B would have the district hospitals
and their private medical staffs take -over the inpatient care of
these patients and the County would no longer employee inpatient
physicians . There are several issues which deserve comment.
1 . What is a "County" patient. We assume it would be understood
that all patients .with whom we have had continuity of care
would remain County patients, whether they were indigent or
not. However, many patients continue to choose to come to
Merrithew Hospital . The physician staff of Merrithew fears
that patients who appear at the hospital for emergent care and
are admitted would be assigned as follows :
Patients with third-party sources would be assigned to the
private medical staffs and patients without third-party
sources or patients who are members of the health plan would
be assigned to County physicians . This has the potential for
changing the breadth of the demographics of the patients we
care for and have negative impact on the residency training
program.
2 . Disproportionate share subsidization of inpatient physician
salaries. Disproportionate share funding continues to pay for
inpatient physician salaries in addition to other health
department services in public health and other divisions .
Either Scenario A or Scenario B will result in the net loss of
millions of dollars of disproportionate share funding. Some
have suggested that disproportionate share funding will
probably continue for only a couple more years . However, we
15
note that virtually every federal health legislation proposed
in Washington provides for "essential community providers" to
replace disproportionate share hospitals and the "vulnerable
population adjustments" to replace the disproportionate share
payment. We do not anticipate any change in this funding in-
the future. Therefore, the loss of disproportionate share or
vulnerable population adjustment funding may force a change
from Scenario A to Scenario B as the County is no longer able
financially to employee its physicians .
3 . In order for us to compare apples to apples it is critical
thatCounty physicians receive precisely the same level and
extent of hospital privileges now enjoyed by County physicians
at Merrithew. In addition, it is imperative' that the
utilization of specialists service occur under either scenario
only under the same circumstances that. a County physician
would request specialty services at Merrithew Hospital
currently. The Medical Staff at Merrithew has serious
reservations about the rhetoric that has been put forth by
these hospitals . Although we understand that the governing
body of hospitals is authorized by JCAHO to make the final
determination on staff membership and privileges, it is very
difficult to "force feed" these to medical staff . There have
been cases which have been litigated for years over the
battles between medical staffs and hospital governing bodies
over such issues . Regulatory bodies look very closely at
situations where medical staff process is usurped by the
governing body for political or economic purposes . Even if
the governing bodies were successful, ,it would create a very
difficult environment for our physicians to work in. As
stated in the May 6 meeting, Mr. Wall estimated that 20 to 30%
of his physician staff would have difficulties welcoming
County physicians . _ The Board of Directors of Mt. Diablo
reported that "if a commitment is made by the board, they
would use their influence and authority to gain 'buy in' . "
While the hospitals object to our bringing up their past track
record, in fact, past behavior.,is the best predictor of future
behavior. A recent event is important to cite. Dr. Ravinder
Hundal is a recent graduate .of our program and is in practice
in Pleasant Hill and on the staff of Mt. Diablo Medical
Center. He applied for routine OB privileges . In support of
his application, he., presented to Mt. Diablo more than 200
16
delivery records . These were carefully screened, and he was
told they had questions about three of the 200 cases . They
sent them to an outside reviewer at Alta Bates Hospital who
did not find any significant concerns . After this process,
which took between 12' and 18 months to. complete, Dr. Hundal
was eventually granted privileges for the simplest and most
basic obstetrics. , Any complications must be turned over to a .
staff physician who carries full privileges . Dr. Hundal ' s
privileges are far more restricted at Mt. Diablo than they are
here at Merrithew. In addition, he has had approximately five
deliveries and has already been`.called before their quality
assurance committee regarding one case for questioning. - He
✓ anticipates that this will be a frequent occurrence as part of
intimidation. -
This behavior troubles us tremendously. There are two issues
here: - One is the struggle to obtain privileges . The second
is the struggle to maintain privileges in potentially. hostile
environments. It must be understood that these decisions are
wholly that of the medical staffs of these hospitals and that,
should they grant privileges and then take them away at any
point, these are reportable events to the California Medical
Board which can seriously adversely affect the professional
career of the physicians involved. Needless to say,
intimidation , is a potential real threat-: and . a . .strong
disincentive for our physicians .
The economic environment in which we all practice today also
fails to reassure us . Incomes of many specialists and
subspecialists are beginning to decline. Physicians
characteristically practice to the. level of income with which
they have become comfortable. We are told by the California
Academy of Family Physicians that they are .getting increasing
complaints. regarding privileging issues in hospitals
throughout the state. It appears that as the economic base of
the specialists continues to be eroded, they are protecting
the final fortress - privileges . If they can restrict
privileges to, themselves• and their colleagues then they can
continue to protect their basic economic :niche.
17
4 . Should Scenario B initially be developed, or arrived at
because of the failure of Scenario A due to lack of
disproportionate share funding as noted above, then very
different medical staff and patient care issues become
concerning. Most obvious of these is the complete loss of
control over inpatient utilization rates for all patients that
the County is responsible for. Without the primary care
oriented or conservative utilization for our physicians, it is
impossible for the County to control its long-term health care
costs . In . addition, significant fragmentation would occur
between the ambulatory clinic physicians and the private
inpatient physicians at the district hospitals . In addition,
there would need to be safeguards to put in place to prevent
private physicians from "skimming" desirable patients from the
County system to their private offices . The safeguards would
be difficult to enforce.
Brookside Hospital provided the following introductory comments on
this section:
"Brookside Hospital and the County have already demonstrated that
a successful relationship can be established that allows for the
County physicians to admit patients to our facility. By all
accounts, the Obstetrical Joint Venture between Brookside and the
County is a complete success. The County and Brookside are moving
ahead with discussions to extend the Joint .Venture to the County' s
primary care physicians. The County Physicians providing care at
Brookside are fully integrated into our medical staff.
Metiesns d�.scussed with the District. Hospitals:.;:
1 . What are the district hospitals' medical staffs prepared to agree to?
Brookside Hospital ' s written response of May 6 , 1994 :
"As with the Joint Venture relationship, the. Brookside Medical
Staff is in full support of complete integration of the
medical staff. "
Los Medanos Hospital 's written response of May 13, 1994 :
"The- directors of the hospital, elected officials, are
authorized to grant staff membership to County Physicians and .
18
grant privileges for clinical procedures for which each .
physician has. demonstrated proficiency. "
Discussion of the issue on May 6 , 1994 :
The general agreement seemed to be that this was a very
general introductory statement . which did not require a
specific answer from the district hospitals.
2. Can the district hospitals commit to providing the County's physicians
with privileges comparable to those they are privileged for at
Merrithew Memorial Hospital?
Brookside Hospital ' s written response of May 6 , 1994 :
"Privileges for practitioners are based on training (as is
with the County Hospital) , credentialing, and a proctoring
-process which is consistent with other hospitals . This
process was not a problem when the Joint Venture was
initiated. Brookside commits to expediting this process as
needed.
Los Medanos Hospital ' s written response of May: 13, 1994 :
"See # 1
Discussion of the issue on May 6, 1994 :
Dr.. Johanna Meyer-Mitchell, incoming. President of the Mt.
- Diablo Medical Staff, commented orally that Mt. Diablo would
provide privileges in keeping with the training and experience
of' each physician. Mr. Finucane requested .a list of family
practitioners and the range of privileges each has at Mt.
Diablo and Brookside Hospitals . Mr. Finucane noted that 70%
.of . ,,Merrithew Memorial Hospitals ' s staff are family
practitioners, whereas the percentage at the district
hospitals. was more, like 70% specialists and 30% family
practitioners
Supervisor: Powers asked whether we were pursuing a family
practice model where' the County' s family practice physicians
19
admitted patients to Mt. Diablo or Brookside and followed them
in the hospital or whether we were considering a more
traditional medical specialist model, such as is generally.
practiced at. district and private hospitals currently.
3 . How .will the district hospitals deal with the situation where they are
asked to provide the County's physicians with a scope of privileges
that the medical staff has historically been unwilling to grant to its
own physicians (i.e. , surgical obstetrical privileges being granted to
family practice physicians) ?
Brookside Hospital ' s written response of May 6 , 1994 :
"Brookside also commits to quickly resolve any issues that may
arise. "
Los Medanos Hospital ' s written response of May 13, 1994 :
"See # 1"
4 . What "buy-in" can the administrators and .boards of the district
hospitals guarantee on behalf of their medical staffs?
Mt Diablo Medical Center's written response of May 6 , 1994 :
"The Board of ..Directors is ultimately responsible for the
governance and oversight of the Medical Center. If a
commitment is made by the Board, they would use their
influence and authority to gain "buy-in" . "
Brookside Hospital ' s written response of May 6 . 1994 :
"Brookside, through its actions and previous commitments,
through .its Joint Conference Committee and Medical Executive
Committee, has and is fully supportive of full integration of
medical staff. "
Los Medanos Hospital ' s written response of May 13, 1994 :
"See # 1"
5. How can we jointly overcome the attitude of some private physicians who
have indicated at least privately that they fully support a County
Hospital to care for County patients?
20
Mt.- Diablo Medical Center's written response of May 6 , 1994 :
"This is a difficult and sensitive issue and we are committed
to work with the County to create a communications plan to
overcome this mindset since the greater good of the community
is at stake. We also need to accept and acknowledge that any
decision that is made will not have unanimous community
support. "
Brookside Hospital ' s written response of May 6 , 1994 :
"The "attitude" - as referenced in the County' s issue paper,
implies that there will be significant problems.. The Joint
Venture underway at Brookside has demonstrated that this
implied "attitude" is either non-existent or can be quickly
overcome.. "
Los Medanos Hospital ' s written response of May 13, 1994 :
"A majority of our medical staff believe that rebuilding
Merrithew Hospital is , not needed, and that all low income
residents of the District are best . cared for in our hospital .
Those in disagreement will not be permitted to overturn the
policy we have set forth in answer to # 1 . "
Discussion of the -issue on May 6 .1994 :
The CEO of Mt. Diablo Medical Center indicated that perhaps
20% to 30% of the physicians at Mt. Diablo shared this
opinion. There seemed to be general agreement that this
attitude was a problem on some level at the district hospitals
and would have to be addressed, although it would never be
possible to convince all of the physicians that having "County,
doctors" admitting "County patients" to district hospitals was
a good idea.
6 . Do the district hospitals understand that the only way they can become.
qualified for a disproportionate share payment similar to what the
County has been receiving is to admit sufficient Medi-Cal and indigent
patients to qualify as a disproportionate share facility and that this
21
may require establishing a track record which may cost the district
hospitals some money in the meantime?
Mt. Diablo Medical Center' s written response of May 6 , 1994 :
"Yes . "
Brookside Hospital ' s written response of May 6, 1994 :
"Brookside already serves a disproportionate share of non-
subsidized patient populations. It is Brookside' s mission to
serve and be available to all of the residents of West County.
The Hospital completely understands the commitments and the
risks of providing services to a disproportionate share of
Medi-Cal and medically needy people. "
Los Medanos Hospital ' s written response of May 13, 1994 :
"We do not accept this premise. . We believe that under the
Governor's strategic plan, and the County initiative that the
state will, under capitation, financing in an expanded County
HMO, reimburse our hospital at an equivalent rate to that now
paid to the County Hospital. This rate is sufficient to meet
our estimated costs for hospital based services . "
Discussion of the issue on May 6, 1994 :
In the discussion of this issue, Mike Wall noted that the
presumed model is that the County will continue to employ its
physicians as County employees and that they will simply admit
patients to Mt. Diablo and the other district hospitals . Mt.
Diablo at least is, however, willing to consider the other
model where Mt. Diablo's medical staff would do all of the
admitting and inpatient work. In this case, Mt. Diablo would
want to have the $13.2 million in property tax money which is
going into Merrithew Memorial Hospital so that it could
properly compensate physicians to care for the County' s
patients. Mr. Wall also agreed with the conclusion of County
staff that it is unlikely that Mt. Diablo would ever qualify
for a Medi-Cal disproportionate share payment. Mr. Wall also
noted, in regard to the potential loss of $16 . 1 million in
disproportionate share payments from the Federal government to
22
this County, that this loss was not a major problem since the
funds could be used to advantage in other jurisdictions .
John Wolfe from the Contra Costa Taxpayers ' Association
suggested we -pursue- federal legislation to exempt Contra Costa
County from the Current disproportionate share rules and allow
the disproportionate share dollars to follow the patient to
another facility.
Dr. Paul O'Rourke suggested that disproportionate share
funding will probably only continue for a couple of more
years, to be replaced by national health reform. He also
questioned whether patient fees should be on a fee-for-service
and cost reimbursement basis or on a prepayment basis.
Discussion of the issue on May 13 , 1994 :
Brookside Hospital 's representatives asked .for a list of
family practitioners and what privileges they have at .
Merrithew Memorial Hospital. Mr. Finucane noted that a letter
had been sent from the President of the Merrithew Hospital
medical staff to his counterparts on the medical staffs of Mt.
Diablo and Brookside Hospitals, including a list of privileges
family practitioners might have at Merrithew, and asking which
of these privileges family practitioners at the district
hospitals have currently and how many family practitioners
have each privilege.
Discussion of the issue on -May 19, 1994 :
Dr. Tremain summarized the questions he had raised with the
medical staffs of the three district hospitals. Each hospital
had its responses present. The responses were shared in
writing with the entire group and a representative from each
hospital reviewed the responses . [See Attachment # 15 for a
letter and attachments from Dr. Tremain to the Chiefs of Staff
of the three district hospitals, providing the district
hospitals with the list of privileges held by family practice
physicians at Merrithew Memorial Hospital and asking what
privileges these physicians would receive at each of the
23
district hospitals: Also attached is a summary, of the
privileging process at Merrithew Memorial Hospital] .
[See Attachment # 16 for a letter from the Chief of Staff at
'Los Medanos Community Hospital responding to questions raised
regarding how many of their family practice physicians have
various privileges ] .
[See Attachment # 17 for a letter from the Chief of Staff at
Brookside Hospital responding to questions raised regarding
how many of their family practice physicians have various
privileges] .
[See Attachment # 18 letter from the President-Elect of the
Medical Staff at Mt. Diablo Medical Center responding to
questions raised regarding how many of their family practice
physicians have various privileges] .
Each of the district hospitals seemed to admit that there had
been problems of differing severities at the hospitals, but
that attitudes were changing and that it was hoped that family
practice physicians would now find a more. receptive audience
at the district ,hospitals .
Supervisor DeSaulnier asked that staff include in their report
to the Board of Supervisors a statement regarding - how the
County would deal with an integration of staff, as we had
asked the district hospitals to do.
Supervisor Powers asked that the report also include short-
term issues and problems .
There seemed to be a general feeling that attitudes were
changing and that it might actually be possible for County.
family practice physicians to get most privileges they have at
Merrithew Memorial Hospital, although Dr. Kate Bennett noted
the struggle she had been engaged in for five years to get
adequate privileges for family practice physicians .
24
Discussion = Medical Staff Integration and Credentials :
Dr. Sharon Hiner, Director of- the Quality Management Department of
Merrithew Memorial Hospital, has written to the Executive Director
Of Merrithew Memorial -Hospital and.. Clinics as follows :'
. "'One of the early principles that was recognized during
a meeting with medical staff members were concerns that
the negotiators are, in fact, not negotiating with
medical staffs, of respective hospitals. District boards
and CEOs Might promise to deliver on medical staff issues
;but be unable to affect change due to their limited scope
of power over the medical staff-. . Though according to
California State. ; Law the Board of Directors may have
ability to negotiate these matters, it's likely that this
power would'be limited to paper only and it would be very
unlikely that they would be able to negotiate for the
medical staffs or enforce any parts of the contract which
may be related to medical staff issues or bylaws. Should
these type of issues come up, the' -finer points need to be
clarified in the negotiations. "
[See Attachment # 191
Also attached are a letter- from the T. Rich McNabb, M.D. , Residency
Program Director 'at Merrithew Memorial Hospital ' to Dr. Tremain
regarding the future ,of the residency program at Merrithew Memorial
Hospital in case Merrithew Memorial Hospital were to close [See
F Attachment # '20] and a letter from the Director, Division of
Education, American Academy of Family Physicians to the Board of
Supervisors, supporting the County' s Family Practice Residency
Program. [See Attachment, # 21]
The medical staff of the District Hospitals have come forward with
a statement that -they are willing to grant Merrithew Memorial
Hospital physicians essentially the same privileges in the district
hospitals that they enjoy at Merrithew memorial Hospital. However,
this can only be a statement of intent. Neither the governing
bodies not the medical staffs can commit that each and every
Merrithew Memorial Hospital ,physician would be granted equivalent
privileges . The granting -of medical staff privileges must be by
25
JCAHO regulations and must occur for each and every physician on an
individual basis . Since there is no way to assure such
credentialing,. our physicians may not receive all privileges
equivalent to . what they hold at Merrithew. -Failure to receive
these privileges would jeopardize the. County' s financial position
regarding its legal responsibilities under Welfare and Institutions
Code S 17000 and may jeopardize patient care.
Staff Recommendations :
21 . ACKNOWLEDGE the problems which have existed in the recent.
past, and which in some cases stillexist today, for family
practice physicians to obtain privileges at district
hospitals, particular for family practice physicians from
Merrithew Memorial Hospital, who are generally used to a
broader pattern of privileges than they tend to be granted at
district hospitals .
22 . ACKNOWLEDGE that restricting privileges, for family practice
physicians at district hospitals. under 'the scenario proposed'
by Mt. Diablo Medical Center ..where the County's physicians
would admit,''patients to the district .hospitals and follow them
as in would tend to require increased use of
.specialists and drive up the . cost of medical care to indigents
for the County.
23 . ACKNOWLEDGE that Merrithew Memorial Hospital operates on a
ratio of about 70V family practice physicians to about 30%
specialists, roughly the opposite of what exists in the
private. sector and district hospitals and that, it is important
for the system of medicine practiced at Merrithew Memorial
Hospital- for this general ratio to be maintained, even if
Merrithew Memorial Hospital is closed and all County patients
are admitted to• district hospitals in- the future.
24 . ACKNOWLEDGE the hard work of many family practice physicians,
including Dr. Kate Bennett and Dr. Ravinder Hundal of
Merrithew Memorial Hospital, in pressing for broader
privileges for family practice physicians .
25 . ACKNOWLEDGE that the medical staffs of the district hospitals
appear to be willing to begin to shift their thinking about
the whole -subject ofprivileges for family. practice
26
}
physicians, a6 issue which has troubled private sector family
practice physicians as well as County-employed family practice
physicians and EXPRESS, the Board of Supervisors ' appreciation
for this apparent shift in the position of. the medical staffs .
26 . EXPRESS the ,Board' s appreciation to the staffs of Merrithew
Memorial Hospital, Mt. Diablo Medical Center, Brookside
Hospital, and Los Medanos Community, Hospital.., for their
cooperation, candor and responsiveness to the issues which are
discussed in this Report.
27 . . RECOGNIZE the substantial movement which has been made,
particularly by the medical , staff of Mt. Diablo Medical
Center, in reviewing its entire policy toward the
credentialing of family practice physicians, ..which appears to
make it possible for many of Merrithew Memorial Hospital ' s
family practice physicians to apply for and obtain privileges
at Mt. Diablo Medical Center. which are substantially
equivalent to those they hold at Merrithew Memorial Hospital .
27
.2 . PATIENT CARE ISSUES
The County' s Health Services Department has a well-.deserved
reputation for, caring for any and all patients, who can not receive
care elsewhere, whether medically. indigent, jail patient,. Medi-Cal,
Medicare,Ior privately insured and regardless of diagnosis,
including specialized geriatric patients, HIV/AIDS patients,
mentally ill patients, dual diagnosis (mental health and drug or
alcohol) patients, . non-compliant tuberculosis patients, perinatal
substance abuse patients, homeless persons and any others in need . .
of care. While the County is not legally or financially
responsible for some of these patients, in order to insure that
there is not an adverse impact on the poor in this County; the
County must insist that its physicians be guaranteed the right to
admit :to all of the district hospitals any patient whose..physical
or psychiatric condition requires acute hospitalization, if. the
County is not going to have its own inpatient facility available
for these patients.. Again, it .is essential to distinguish the
County':s legal and financial obligations from its moral commitment
to the members of the broader community who are in need of acute
hospitalization and have historically been unable to obtain care
from other than the County Hospital and Clinics .
Los Medanos Hospital provided the following general response to
this issue on May 13, . 1994 :
"Again, we. take strong exception to this statement.
"Our hospital, in collaboration with the county, is fully .prepared
to end both the segregation of patients based on their diagnosis,
or their enforced centralization away from care in the community in
which they live.
"All scientific data indicates, clearly that community-based
services, both ambulatory and in-patient, bring better outcomes at
lower cost.
"The district hospital .is fully prepared to develop, without delay,
hospital based services without regard-to diagnosis . "
est e d eeu sed ;;with: ;t a ri. t; Ht s ,eta s
28
1 . Are the medical staffs of the district hospitals prepared to guarantee
in writing that they will care for all indigent patients, jail
patients, HIV/AIDS patients, acute psychiatric patients, dual diagnosis
patients, homeless patients; non-compliant tuberculosis patients,
perinatal substance abuse patients, and all other individuals who seek
and are in need of medical care?
Brookside Hospital ' s written response of May 6 , 1994:
. "Brookside Hospital has also a well-deserved reputation for
caring for all patients from the West County. The Hospital
and its medical staff already care for most of the types of
patient population described. The Hospital has already stated
that it quite willing to integrate the County physicians
into its medical staff. "
Discussion of the issue on May 13 ,1994 :
There was a general agreement that this issue was so closely
tied to the issue of the integration of the. medical staffs
that further discussion should await resolution of that
question.
2 . If not, are the medical staffs of the district, hospitals.prepared to
guarantee in writing that they willppexmit County physicians caring for
these patients to:,admit them to the district hospitals and care for .
them in the district hospitals?
Brookside Hospital ' s written resbonse of May 6 , 1994 :
"The mission of the Hospital continues to be to serve all
patients from the, West County District. "
Discussion of the issue on May 13, 1994 :
There'was a general agreement that this issue was so closely
tied to the, issue of the integration of the medical staffs
that further discussion' should await `,resolution of that .
question,
In addition, Mr. Tripp ,suggested that the resolution of this
issue depended on.. the matrix you assume for the. district
29
hospitals. Brookside assumes that the County's physicians are
caring for the patients that are in the district hospitals .
Mr. Finucane suggested that this was where the issue of money
would enter the equation again. With .the disappearance of. the
disproportionate share funding on which the County's depends,
continuing to provide inpatient medical services in the
district hospitals may be difficult.
Donna! Gerber asked whether there really is a Los Medanos
Hospital to be talking .about and whether there is a' medical
staff for Los Medanos . , Dr. . Clarke replied that technically,
there -was" not a hospital or a medical staff: However, he
noted that the same physicians are still practicing in East
County and that when Los Medanos is reopened, the doctors will
still be . there' and can reform a medical staff . Ms . Gerber
asked what was meant by serving all of the Medi-Cal and
Medicare patients since that does not happen now. She shared
the story of a mother who tried to get care for her baby at
the Mt. Diablo emergency room and was told that she could not
be seen there and would have to go to the County outpatient
clinic on Port Chicago Highway. She asked what was going to
change in' the future. Dr. Kevin Degnan suggested that this
could. happen ' now because the district hospitals do not now
have a contract with the County to care for these patients .
Phil Bertenthal, on behalf of the Legal Services Foundation
asked about a guarantee of access to. care for Welfare &
. Institutions Code § 17000 clients . He noted, that he
understands there are perhaps 14,000 separate individuals
covered, by these "indigent" . requirements. In, addition, he
indicated that he saw nothing in. the responses to these
questions that guaranteed access for Medi-Cal - patients.. In
response, Dr. O'Rourke indicated that Los Medanos was willing
to accept all patients . The Los Medanos Hospital Board of
Directors would control this by the granting of privileges.
Evelyn Rinzler from the Legal Services Foundation noted that
in working with Medi-Cal and Medicare recipients on patient
care and access issues for 11 years, she had never had a
complaint about the quality of care that is provided at
Merrithew Memorial Hospital. She noted that Legal Services is
concerned about the manner in which minorities are treated.
30
i'
She indicated that Merrithew Memorial Hospital does an
excellent job of being culturally sensitive and being able to
communicate with a patient in the. patient' s primary language.
[See Attachment # 22 for confirmation of the Legal Services
Foundation's concerns about patient access . ]
Discussion - Patient Care Issues :
It is clearly important in serving the medical needs of the low
income and indigent to insure that adequate support services are
available, including translation services, transportation services
and financial counselors, and that the entire staff is trained and
prepared to approach their jobs with a recognition of the need for
cultural sensitivity, an attitude. of helpfulness and a commitment
to deliver the highest possible quality of medical care to each
individual, without regard to the patient's economic status. It is
also important. to insure that low income and indigent patients,
receive a ual . access to medical care - not separate but equal
access ."
The- CEO of the Mt. Diablo. Medical Center indicated that perhaps 20%
,. to 30% of private doctors on staff at Mt. Diablo Medical Center may
not agree with taking County patients .
For the first half of 1993, 6 .5% of the, discharges from Mt. Diablo
Medical Center were Medi-Cal patients, whereas 34 . 3% of the
discharges from Brookside Hospital were Medi-Cal patients . By.
contrast, 53.8% of the discharges from Merrithew Memorial Hospital
were Medi-Cal patients . [See page 4 of Attachment # 23]
These differences- are more than just cold, , sterile numbers . It is
anticipated that there would be a significant transition process
involved for -the district hospital board members, administration,
medical staff and support staff to increase their service to Medi-
Cal and indigent patients enough to meet the County' s obligations
and insure that all Medi-Cal patients in need of care receive that
care.
The responses to the questions posed by the County and the data
which is available make 'it clearly evident that Brookside Hospital
is different from Mt. Diablo Medical Center in terms of its
31
background. and experience in treating Medi-Cal patients and the
indigent. This is borne out most recently by the fact that
Merrithew Memorial Hospital and Brookside Hospital are in the
process of concluding negotiations , on a letter of intent' to expand
the relationship between Brookside Hospital and Merrithew Memorial.
Hospital which has been so success for the past three years.
Staff Recommendations :
28 : ACKNOWLEDGE that there has beena problem in the past with the
level of Medi-Cal and indigent patients who have been served
by the district hospitals. This' is, of course, not so much a
problem caused by the hospitals themselves as by the. private
sector physicians, to the extent that physicians have chosen
not to serve Medi-Cal ,patients because of the level of
reimbursemene .they receive.
29 . ACKNOWLEDGE that it is possible for the County and the
di'st_rict hospitals to negotiate most of these issues as has,
been done successfully at Brookside Hospital .
30 . Also ACKNOWLEDGE that there has been an apparent turnaround in
the attitude of the medical staff at Mt. Diablo which has been
more fully explored in, Critical Issue # 1 and that the Board
of Supervisors , hopes that this will result in a permanent
change .,in the willingness of physicians at Mt. Diablo Medical
Center to treat Medi-Cal -patients .
31 . CONCLUDE that it is necessary to maintain a continuum of
professions and services in order to. insure quality patient
care for those patients for whom the County is responsible.
AGREE that many. parts of this •continuum are in , place at
Brookside Hospital . NOTE that there appears to be a sincere
interest at. Mt. Diablo Medical Center to insure that such a
continuum is implemented there in- the near future.
J
32
3 DEFINITION OF PATIENTS FOR WHOM THE COUNTY IS RESPONSIBLE
It is absolutely essential that all parties understand that when
the County-uses the term "provider of last resort" in relation to
the County' s statutory responsibilities, this term is used. in a
very limited . sense. It includes the "medically indigent" as
defined in State law, patients who are incarcerated, acute
psychiatric patients,, and other, specific groups for whom the County
is statutorily obligated to provide health care. The County.1 s not
legally required to provide health care to Medi-dal and Medicare
patients who, at least theoretically, have access to private sector
medical care and can seek treatment and care from any physician
willing to' see. them. The County has provided care for Medi-Cal and
Medicare patients in. its inpatient facility because some of them
either voluntarily chose to use the County' s facilities or were
unable to obtain -care' from private physicians in the community. In
this sense, the County has voluntarily assumed a broader "provider
of last resort" role than that which• .it is statutorily required to
assume. However, any contractual relat.ionship ,between the County
and one or more district hospitals involving funding of inpatient
care must be understood to exclude all Medi-Cal and Medicare
patients, .except as County physicians' .may have a patient who is
eligible for Medi-Cal or Medicare and needs acute hospitalization.
The County will not provide any subsidy for those patients beyond
that which the State currently, pays . . In these cases, the district
hospital will be expected to bill Medi-Cal or Medicare and be
reimbursed as they. are .today for any other Medi-Cal or Medicare
patient that is, admitted to their facility. . Whatever , funds the
County has avai`lable .to purchase -inpatient health care will be
dedicated. to the indigent and others for whom the County is
. .statutorily obligated to provide care. ,
Brookside Hospital provided the following written response to what
is now Critical Issue # 3 on May 6 ,1994 :
"It is clear to Brookside 'Hospital that the term 'provider ,of last
resort' in relation to the County'.,s statutory responsibilities is
limited to. a small group. of specific categories of patients now
being served by the County. The Hospital understands that
Medicare,, Medi-Cal, and other similarly sponsored patients are
excluded from " the County' s statutory requirements . As is' the
33
situation today, Brookside does not expect a subsidy for these
patients that .are the responsibility .of other government entities . "
Los Medanos Hospital provided the following general response to
this issue on May 13, 19.94 :
"We take strong exception to this extra statement. for these
reasons :
"The County is, . in fact, required by law to provide service to both
medical eligibles ., and 'crossover' medical eligibles who either,
• elect to use County, facilities or who can not find access to
private physician providers .in their own communities .
"The heart of the - district proposal is the desirability and
feasibility ' of integrating these eligibles as well as County
indigents into a prepared [sic] capitated health plan with access
to community-based. primary and hospital based services .
"Their integration via a democratically governed and publicly
operated County Plan will increase the . participation of private
physicians in the plan, and, with fair capitation derived
reimbursement, . wil1 overcome the disinclination to use the fee
based, low reimbursement system which now prevails.
"We are now convinced that the expansion into district hospitals
and amongst private community practitioners, is the best pathway , to
integration of both medical staffs and the low income persons
residing in this ..district. "
' t ns curse l ; r t1 t . st.r kc Ha p to s:
1 . Do the district hospitals understand that the County does not now
control where Medi-Cal 'and Medicare patients seek their medical care
and that, in the absence of a County Hospital, many will necessarily
seek care from the district hospitals and their medical staffs?-
Discussion of the issue on May 13, 1994 :
Representatives from both Brookside Hospital and Mt. Diablo
Medical Center indicated that they understood and will care
for these patients .
34 '
2 . Do the district hospitals understand and agree' that the County will not
subsidize Medi-Cal rates for Medi-Cal ` patients :,and that private
physicians will have to care for and admit all Medi=Cal patients who
seek care and treatment from them?
Discussion of the issue on May 13 1994 :
The representative from Brookside indicated that a complete
answer to this questions requires clarification of medical •
staff privileges, . but that in this context they understand.
Ori behalf of Mt. Diablo Medical Center, Ms . Chenoweth
indicated that they also understand.
Supervisor Powers indicated that in West County there are few
physicians willing to accept Medi-Cal patients . He posed the
question about how we would be able' to get more physicians to
accept Medi-Cal patients. Ms . Chenoweth suggested. that a
response wait until next week' s discussion on medical staff
privileges since the °medical staffs are working through these
issues . Brookside' s representatives indicated that they
understand.
on behalf of Los Medanos, Dr. Clarke admitted that the reason
this has not happened in the past is a very complex issue.
Los Medanos .is. seeking a capitated system. He agreed that we
need to get into .this issue, but need to bring the private
physicians into the discussion. He suggested that this is
often a financial issue:
Dr. Paul O'Rourke, speaking on behalf of - Los Medanos
Hospital 's Board, indicated that Los Medanos is presuming that
the CCHP is willing to use private physicians and others in a
prepaid plan. Capitation becomes the method of reimbursement,
not'. fee-for-service. If that were to, happen, we would have
more physicians in the CCHP.
Mr. Finucane indicated that the County is working on a matrix
which should be completed.- very soon. and will be shared with
the medical staffs and others .
'35
3 . Are the district hospitals and their medical staffs prepared to commit
in writing to care for and admit all Medi-Cal and Medicare patients?
[See also requirements in Health & Safety Code S 1442.5 quoted above] .
Mt Diablo Medical Center's -written response of May 6, 1994 to
this and the two .preceding questions : .
"The Districts do understand that the county does not control
the choice , of provider selection of Medi-Cal and Medicare
beneficiaries, although that choice is heavily influenced by
the County Health System. The proposal to the County was
based upon these patients receiving care at the district
hospitals . The district hospitals are not asking for a
subsidy earmarked for the care of Medi-Cal and Medicare
patients .-
"The
atients :"The district hospitals would grant normal privileges to the
County physicians and would arrange for any needed. physician
coverage beyond this . The hospitals would enter into a
contractual arrangement for the County which would stipulate
that the acute inpatient and emergency care of these patients,
both professional and technical would be provided and arranged
for.
Brookside ' Hosiital' s written response of May 6 1994 :
"The Hospital and its medical staff are prepared .to care for
the patients now being served by the County. "
4 . If not, are the district hospitals suggesting that the County keep its
own medical staff intact' to treat and admit all patients who have
"traditionally been considered "County" patients?
Mt ' Diablo Medical Center's written response of May 6 . 1994 :
" (see above,,answer) " [to question # 3]
5 . Do the district hospitals understand that through the disproportionate
share funding the County subsidizes inpatient physician reimbursements.
fif this funding source is not available, we cannot provide this subsidy
and may lose all of our inpatient medical staff.
Mt Diablo Medical Center's written response of May 6 , 1994 :
36
"Yes .
Brookside Hospital ' s written response of May 6 , 1994 :
"Brookside already serves a disproportionate share of non-
subsidized patient populations. It is Brookside' s mission to
serve and be available to all of the residents of West County.
The Hospital completely understands the.. commitments and the
risks of providing services to a disproportionate share of
Medi-Cal and medically needy people. "
Los Medanos Hospital 's written response of May 13 . 1994 :
"We believe that without rebuilding Merrithew, ; that , all
funding assistance, with the exception of capital costs,
subsidies from State and Federal government can follow
eligible County Hospital caseloads into District Hospitals .
We are not asking, in our . alternative, for any capital
assistance in return for providing hospital based services to
anyone, eligible for State, and Federal Assistance.
"Also, we are fully prepared to finance hospital care costs
for eligibles on a risk basis, assuming prepaid capitation
financial method now in use under the County' s prepaid health
plan. "
Discussion of the issue on May 6 , 1994 :
County staff indicated that the County will receive some $16 . 1
million in disproportionate share funding during the 1993-94
fiscal year. This funding will be lost to the County if
Merrithew Memorial Hospital is closed since these payments are
based. on the .number of indigent, Medi-Cal and Medicare
patients seen in the hospital . Brookside does qualify for a
Medicare disproportionate share payment, but not for a Medi
Cal disproportionate share payment. It is possible that
Brookside would. qualify for a Medi-Cal disproportionate share
payment if sufficient additional Medi-Cal and indigent
patients were admitted, although it is unlikely their payment
would be nearly_ as . high as Merrithew Memorial Hospital ' s
payments . It was generally conceded by those present,
37
'including the CEO of Mt. Diablo Medical Center that Mt. Diablo
Medical Center probably: ' would not qualify for a
disproportionate share payment under any likely scenario.
The CEO' of Mt. Diablo Medical Center indicated that he had no
particular problem with the loss of $16 . 1 million in
disproportionate share funding since this-money would simply
be available to another. facility in another area of the state.
or country.
[See Attachment # 24 for more details. on the formula for the
disproportionate share payments and which hospitals currently
qualify for these payments. ]
Contra. Costa County currently provides only $13 .2 million in
County General Fund subsidy to, the inpatient hospital
operation at Merrithew Memorial Hospital . Therefore, this is
the absolute maximum amount'which is available for contracting
with the district hospitals for the care of - indigents,
including those with no other form of insurance, jail
patients, acute psychiatric patients and 'others who are the
statutory responsibility of the County.
Discussion of the issue on May 13, 1994 :
As a general response to this issue, Dr. O'Rourke indicated .
that Los Medanos wants to" be a part of the solution. They
want to integrate patients and medical staffs . Then it will
be, unnecessary to make a distinction between County and
district hospital patients or "physicians .
Discussion - Definition of Patients for Whom the. County is
Responsible:
If the disproportionate share payment -is lost, a number of
questions 'are raised about how the County and/or district hospitals
would be able to "continue to subsidize payments to physicians
providing inpatient care of Medi-Cal and Medicare patients. If the
County continues to -have its physicians .provide inpatient care in
the district hospitals, these funds would not be available to make
it possible for "physicians to follow Medi-Cal and Medicare
patients . . If the district hospitals provide inpatient physician
38
services, there would be no revenue available from the County to
supplement the Medi-Cal and Medicare rates .
It is clear 'the loss of $16 . 1 million to the County ;_would be a
major blow . in terms of the available funding for health care
services in the County,. - ' Thereis general agreement that Mt. Diablo
Medical Center is not going to qualify for a disproportionate share
payment even if were taking more of. the County' s patients — It is
possible that Brookside will receive some disproportionate share-
funding in the future. However, from the County's point of view,
if Merrithew Memorial Hospital closes, all of the supplemental
funding the County. has been receiving will also be gone. If one
estimates that the ongoing disproportionate share funding to the
County would be $13 million annually, then over the course of 30
years, a total . of $390 million would have been lost in terms of
available funding for patient care in this County.
While we appreciate the commitment of the district hospital 's
boards of directors -.and administrators to care for. all Medi-Cal and
Medicare patients, Dr. Hiner's memorandum [Attachment # 19 ]
continues to raise the very practical question about whether any
board of directors or, administrator can force ,a physician to
provide care to a Medi-Cal or Medicare patient if the physician
chooses not to do so. After all, the district hospital ' s promises
to care for all patients are not of much assistance if no private
physician is willing to admit and care for the patients and if the
County no longer has the disproportionate share funds .available to
retain its own physicians .
It is clear that the' ultimate answer to these issues rests with the
. successful resolution 'of the medical staff integration and
credentialing issues which have been discussed under Critical Issue
# 1 . However, even a successful resolution of those issues does
not necessarily resolve the medical procedure cost issues outlined
in Dr. Hiner's. memorandum, particularly when under the , private
sector scenario costs will being going up and-revenue will be going
down.
Staff Recommendations :
39
32 . ACKNOWLEDGE that there appears to be complete agreement on the
part of the County and the district hospitals that the- County
is only willing to subsidize the cost of the care provided to
. ..patients who are legally the County' s responsibility and that
this does not include Medi-Cal and. Medicare patients.
33 : ACKNOWLEDGE that the closure of Merrithew Memorial Hospital
will result in the removal of all disproportionate share
funding,. or its eventual successor, from the County' s medical
caresystem without- necessarily having reduced or eliminated
any ,of the costs of providing that care. This will present a
significant challenge to all parties in terms of trying to
continue , to provide the same level of service with
substantially fewer dollars.
34 . ACKNOWLEDGE that the County will receive $16 . 1 million in
disproportionate share funding in the 1993-94 fiscal year. If
even- $l.3 million were lost each year for 30 years, more than
'/3. of .a billion dollars will have been eliminated from the
revenue stream supporting health care in this County.
35 . ACKNOWLEDGE that, with' the loss of the disproportionate share
funding, the Health Services Department staff believe that the
County will. likely be unable to financially support the level
of patient ,care which is provided currently, resulting in the
loss of some physician support and that, therefore, there will
be an adverse impact on those patients for whom the County is
responsible.
36 . In view of the fact that the County will lose millions of
dollars annually (and '/3 of a billion dollars over 30 years)
with the loss of the disproportionate share funding and that
this will inevitably lead to a reduction in the quality of
care which is available to the County' s patients, DETERMINE
whether it seems prudent to abandon the partial replacement
project for Merrithew Memorial Hospital and, instead, contract
with the district hospitals .
40
4.- ABILITY TO DEPEND ON THE' EXISTENCE OF THE DISTRICT HOSPITALS
If the County abandons its plans for a partial replacement of the
County Hospital, Merrithew Memorial Hospital will face imminent
closure. Merrithew Memorial. Hospital in its present condition has
been determined out of compliance with a number of California and
federal regulations by the State Department of Health Services and
has been allowed to stay open .only with the understanding that the
partial replacement project was moving ahead. Once the 'County
: 'closes the `existing County Hospital, it will never be able to
reopen it as an acute hospital and will have to depend totally on
the district hospitals to meet its legal obligations to provide
care to the medically indigent and others for whom only the County
is obligated to. provide care. , '
The recent closure of Los Medanos Community Hospital raises the
issue of the long- term .financial health of the other two district
hospitals and the extent to which the County will be able to depend
on them financially and physically as a resource in which to .carry
out the County' s legal responsibility in the future. This is
related- to ' the governance . issue and points to the need - for the
County to have a significant role in governing the district
hospitals in order to insure that the County' s essential interests
are protected. While it is unfortunate for the entire community
that Los Medanos' Community Hospital had to close, Los Medanos
Hospital had no legal obligation to serve any element of the
community and could, therefore, make a decision to close its doors
basedsolely on business reasons. In the future, if the County had
to depend on Brookside Hospital and. Mt. Diablo Medical Center to
meet the County' s legal obligations, the County would be hard
pressed if either. facility closed and certainly could not be in a'
position where either facility made the decision to close its doors
without the concurrence of the County. Therefore., the County would
have to be An - a position .to -determine whether either of these
facilities should be allowed to close.
Los Medanos Hospital provided the following general response to
this issue on May 13, 1994 :
"We are convinced that the future viability of our tax supported
public institution can only be assured, if, under this alternative,
41
we are able in a capitated system of financing to provide care to
everyone . in our district who wishes to be served at,..home in our
community.
"To succeed, we must have the active, positive collaboration of
County Government and it' s [sic] prepaid plan, and put to optimum
use both the manpower and fully equipped facilities we- now possess .
"We believe that, as ,elected officials, we have an obligation to do
everything in our power to avoid the . enormous. expense. of
reconstruction of Merrithew. We are convinced that this project is
not financially feasible over the sixty year predictable life of an.
acute general purpose hospital. Once entitlement to comprehensive
benefits is conveyed by health reform, low income medi-cal [sic]
eligibles and working' poor will have freedom to choose where they
receive their care.
"That population, carrying these labels, simply will not show up as
patients in a reconstructed County Hospital . They live too far
away to use that hospital and the County HMO. The financing of .the
new- hospital is totally dependent on the future use of the hospital
by, medi.-cal [sic] , medi-care [sic] and county .indigents . "
ustvns discussed :ath. thy. Da sra gt: Hoppa tads
1 ." What assurances can .the district hospitals offer the County that they
will remain financially viable for the indefinite future, given that
both remaining district hospitals are currently running in the "red"?
.Mt. - Diablo Medical Center' s written response of May 6 , 1994 :
"Mt. Diablo has a sixty year history in' Contra Costa. It has
demonstrated sound> .' financial management has continued to
strengthen its fiscal reserves and fund balances through sound
business practices in a competitive, free market environment.
Despite experiencing swings. in volume, it has consistently
produced a bottom line and provided a high quality, of service
to its Community. . Its key programs are vital and growing in
volume. Mt. Diablo is well positioned for success in a
managed care environment. At present, Mt. Diablo' s future is
as. strong as any community hospital . "
42
Brookside Hospital ' s written response of May 6 , 1994 :
"As noted by the County, most of the patients cared for by the
County "theoretically" have access to the private hospitals .
Brookside has. taken . steps to assure its financial viability
well beyond the forty years it has been in existence. "
Discussion of the issue on May 13 , 1994 :
Brookside Hospital admitted that it lost money last year.
However, with its property tax revenue it expects to make a
profit this year. In its recovery plan it has laid the
groundwork to continue to remain a viable entity into the
future.
Mr. Finucane noted that the County has asked Mt. Diablo for
financial information on all of its subsidiary corporations .
He indicated that the County would also like to have from each
of the district hospitals all non-confidential information on
the hospital ' s Medi-Cal contract with the State [minus the
actual rates] , and any other documents involving Cal-Mortgage,
the Medi-Cal Commission or other .similar documents which would
help the County evaluate the fiscal health of the district
hospitals . . Brookside indicated it had only its Medi-Cal
contract- and was willing to share that contract, without the
actual Medi-Cal rates .
Brian Uhlir from Mt. Diablo Medical Center asked the County .to
provide Mt. Diablo with a list of what it wanted and they
would be happy to review it.
Dr. Clarke noted that Los Medanos ' s situation was obviously
somewhat different and read the above statement from Los
Medanos Hospital .
2 . What assurances can the district hospitals offer the County that they
will remain physically viable for the indefinite future, given that as
a result of the Northridge earthquake in January, numerous hospitals
were entirely closed or substantially damaged by the eartliquake and
given the age of Brookside Hospital, in particular?
43
Mt Diablo Medical Center' s written response of May 6 , 1994 :
"Mt. Diablo's core facilities include its new south wing which
was opened this year and its old south tower which was built
in the 1970 's . Under Mt. Diablo's original proposal, the bulk
of the services provided to patients would be provided in
these areas. Under the scenario of a magnitude 6 to 6 .4 quake
on the Concord fault, these facilities would probably still be
operable. Even if Brookside was not operable, there would be
capacity at Mt. Diablo to meet its existing bed needs and the
bed needs of all of the Merrithew patients . "
Brookside Hospital 's written response of May 6 . 1994 :
"The County' s concern about physical plant viability in a
disaster should be considered as part of an overall County-
wide disaster plan. It would be more appropriate to discuss
this issue in the context of a system of services distributed .
throughout the County, increasing the probability of some
plant survivals. "
Discussion of the issue on May 13, 1994:
Isabelle Chenoweth noted that the newest and next to the
newest towers at Mt. Diablo are both fully up to current
codes . In terms of the two older towers, Mt. Diablo believes
that the towers might not be usable after a major earthquake,
but that they would not "pancake" one floor on the next lower
floor. This would allow staff to get the patients out, even
if these towers could not be used in the future. Brian Uhlir
noted that the two newest towers would house all of Merrithew
Memorial Hospital ' s patients .
Supervisor DeSaulnier emphasized the importance of having the
Board of Supervisors clearly understand this issue thoroughly.
Dr. Degnan asked about the ability of Merrithew Memorial
Hospital to withstand an earthquake. County. staff noted that
A one-story building such as Merrithew ,Memorial Hospital is
normally not an issue in terms of seismic problems . Mr.
Puglisi admitted that Merrithew Memorial Hospital does not
comply with life safety codes .
44
Discussion - Ability to Depend on the Existence of the District
Hospitals •
Financial Dependability of the District Hospitals
Following a review of the audit report of Brookside Hospital for
the fiscal year ending June 30, 199,3, the County Auditor-
Controller, Kenneth J. Corcoran, concluded, as follows :
"Ernst and Young completed the most recent audit, which
covered the fiscal year ending 6/30/93. The opinion
letter of the auditors included a 'going concern'
comment. The auditors particular concern was with
recurring operational losses and non-compliance with
certain covenants of loan agreements.
"My experience is that going concern comments are very
serious matters and are. only issued after intense
scrutiny by the independent auditors. On this basis, I
also would have serious reservations about the continued
viability of Brookside Hospital. "
[See Attachment # 25]
It is interesting to note that Arthur Anderson & Co. made a similar
"going concern" finding in the audit of Los Medanos Hospital for
the fiscal year ending June 30, 1991. Less than three years later,
the corporation which operates Los Medanos Hospital has filed for
bankruptcy. [Attachment # 25]
Mr. Corcoran also noted that from his review of the past several
audits for Mt. Diablo Medical Center that the auditors for the
fiscal year ending June 30, 1993 issued an unqualified opinion.
Mr. Corcoran goes on to- conclude:
" . . .it appears Mt. Diablo is stable, has generally
experienced positive operating results and has
substantial reserves available to cushion any short term
adversities. I believe Mt. Diablo will .remain viable
. into the foreseeable future. "
45
[Attachment # 25]
Physical Dependability of the District Hospitals
In ' regard to the experiences we might learn from the Northridge
earthquake of January 17, 1994, structures built prior to the 1972
Hospital Act, which applied the precepts of the Field Act for
public schools to new .hospital construction, tended to perform
poorly. ' Within the San Fernando Valley/Northridge area, six
hospitals were either forced to close or . to reduce services . An
additional 16 hospitals in adjacent areas (Los Angeles/Santa
Monica) were also forced to close or severely curtail operations .
Twelve hospitals reported full or partial patient evacuations . Two
hospitals had not reestablished inpatient services two months
following the earthquake. [See Attachment # 26]
See also portions of reports from the State Office of Emergency
Services (OES) regarding the performance of hospitals following the
Northridge earthquake provided to the County Administrator by Ed
Bortugno, geologist for the State OES. [See Attachment # 27]
Consultants for the County who examined Brookside Hospital for
possible structural problems which would occur following a
substantial earthquake noted that the main tower of Brookside,
which contains nearly all inpatient beds, was constructed between
1954 and 1956 . The balance of the inpatient beds are in an
addition added in 1963 . They conclude as follows:.
"Based on the various ages and types of construction at
Brookside Hospital and its proximity to the Hayward
Fault, it ' is ' judged that this hospital will lose.
functionality in several of the buildings on the campus.
However, the critical functions including' Emergency Room,
Surgery, Radiology and Laboratory are located in the
newer buildings on the campus. The number of available
patient beds will be severely reduced if the Main Tower
is judged unusable due to structural damage.
[See Attachment # 28]
This conclusion is based on the following observations made by
staff from O' Brien-Kreitzberg:
46
The Brookside facility sits within 2700 feet of the Hayward fault
and is within the inundation zone identified by the East Bay
Municipal Utility District for a failure of the San Pablo Reservoir
dam.
The California Division of Mines and Geology identified the maximum
credible event of a 7 .5 magnitude earthquake for the Hayward fault
with a probability of 28% over the next 30 years .
Based upon the experience of the Northridge earthquake, the age and
location, instability of soils in the area and the- anticipated
disruption of key utilities, planners should expect hospital
services in West Contra Costa County to be significantly disrupted
or even nonexistent for some time following a 7 . 0 to 7 . 8 magnitude
earthquake on the Hayward fault.
In- Santa Monica, the eight closed hospital buildings ranged in age
from 24 to 68 years. In seven of them the damage was ,to nonductile
(nonflexible) concrete shear walls. Brookside has an irregular
structural configuration and discontinuous shear wall elements
which can lead to increased seismic damage.
In this same report from O'Brien-Kreitzberg, the following comments
are made regarding Mt. . Diablo Medical Center:
"Due to the differences in age and construction of the
various buildings at the Mt. Diablo Medical Center, it is
judged there will be some loss of function of the
hospital, most likely occurring in the oldest portions of
the campus, the C Wing and D Wing. Because these wings
are patient bed wings, it is judged there may be a
reduction in available patient beds because of a major
earthquake on a nearby fault.
The level of damage and consequent loss of function in B
Wing is difficult to predict. The building is fairly
modern but designed just before the use of the State's
hospital codes. The recent upgrade of the Central Plant
is a positive. strength in improving the ability of the
life-line utilities to withstand major earthquakes. "
47
[Attachment # 28]
This conclusion is based on the following observations made by
staff from O'Brien-Kreitzberg:
Mt. Diablo has several wings with the oldest being the 1956 Wing D
with 28 bed capacity. Wing D .is vacant .and available for overflow
use at this time. It has undergone limited upgrading to increase
the seismic life-safety but not for functionality after an
earthquake. Loss of function can be expected after a major event.
The 1963 Wing C with 58 beds is a steel frame building and is
judged to provide reasonable seismic life-safety. A cross
connection to the adjacent 1956 building may suffer sufficient
damage in an earthquake to close the building for an extended
period .of time.
The 1972 Wing B with 122 beds was designed prior to the State
hospital codes . The steel frame of the building is relatively
flexible which can allow for non-structural damage sufficient to
reduce functionality of the building spaces but not threaten life
safety.
Wing A with 65 beds was completed in 1994 and 'meets the latest
State. codes .for hospitals :
The central plant has been upgraded to current seismic codes and is
a positive strength in improving the ability of the life-line
utilities to withstand major earthquakes .
Mt. Diablo Medical Center is 0.4 miles from the Concord fault.
The County' s consultants concluded that while there may be some
relatively minor damage to Los Medanos Hospital from an earthquake,
they would not anticipate any loss of bed capacity. [Attachment #
22 ]
This conclusion is based on the following observations made by
staff from O'Brien-Kreitzberg:
All buildings on the campus were designed to meet the State of
California hospital criteria. The hospital is further away from
the major fault lines than the other district hospitals .
48
The only area of concern that was identified as a potential problem
are the two stair towers which may show signs of seismic movement
but would not represent a seismic life-safety concern nor cause a
reduction in available beds.
Also attached is a portion of an Earthquake Planning Scenario for
a magnitude 7 .5 earthquake on the Hayward fault, prepared by the
Division of Mines and Geology of the California Department of
Conservation. This study points out the danger to the eight
hospitals ( including Brookside) from a 7 .5 earthquake on the
Hayward fault. [See Attachment # 29 ]
As a further comment on the permanence of hospital districts versus
counties, County Counsel .Victor J. Westman has commented as
follows:
The .establishment and continued existence of California
counties is provided for in Article XI of the California
Constitution, which requires that the State be divided
into counties. Local hospital districts, such as Mt.
Diablo and Brookside, are created by and exist solely
pursuant to - state statutes (Health and Safety Code
sections 32000 et seq. ) which statutes may be modified or
repealed at any time by the State Legislature. . Similarly,
such hospital districts are also subject to being
dissolved, merged, reorganized, or consolidated at any
time by a local initiative of the voters pursuant to the
provisions of the Cortese-Knox Local Government
Reorganization Act of . 1985 (Government Code sections
56000 et seq. ) and the completion thereunder of LAFCO
approved proceedings.
[See Attachment # 30]
It seems clear from the comments of the County's architectural
consultants and structural engineering consultants that Brookside
Hospital, at least, will have to undergo major replacement in the
near future. If the County were contracting with Brookside for the
major portion of indigent patients in West County, it would seem
that contract would have to reflect Brookside' s long-term capital
costs. Any future construction will likely have to be financed at
49
higher interest costs than the .County was able to obtain at the
time the bonds for the partial replacement project were sold. In
addition, Brookside would not have the SB 1732 and SB 855 federal
funding available, to help offset some or all of the local costs .of
such a . capital project. It is difficult to understand how , these
capital costs would not end up costing the County more in local
County General Fund dollars than is the current partial replacement
project. The same scenario would. appear to be true for any
substantial capital costs over' the next 30, years at either of the
other two district hospitals ,
Staff Recommendations :
37 . ACKNOWLEDGE that in view of the fact that Los Medanos
Community Hospital 's auditors issued a "going concern" finding
in . 1991 and three years later Los Medanos Community Hospital
filed for bankruptcy, questions might well be raised about the
,long-term financial stability of Brookside Hospital, which
received a "going concern" finding in 1993 .,
38 . ACKNOWLEDGE ' that the comments made by the Auditor-Controller
are disturbing, and that the County' s- ability to depend on
Brookside Hospital as a - substitute for Merrithew Memorial
Hospital over the long-term may be more problematic.
39 . ACKNOWLEDGE that if Brookside Hospital were to follow Los
Medanos into bankruptcy 'and be forced to close, and if the
County had in the meantime closed Merrithew Memorial Hospital,
relying on Brookside to provide care to the indigents in West
County, the Board of Supervisors could well be left with few,
if any, alternative means of meeting its statutory
responsibilities to care for the indigent in West County. ,
40 . ACKNOWLEDGE that Mt. Diablo Medical Center appears to be in
-sufficiently strong. financial. condition that the County may be
able to rely on the future availability of Mt. Diablo Medical
Center , as a resource for meeting its statutory
responsibilities to the indigent in -Central County.
41 . CONCLUDE that, based on the professiorial conclusions of the,,
architects, geologists and structural engineers consulted by
the County staff, hospitals which were constructed prior to
50
1972 and have not undergone substantial seismic retrofitting
are at considerable risk in case of an earthquake.
42 . ACKNOWLEDGE that, based on the above conclusion, in case of a
substantial earthquake on the Hayward fault it is likely. that
most, if not all, patient rooms at Brookside Hospital would be
unusable, even though the Emergency Room, Surgery, Radiology
and Laboratory services might remain available.
. 43 . CONCLUDE that, in case of a substantial earthquake impacting
Central County, the older wings of Mt. Diablo Medical Center
(Buildings "C" and "D" ) may be unusable, seven though they may
not "pancake" and that the damage to Building "B" is difficult
to predict on the basis of the survey which has been
conducted.
44 . ACKNOWLEDGE that Brookside Hospital, at least, will have to
undergo major replacement in the near future and that if the
County were contracting with Brookside for the major portion
of indigent . patients in West County, it would seem that
contract would have to reflect Brookside' s long-term capital
costs .
45 . ACKNOWLEDGE further, that any future construction by Brookside
Hospital will likely have to be financed at higher interest
costs than the County was able to obtain at the time the bonds
for the partial replacement project were sold and that, in
addition, Brookside would not have the SB 1732 and SB 855
funding available to help offset . some or all of the local
costs of such a capital project.
46 . CONCLUDE that there is substantial evidence that the County
may not be able to depend on Brookside over the long-term as
a viable inpatient resource.
.47 . In light of the above conclusions and comments regarding the
County's ability, to depend on the district hospitals both
financially and physically, EXPRESS the Board' s concern about
the ability of Brookside Hospital to care for the County' s
patients over the long term, NOTING that it would not be
51
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5 . GOVERNANCE
In entering into any contractual relationship with one or more
district hospitals, the County is not simply another payor
source. Because of its statutory responsibilities as the
provider of last resort for the medically indigent in this
County, the County must have a role in governing any hospital
into which its patients are admitted in order to insure access
and long-term cost stability. This issue can be resolved in a
variety of ways, but it must be resolved in a way which allows
, the County to insure that it will be able to continue to meet its
statutory responsibilities, even if it does not directly operate
its .own inpatient facility.
In addition, the County must have control in case there are
future changes in the health care field so extreme that they make
a . 30 year contract for hospital beds no longer a viable
possibility. The County needs to have a significant role in
renegotiating future contracts in order to protect 'its vital
financial interests .
Brookside Hospital ,provided the following written response to
what is now Critical Issue # 5 on May 6 , 1994 :
"Most of the patients served by the County are Medicare and Medi-
Cal eligible as referenced in Section Five [now Critical Issue #
3] of the County Issue Paper. As stated, the County is not
legally required to provide health -care ' for those patients who
have access to the private or district sector for health care.
The remaining population, which is not the significant portion of
the County' s patient population, can be effectively managed and
"controlled" through contracting for services . However, the
Hospital does commit to .developing a governing arrangement (Joint
Powers, other? ) for. arranging care for those patients the County
is statutorily responsible for. "
Los Medanos Hospital indicated the following in their response to
this issue on May 13, 1994 :
"We concur with this statement. "
53
uts di d. �rh;...theistrit Hospas
1 . What method of governance do the district hospitals propose that will
adequately protect the County's legitimate interests in the
availability of affordable.health, care for those in the community whose
health care is the -statutory responsibility of the County?
Mt. Diablo Medical Center -did not provide an answer to this.
question.
Los Medanos Hospital 's written response of May 13, 1994 :
"A joint power authority, whichdoes not remove any statutory
authority of participating jurisdictions .
2 . Would the . district hospitals consider a single governing body to
operate the three district hospitals plus Merrithew Memorial Hospital?
Mt Diablo Medical Center's written response of May 6, 1994 :
"No, -Mt Diablo would not. "
Los Medanos Hospital ' s written response of May 13, 1994 :
"We support a joint powers agreement involving the. three
district hospitals and the County. We do not believe there is
any justification to rebuild Merrithew. "
3. if not, would the district hospitals be willing to work with the County
to restructure .the governing boards of the district hospitals to
provide the County with sufficient voice in governing the district
hospitals to protect the County's legitimate interests and statutory
responsibilities?
Mt. Diablo Medical Center' s written response of May 6,. 1994 :
"We are not aware of any legal method . in which the .Distric,t
governance structure could be changed. We would be willing to
consult with the Supervisors on key issues identified prior to
implementation, as well as . to continue to explore ways that
the County could give input.
54
Los Medanos Hospital ' s written response of May 13. 19.94:
"Clearly, to succeed, a joint powers agreement can not work
unless the County has a major voice in seeing to it"' that its
legitimate interest and . statutory responsibilities are
preserved. The district hospitals by their origins and
character, can not assume County responsibilities given to the-
County under 'State statutes . "
4 . t Do. the district hospitals understand that closing the County Hospital
would not eliminate the legitimate policy interests of the Board 'of
Supervisors in seeing that health care is made available to all
individuals -kho are in need?
Mt Diablo Medical Center' s written response of May 6 . 1994 :
"Mt. Diablo understands that the Board of . Supervisors has
responsibility for those. individuals who have no health care
coverage.
Los Medanos Hospital 's written response of May 13, 1994 :
"See # 3 . we completely understand and concur_ with the
premise reflected in this.,question. "
Discussion of the issue on May 13, 1994 :
. Phil Bertenthal from the Legal Services Foundation asked
whether the discussion on governance would include the
possibility of combining the ..district hospitals with the
.County Hospital . Supervisor DeSaulnier indicated that this
would be covered at the next meeting and would be included in .
the final report to the Board of Supervisors . Supervisor
DeSaulnier indicated his preference for a, joint powers agency
of some type: .
Discussion of the issue on May 19 , 1994 :
Mr. Batchelor indicated that the County needed to have some
assurance that the County would have sufficient control to .provide
55
that the County's Welfare and Institutions Code S 17000 obligation.
would continue to be met.
Isabelle Chenoweth indicated that was not legally possible. There
would be no support from- her Board for, combining the hospital
districts .
Minot Tripp indicated that they would be willing to look at a JPA
for the County's patients. " There is a lot of interest in some type
of joint venture that would protect the County's interests .
Dr. Clarke agreed - that the County needed to be a part of the
governing structure. - District hospitals have to be willing to
change:
Mr.- Westman summarized the LAFCO requirements both with and without
the unanimous, agreement of the hospital district' s Board of
Directors.,.
Supervisor DeSaulnier asked about setting up a superagency like the
Metropolitan 'Transportation Commission and asked. staff to comment,
on this question and Joint Powers Agencies in the report to the
Board of Supervisors.
Supervisor Bishop indicated she was researching what Solano County
did when they ,closed their hospital`.
Dr. Rice indicated he. was. interested in an inclusive process with
the three district hospitals and the County.
Both Ms . Chenoweth and Mr. Tripp agreed to look at- a JPA for the
County' s Section .17000 obligation.
Mr. Finucane indicated that the County needed to be able to have a
hand in governance in order to address care issues and generally to
try to improve. the quality of care in the community.
Henry Clarke urged consolidation of the three districts and the
County.
Supervisor Powers asked staff to include in the report to the Board
of Supervisors . a discussion which compared JPA' s to other forms of
governance and to comment on which would insure . that, the County' s
56
partners would share without question the County' s Section 17000
obligation.
Discussion - Governance:
On April 26, 1994, the .Board of Supervisors. ,approved the following.
recommendations from Supervisors Torlakson and Smith:
"(1) Direct the County Administrator, the Health Services Director
and County Counsel to develop a proposal for presentation to the
district hospitals recommending consolidated administration
( functional ' integration) with the County Health Services
Department
11 ( 2 ) Additionally, direct that consideration be -given to actual
consolidation of the districts, pros and cons, and direct staff "to
report back on 'the steps that would need to be taken with the
district hospitals and LAFCO.
11 (3) Initiate merger discussions with- East -Bay Hospital- to see if
this hospital 'would like to functionally integrate its
administration with the proposed joint administration under the
County Health Services Department. " [See Attachment # 31]
There are at -least five levels on which "governance" options can be
explored. -Various combinations of these options are also possible.
These are:
1 . Dissolve the hospital districts- and transfer all of their
assets to the County, allowing the County to operate all four
facilities as a single health care system.
2 . Sponsor special legislation .to allow the hospital districts to
remain in place but. allow the Board of Supervisors to be the
governing body, for the districts, much as` is •true with the
dependent fire districts .
3 . Enter into a joint powers agreement (JPA) of one type or
another--- with one or more of the hospital districts .
57
4
j
4 . Contract for services with one or more of the hospital
districts, as is now done for obstetrical care of County
patients at Brookside Hospital.
5 . Implement some level of functional integration between the
County and one- or more of the hospitaldistricts, much as has
been done with. the ,dependent fire districts .
A discussion of each of these options follows :
I . Dissolve, the hospital districts and transfer all of their
assets to the County, allowing the County to operate all four_
facilities as a single health care system.
This is perhaps. the most extreme way to address the need for
closer cooperation between the , district hospitals and the
County. It may also be the most complicated to implement.
Either the County or LAFCO itself would have to initiate
proceedings. to abolish each' of the three hospital districts .
. If the• Boards- of Directors of each of the hospital districts
were willing to support the dissolution of the districts and
voted unanimously to abolish the district, it. could -be
accomplished fairly quickly. Assuming that it would not be .
possible to get a. unanimous vote from each of the district's
boards of directors, the dissolution would have to be put on
the ballot in each of the three -districts And"be approved by
a majority vote in each district. It is quite possible that
the voters in one or more of the districts would refuse to
dissolve the district. In this case, it might happen that one
or two of the districts would ;be dissolved and its assets
transferred to the County so the County. could, continue to
operate the hospital in that district. However, the third
district might remain in existence and able to operate its own
hospital. It is likely that it would be highly divisive to go
through this process . There are also some very sound reasons
to keep the hospital districts in place, regardless of what
other governance changes may be made in the operation of any
of the district hospitals . Under current law, only the
hospital district' s board of directors can' levy the property
tax which is used in ' each district to varying degrees
currently. Los Medanos Community Hospital District, for
example, levies a voter-approved property tax surcharge to pay
58
off the bonds which were used to construct the hospital. This
property tax surcharge is needed to pay off these. bonds .
2 . Sponsor special legislation to allow the hospital districts to
remain in place but allow the Board of Supervisors to be the
governing body for the districts, much as is true with the
dependent fire districts .
'Currently the only organizational mechanism provided in State
law for governing. , a hospital district is an independently
elected board of directors, which may, however enter into
JPA's and contracts . One option which is less extreme than
abolishing the districts themselves would be to seek special
legislation• applicable only in this County to permit the Board
of Supervisors to either , appoint other individuals as the
members of the boards of directors of one, or more of the three
hospital districts or to appoint itself as. the governing board
of one or more of the hospital districts, effectively making
the •districts. "dependent" special districts akin to the Contra
Costa County Fire Protection District, which is governed by
the Board of Supervisors . This would leave the districts in
existence and would leave in the hands of the board :of
directors of each district .(either the Board of Supervisors or
an appointed board of directors) the power to levy .the
necessary property taxes to continue the operation of each 'of .
the districts. In this way, :the•.Board of Supervisors would be
able to order functional, integration, specialization of
services and otherwise direct the activities of the three
hospitals . ,. It seems likely that there would be substantial
opposition to such legislation, not only from the hospital
districts in this County, but from their statewide
organization, since passage of such. legislation could serve as
a precedent for similar action in other counties. .;Legislation
like this would again be very divisive to many parties within
the County. ' It is really questionable whether any member of
this County's legislative delegation would be willing to
author such legislation and it is highly questionable whether
such legislation would be ableto get approval by the
Legislature„and the Governor.
59
3 . Enter into a joint powers agreement (JPA) of . one kind or
another with one or more of the hospital districts .
State law provides .a mechanism whereby two or more public
agencies may exercise any power common to the contracting
agencies through the use of a Joint Powers Agreement (JPA) .
JPA' s take a wide variety of forms and may be complex or
simple. The JPA can provide for a separate governing board to
be created to which the contracting agencies delegate the
common power(s) to be exercised by the JPA. Frequently, ,a JPA
governing board is comprised of members of the governing
boards of the contracting agencies, although the JPA can
provide , for the appointment of other individuals to its
governing board.. ' For example, if - the underlying legal
requirements could be met, the Board. of Supervisors and the
three district hospitals might enter into a JPA to jointly
operate the four public hospitals in the County. In this way,
the Board of Supervisors would retain at least partial control
over the operation of Merrithew Memorial Hospital and gain
partial control over the participating district hospitals. To
the extent of . its authority, such a JPA. could implement
functional integration among the participating hospitals . In
this case,. however, the legal requirements for a JPA cannot be
met.
The JPA is a very flexible mechanism for achieving cooperation
and coordination among public agencies-, but -even if a JPA
could be used to merge the operations of the County's hospital
and the district hospitals, . it would have a number of
drawbacks . First, since a JPA may only be created by mutual
agreement of the contracting parties, it is probable that the
Board of Supervisors would not have majority control over the
JPA and could not unilaterally direct the activities of the
JPA. Thus, the Board of Supervisors would not be able to
direct the activities of Merrithew: Second, a JPA requires
the complete consensus and agreement of the parties in order
to establish the JPA, determine the range of powers of the
JPA, and determine how the JPA will , be governed. . It is .
unclear what `sort of consensus is possible in this situation.
Finally, it is doubtful whether a JPA, could lawfully be
established in this instance. A JPA cannot be authorized to
do anything each of the contracting parties is not
individually authorized to do.. In this . case, the County has
60
a legal obligation pursuant to Welfare and Institutions Code
section 17000 to relieve and support the poor. This
obligation is imposed upon the .County without regard to the
cost to the County. By contrast, district hospitals have no
comprehensive responsibility, and therefore no authority, to
care for all of the poor. In fact, hospital districts are
prohibited by law from contracting to care for indigent county
patients at less than the district's cost for their care.
(Health and Safety Code section 32125(b) . ) Accordingly, with
regard to the authority and responsibility to care for all of
the poor without regard to cost, the County and the hospital
districts lack the necessary common power, which is essential
to the formation of a JPA to provide medical services to
indigent patients .
In the course of discussions about JPA' s, it was suggested
that an entity be formed comparable to the Metropolitan
Transportation Commission (MTC) . The MTC was created by a
state statute enacted by the State Legislature. (Government
Code sections 66502. ) MTC was not created by the agreement of
the parties and for that reason, it . is not comparable to a
JPA. MTC is a separate and distinct public agency, created by
state law to provide comprehensive regional transportation
planning for the Bay Area. Legislation at the state level
would be necessary to create a comparable entity in order to
provide medical care to all indigent county residents .
4 . Contract for services with one or more of the hospital
districts, as is now done for obstetrical care of County
patients at Brookside Hospital .
A contract for services between two public agencies is really
nothing more or less than a highly focused joint powers
agreement. , The two (or more) jurisdictions agree voluntarily
that one will provide a specified type of service to the other
in exchange for some type of payment which both parties agree
represents a. fair payment for the services that are provided.
The County has historically had in place contracts with the
district hospitals, as well as the Veterans Administration and
other public and private agencies, for specialized medical
services: In particular, the County presently contracts with
61
Brookside Hospital . for obstetrical services . Under this
contract, County physicians provide. pre-natal care to their
patients at the County's outpatient clinics in Richmond. When
the woman -is ready to deliver, she. is admitted to Brookside
Hospital and is followed .there by her County physician. We
note elsewhere in this- report that this contract is being
expanded and that the. Board of Supervisors is being asked to
approve = a . letter of intent with Brookside to expand this
contract.
A ;,contract 'can obviously cover either specific services for
specific patients, or could cover all needed medical services
for all of the patients for which the Board of Supervisors is
statutorily responsible. at one or 'more of the district..
"hospitals . A contract avoids the need for the more formal.
,,. organization of a joint powers authority. The major drawbacks
of a . simple contractual relationship between the County and `
the district hospitals are 1) the County, probably cannot
dictate any changes in - the organization or operation of the
district hospitals, except through the negotiation of language
within the contract itself, and 2) a contract,, as with a JPA,
requirescomplete agreement between or among the parties
regarding the terms of the contract.
5 . Implement some level of functional integration between the
County and one or more of the hospital districts, much as has
been done with the dependent fire districts . _
Over the past year or more, the Board of Supervisors has.
achieved impressive savings in the administrative overhead of
the dependent I fire districts . by combining overhead and
allowing one district to provide specialized services to other
districts. A single Fire Chief was put in charge of six fire
districts and such elements as training and fire inspection
were specialized in one district, which then provided the same
-, high quality services to all districts .
There are no -doubt numerous opportunities. to share equipment
and . supplies among hospitals, eliminate 'duplication among
hospitals, .. allow for further specialization of tertiary
services in ,a single hospital, allow the sharing of specific
administrative. or organizational skills which may be possessed
by one facility among all facilities, permit the joint use of
62
specialized support services such as translation services, and,
the actual elimination of duplication and overlapping of
administrative support by sharing such administrative staff
between facilities . Financial difficulties have -forced such
sharing of resources and actual mergers among hospitals
throughout the United States . More moves toward such
efficiencies are going to continue as health care dollars
become..more; scarce and as more and more traditional inpatient
services are. moved to an outpatient mode and inpatient
hospital stays are reduced, or eliminated. This is clearly an
area which could -use greater attention and more detailed
exploration. Again., the major drawbacks here are 1) the
County probably cannot dictate any changes in the organization
or —operation of the district hospitals, except through the
voluntary agreement of the district hospital ' s board of
directors, .and 2) without the use of a contract or JPA'
functional integration requires complete agreement between or
among the parties and can always_ be reversed at the option of
one party: Without being in charge of the three district
hospitals, we . believe it would be difficult for the Board of
Supervisors - to reach agreement with the district hospital ' s
board . of directors to achieve , the level of functional
integration which has been achieved in the fire districts .
The CEO of Mt. Diablo. Medical Center indicated in one of our ,
meetings that he really preferred to contract with the private
sector and if he were to contract, it would more likely be
with .Catholic West or Sutter. -
Staff. Recommendations :
48. ACKNOWLEDGE the opposition of the district hospitals to any
type of district-County relationship that would allow the
County to have sufficient control over the activities of the
district hospital to insure that the County' s. Welfare and
Institutions Code S 17000 obligations are met.
49 . ACKNOWLEDGE the difficulties involved in abolishing the three
hospital' districts without the. agreement of the district
hospitals ' boards of directors, RECOGNIZE there may be legal
advantages to retaining 'the hospital districts as long as
63
property tax revenue is needed to maintain the operation of
the districts or retire bonds .and AGREE not to pursue this
option at this time.
4
50. ACKNOWLEDGE the difficulties ' involved in obtaining special
legislation which would allow the Board of Supervisors to
become the governing board of the three. hospital districts,
and the divisiveness which would be created by seeking such
legislation and AGREE not to pursue this.. option at this time.
51 . AFFIRM the Board . of Supervisors ' commitment to functional
integration of the hospital districts with Merrithew Memorial
Hospital in an effort to eliminate duplication, streamline
administration of the hospitals,. reduce overhead costs, and
improve the quality of medical care available to all residents
of this County.
52 . ACKNOWLEDGE the difficulty of making functional integration
work where there are multiple, independently elected governing
bodies who do not concur with the concept of consolidation,
and AGREE to postpone functional integrati,on as a viable
option at. this time until more fundamental governance actions
are implemented which make functional integration a more
likely possibility. .
53. ACKNOWLEDGE. that the Board of Supervisors has a much broader
policy.view for the' health care of the general public than do
the district hospitals and that the Board . should .do nothing
which would prevent positive changes to the health care system
in the future, or which would - intrude on the Board' s ability '
to control its own destiny in the health care arena, or which
would jeopardize the Board's policy options in the future.
54 . DIRECT the Health Services Director and Executive Director,
Contra Costa Health Plan, to continue- to explore with the ,
district hospitals and other providers in the community
opportunities for contracting where such, contracting is to the
mutual benefit of the contracting parties- and will allow the
County ,to be a,prudent buyer in the market.
55 In view of the unwillingness of the district hospitals to make
any governance adjustments which would satisfy the County's
desire to .have a voice in the quality and variety of programs
64
which are provided to the patients for whom it is responsible,
and to insure that the County's W & I Code S- 17000 obligations
are carried .out, DETERMINE whether . it would be prudent to move
ahead with any contract with the district hospitals which
would result in the closing of Merrithew Memorial Hospital .
65 ,
6 DEFEASING, THE CERTIFICATES OF PARTICIPATION
The Board of Supervisors authorized the sale of $125 million in
certificates of participation (COP' s) two years ago to finance
the partial replacement of Merrithew Memorial Hospital. These
COP ' s include a "no-call" clause which prohibits their being
"called" or bought back by . the County .until the year 2002, and
then at a 2% prepayment premium. Even if the COP's are defeased,
the interest on the certificates must be paid until the first
call date. In addition, all of the construction, architectural
and planning money that _has, been expended to date would have been
wasted. If this is to take place, an acceptable mechanism must
be found whereby the district hospitals ;can fully reimburse the
County for the costs of. the defeasance, plus the construction,
architectural and planning money that has been expended to date.
A defeasance will require that securities sufficient to pay the
principal, interest, and prepayment premium be placed in an
escrowaccount through the year 2002, for the certificates of
participation, ..and through the years 2007, 2013, 2014 and 2015
for the. non-callable capital appreciation certificates . The
remaining unspent COP proceeds could be made available to
partially' fund the escrow requirements . Additional funds in
excess of $22,000,000 (as of April 21, 1994) would be, required
for the escrow to make up for the COP proceeds which have already
been spent, defeasance legal and technical costs and the
difference between interest costs and interest earnings due to
the legal yield restrictions on the * COP proceeds . It is not
permissible to issue additional certificates for investment
purposes to make up this difference.
uestcs dz acus sed. z the thea sera c .' Hospitals..'
1 . Assuming the defeasance can be accomplished without injuring the
County's overall credit rating, are the district hospitals willing to
reimburse the County for all of the costs of defeasance, since the
County has no resources for this purpose and could not generate such
resources without laying off substantial numbers of County employees?.
Mt. Diablo Medical Center' s written response of May 6 , 1994 :
"The districts have presented a series of questions to the
County and its bond counsel . Repeated requests have been made
66
since . October for specific information relating to these
bonds. . To date we have not received the information necessary
to adequately analyze this issue, despite assurances made by
the 'County Administrator that access to bond counsel would be
available.
"This issue aside, the district hospitals .have and will commit
to� the proportional assumption of "defeasance". costs under the
financial commitment presented to the county' to assume the
care of this patient population at no greater cost than the
county presently incurs to operate its Merrithew facility's
acute inpatient and emergency services. This, was estimated by
the County Health Services Finance Director to be $13 .2
million per year. It is likely that the district hospitals
could reduce , this cost to the county, however they are unable
to commit 'to anything' less than this until the County makes
its response to the district's financial questions available. "
Brookside Hosr)ital ' s written' response of May 6 , 1994 :
"Brookside Hospital .is prepared to equitably share in the
defeasing`�of the bonds for the County Hospital . "
Los Medanos Hospital ' s written response of May 13, 1994 :
"We will defer discussion. on this issue to the next meeting. "
Discussion of the issue on May 19 , 1994 :
Arnold Mazotti commented on the impact of the current
uncertainty on the County's credit rating 'and the impact of a
defeasance on the County's credit rating. . Mr. Mazotti updated
the numbers in his written submission by indicating that the
cost of defeasance was $24 .4 million as of May 9, 1994 . The
• total cost to abandon the project. is about $30 . 0 million. He
noted that the Merrithew. Memorial Hospital partial replacement
project was the highest rated bond issue in California.
Mr. . Westmam commentedon the difficulty which the "district
hospitals might face in trying to contribute to the cost of
67
the defeasance. He also indicated. that the County could not
borrow its share of the defeasance costs .
Mr. Wall indicated that the hospitals had just received this
information and would have to have time to meet with their
counsel and give the County their.. comments ., Mr. Wall
indicated. - that he could not recommend to his Board of
Directors that . the hospitals pick up the total cost of
abandonment without the County having any share of it.
There. was also further discussion of the disproportionate
share funding and the likelihood that , it would ,continue into
the future.
Discussion = Defeasing the Certificates of Participation-
In response to the request of the district hospitals, the County
asked their bond counsel, Mt. Tom Shearer, of Orrick, Herrington &
Sutcliffe ,to- respond to the .questions which had been raised by the
district hospitals . , Mr. Shearer responded as follows :
"The following questions have been asked with regard to this
matter. As. many factors' go into the answers to these ,questions, we
have not attempted -to document our. reasoning, but would be pleased
to discuss these answers with you in greater detailif to do so
would be helpful .:
1 . Does the County have the option .of changing the location of
the Project? No
2 . Does- the County have the right to sublet, the., Project to
another party? Possibly, depending on the circumstances, with
consent of Corporation I and if no, adverse tax or credit
consequences would result.
3 . Is it possible for the obligation represented by the existing
transaction to be assumed by another governmental entity in, a
transaction which would release the County from liability?
NO.
4 . Is it possible for the obligation represented by the existing
transaction to be assumed by another governmental entity in a
68
transaction which would not release the County from liability?
Yes, depending on circumstances .
5 . Does the County have an obligation to complete the Project?
Yes .
6 . Can the County voluntarily split the Facility Lease into
separate leases of parts of the Project?. No
7 . The Capital Appreciation Certificates are not subject to
optional redemption. Can a defeasance work if the,:Capital
Appreciation Certificates remain outstanding?. Yes .
A . Can County abandon the Project and continue to make payments?
No.
9 . Can the Facility Lease be -amended to change location' of the
project? No.
The County's financial consultant has concluded. that the cost of
abandoning the partial replacement project as of June 1, 1994,
given interest rates as they were on April 21, 1994, was $22 . 9
million. This amount changes, literally daily, as interest rates
change, making the County's investment in the government .securities
which back the Certificates of Participation worth more . or less
than they were the` day before.. [See Attachment # 32 ]
69
The expenditures, on .the partial replacement project, as of March
31; 1994, were. as follows :
ITEM AMOUNT
Reimbursement of Early Costs $ 2,.009,824
Architectural` Fees 4, 128,545.
State Plan Check Fee 808,520 .
Management and Contract.: Costs 2 , 112 .728
TOTAL DIRECT COSTS $ 9,059 ,617
Capitalized Interest to April 15, 1994 $15,550,044
Underwriter' s Discount, Original
Issues Discount and Cost of Issuance $ 3,505 ,568
TOTAL SPENT $28, 115,2291
1 This amount does'not include interest costs that would occur prior to defeasance,
nor does :it include outstanding contracts.
If the County were to, delay the partial replacement. project or
suspend it, it is essential that the County give immediate, prior
notice to the rating agencies in order to avoid being in default on
the COP's which are funding the project.
If the -County. were to terminate the project and defease the COP' s,
it would be essential that all of the required funds (which will
probably range between $22 .0 million and $24 . 0 million) be
deposited within .,90 days of the decision to suspend or terminate
the project.
County Counsel has raised serious-questions regarding what public
purpose, the,- district hospitals could use to : justify their
contribution of any portion of these required funds since the
districts cannot simply "give" the money, to the County without
having a legally justified public purpose in doing so.
70
The County financial consultant points out that any apparent
indecision on the part of the County about moving ahead with the
partial replacement project could result in the rating agencies
suspending the County's ratings, thereby making it impossible for
the County to borrow funds for some period of time and more
expensive to borrow funds for a period of years thereafter. The
high ratings the County has worked so hard to obtain and retain
over the past ten years .could be lost literally overnight.
For a number of legal and practical , reasons, it is unlikely that
the County could borrow the funds to defease the COP's. For one
thing,. the County would. be eliminating the existing collateral for
the COP 's (the - replacement hospital) and ' thus would have to
mortgage some -other real property in order to provide security for
any, additional borrowing, something which, does not appear to be
feasible.
` As the County's financial consultant points out [Attachment # 33] ,
the rating agencies and investors who hold the County's COD's for .
this project are beginning to ask some rather pointed questions
about what the County's intentions are and whether the project is
actually going to move forward.
The. Auditor-Controller, Kenneth J. Corcoran, has likewise received
several calls independently about the stability of the certificates
for this project and what recourse investors may have if the
decision to 'proceed with the partial replacement project. is
overturned or substantially delayed. [See Attachment # 34 ] .
The County's financial advisor has provided a declaration in
opposition to the application for a preliminary injunction to stop
the partial replacement project which controverts the declaration
of R. Neil Gilbert in 'the pending Federal District Court case which
is trying to stop- the partial replacement project. Mr. , Mazotti ' s
declaration refutes statements made by Mr. Gilbert regarding the
ease with which the County could. defease the certificates of
participation. [See Attachment # 35]
The Project Manager for the partial replacement project, Mr.
DeRoyce Bell, . of the County Administrator's 'staff, has likewise
given a declaration in. this case which sets- forth the construction
71
costs which have been incurred to date and which reaches certain
professional conclusions regarding the possibility that the
County',s ratings would be downgraded if the certificates of
participation were to be defeased. [See Attachment # 36]
Staff Recommendations:
56 . ACKNOWLEDGE that defeasing the .COP's for Merrithew Memorial
Hospital will cost in excess of $22 million and that the
County has no resources to pay for any of these costs . The
cost would approach $30 million with construction costs .
.57 . ACKNOWLEDGE that, based on comments of the County' s financial
advisor, there is a substantial risk of having the County's
credit. ratings - downgraded or suspended if the partial
replacement project is suspended or abandoned.
58. Based on the statements of the County's financial advisor,
ACKNOWLEDGE that there are significant legal ,I-mpediments to
borrowing or otherwise obtaining .the funds to . pay for the
defeasance.
59 . Based on the advice of the County Counsel, CONCLUDE that there
may be serious legal impediments to the hospital districts '
ability to contribute to the County's defeasance costs,
60. ACKNOWLEDGE that there are very real practical concerns about
the ability of Brookside Hospital to contribute to the costs
of defeasance and,, of course, no ,possibility that Los Medanos
will be able . to make any contribution.
61 . Based on the statement of the Auditor-Controller, ACKNOWLEDGE
that there is a significant question about the financial
ability of Brookside Hospital to contribute to the County' s
defeasance costs, , even if it were willing to do so and, of-
course, no possibility that Los Medanos will be able to make
any contribution.
62 . RECOGNIZE that any indecision on the part of the Board of
Supervisors about reaffirming its decision to proceed with the
partial replacement project may be interpreted by the ratings
agencies and those who have bought the County's COP's as an
indication that the, County may technically be in default on
72
the COP's, thereby making it very difficult and prohibitively
expensive for the County to borrow any funds in the financial
markets in the foreseeable future.
73
-_7 . LEGAL AND "BEILENSON" ISSUES
The County is in a ;unique position as . a health -care provider- in
this County. When a' district hospital goes broke, it files for
bankruptcy and close's - its doors . It does -not hold any hearings
or ask anyone' s permission to close. The County is unable to do
this, even if it is facing -'severe financial- 'difficulties . Any .
County which proposes to close a hospital. or substantially alter
the manner of providing care to indigents must define the precise
nature and the extent to, which care will be-changed and- identify
what alternatives will be available. These proposed actions and
impacts must be defined in writing and .posted on each health care
facility in the County. The Board ' of ' Supervisors must then
conduct. a hearing before making a decision to proceed [Health &
Safety. Code § 1442 . 5 (this section: contains the so-called
"Beilenson Hearing" provisions) - See Attachment # 37 for a copy
of § 14.42 .5 ] .
Among other things, this section also requires that "where this. .
duty [to provide care to indigents] is fulfilled by a contractual
arrangement with a private facility or individual, the facility
or individual shall assume the county' s full obligation to
.provide care to those who cannot afford it, . and make their
services available to Medi-Cal and Medicare recipients . " [Health '
&Safety Code § 1442 .5 . (a) , emphasis added] . No urban county the
size . of Contra Costa County has closed a hospital in the 20 years
that these "Beilenson" hearing requirements have been in effect.
The County will have to be able to successfully complete the
"Beilenson hearing process -as a condition of doing any ,
contracting with one or . more district hospitals . I.n addition,.
the County has Already- been warned 'informally that it will be the
subject of one or. ,more lawsuits if it attempts to close its
hospital . It will be essential that the County be able to
negotiate its way through any such lawsuits in order to be able
to contract with one or more of the district hospitals.
Brookside Hospital provided the following written introductory
comments on this section:- '
"West Contra Costa Hospital District (Brookside Hospital) is,
aware of the County's position as a health care 'provider in this
County. As noted by County staff, that role is to provide or to
arrange . for the provision of health care for its indigent
74
population. The County's definition of 'indigence' does not include
a mandate for the County to provide care to the Medicare and Medi-
Cal population it is now serving. The referenced 'uniqueness' for
the County therefore only applies, to that percentage of its client
base that does not qualify for third party coverage. "
gxat4ns discussed ;with theDstriCt Hosp�t •
1 . Can the. district hospitals assure the County there w111 not be a Title ,.
VI Federal,Civil Rights Act violation as a result of transferring care
from the County Hospital to the district hospitals?
Mt Diablo Medical Center' s written response of May 6 ; 1994 :
"Mt. Diablo cannot assure the County that there will be no
lawsuits under Title VI Federal Civil Rights -Act as a result
of transferring care from the County . to the district
hospitals; "however, it is our understanding that any such
action would be meritless . "
Brookside Hospital ' s written resronse of May 6 , 1994 :
"Brookside Hospital cannot assure the County that there will
be no ` lawsuits under Title VI Federal Civil Rights Act as a
result .of transferring care from the County to the district
hospitals; however, it is our understanding that any such
action would be meritless . "
Los Medanos Hospital ' s written response of May 13, 1994 :
"We believe that'. use of the three district hospitals by the
county as an alternative to re-building Merrithew Hospital
completely mitigates any prospect of a complaint, because it
has the effect of integrating low income minorities residing
in each district with other citizens of each district. In
this way, their access to hospital based services, both
ambulatory and in-patient will, be vastly improved.
"As. a public institution, 'this district; . under : existing
California Law, cannot, and does, not, discriminate against any
75
patient on , the basis of race, creed, color, national origin or
diagnosis for treatment within the hospitals clinical capacity.
"We, however, have no legal obligation to subsidize that care
except under conditions of emergency or for patients whose
transfer is detrimental to their well being. "
Discussion of the issue on May 6 , 1994 :
In the discussion on this point it was noted that, in the
opinion of some of those present, the Office for Civil Rights
(OCR) report documented that at, least some of the district
hospitals have effectively discriminated against minorities
and poor patients in the past. Others present indicated that
they did not read this into the OCR report.
2 . Are the district hospitals and their medical staffs prepared to fully
comply with the requirements of Health & Safety Code § 1442.5?
Mt Diablo Medical Center' s written response of May 6-, 1994 :
"Assuming that an .agreement with the County is reached, Mt.
Diablo and its medical staff are fully prepared to work with
the County to help the County fulfill its obligations under
Health. and Safety Code 1442 .5, including assuming the .
obligation to provide those in-patient services for which the
County has contracted with Mt. Diablo and continuing to make
its services available to Medi-Cal and Medicare recipients . "
Brookside Hospital ' s written response of May 6 , 1994 :
"Assuming that an agreement with the County is reached,
Brookside Hospital and its medical staff are fully prepared to
work with the County to help the County fulfill its obligation
under Health and Safety Code S 1442 .5, including assuming the
obligation to provide services for which the County has
contracted with Brookside and continuing to make its services
available to the Medicare and Medi-Cal recipients, including
those now served by the County. "
76
Los Medanos Hospital ' s written response of May 13, 1994 :
"Yes, we the directors• of the hospital, responsible for policy
decisions, are prepared to comply fully with the Beilenson Law
Requirements . "
Discussion of the issue on May 6, 1994 :
In the discussion on this . point it was noted that, as the
governing board of the hospital district, the Mt. Diablo
Medical Center District Board of Directors was in a position
to speak for the medical staff since the Board of Directors
ultimately had. the.,power to extend or deny privileges to any
physician.
3 . Are,;, the district hospitals prepared to pay for the costs of defending
the County in lawsuits from poverty group attorneys, union attorneys,
citizen groups and others who may try to prevent the contracting with
the district hospitals?
Mt Diablo Medical Center' s written response of May 6 , 1994 :
"Mt. Diablo is not prepared to pay. for the costs of defending
the County _ from actions brought by those who may try to
prevent the contracting.,with district ,hospital, but would join'
a; defense against the districts and the County. County
Counsel should advise the Board of Supervisors on the merits ,
of-any, such action."
Brookside Hospital ' s written response of May 6 , 1994
"Brookside is not- prepared to pay for the costs of defending
the County from. actions brought by those who may try to
prevent the contracting with District hospital, but would join
a defense against the Districts and the County. County
Counselshould advise the Board of Supervisors on the merits
of any, such action. "
Los, Medanos Hospital ' s written- response 'of May 13, 1994 :
77
"Weare prepared, together with County Government, to defend
against any lawsuit emanating against the use of Los Medanos
Hospital as an alternative to the County Hospital to serve low
income minorities residing within our hospital district. "
Discussion - Legal and "Beilenson" Issues :
The successful resolution of the Office for Civil Rights complaint
(see Part 2 of this report) would seem� to substantially preclude
the possibility of success on the pending lawsuit on a Title VI
violation. The County is appearing in court on the date this
report is presented to the Board of Supervisors in response to an
application for a preliminary injunction to stop work on the
partial replacement project. An oral report on this hearing may be
available.. at the time this- report is presented to the Board of
Supervisors .
- State law expressly requires that any contract by which county-
provided medical services become the responsibility of a third
party shall provide for the third party to "assume the county' s
full obligation to provide care to those who cannot afford it" and
for the third party to make their 'services available to Medi-Cal
and Medicare recipients . (Health and Safety Code § 1442 .5 . )
Brookside Hospital and Mt. Diablo Medical- . Center have both
indicated that they are unwilling or `unable to make this legally
required commitment.
The absence of that commitment will subject the County to.
lawsuit(s) by advocacy, groups for the medically indigent, the
defense and any results) of, which the County will be solely
financially responsible. .The district hospitals have indicated
that they are unwilling to indemnify the County, but only to join
a defense against the districts and County when they are a named
party in the lawsuit.
Staff Recommendations :
63 . ACKNOWLEDGE that Health and Safety Code § _ 1442 .5 requires that
"where this dutv ' [to provide care to indigents] is fulfilled
by a contractual arrangement with a- private facility or
individual - the facility or individual shall assume the .
county's full obligation to -provide care to those who cannot
afford it and make their services available to Medi-Cal and.
78
Medicare recipients ." and that the district hospitals have not
made such a commitment.
64 . ACKNOWLEDGE that even if the commitments required by the
"Beilenson" provisions were . undertaken by the district
hospitals and even. if the County could effectively design a
contract which required the district hospitals to provide a
long-term commitment to serve Medi-Cal and Medicare patients,
the County would remain responsible for its underlying
responsibilities to the indigent pursuant to Welfare &
Institutions Code § 17000, which places squarely and solely on
the County the responsibility to " . .relieve and support all
incompetent poor, indigent persons and those incapacitated
by acme, disease or accident lawfully resident therein, when
such persons are not supported and relieved by their relatives
or friends by their own means -- or by state hospitals or other
state or private institutions . "
65 . ACKNOWLEDGE that the districthospitals are, perhaps
rightfully, unwilling to pay for the cost of defending the
County for any and all lawsuits that might be filed against
the County in case the County closes Merrithew Memorial
Hospital but are willing to .join the County in defending
against any such lawsuits if they are also named as a .
defendant.
66 . In light Iof the fact that we cannot depend on the District
Hospitals to defend the County in areas which are the
statutory responsibility of the County, • in view of the fact
that the County will have to assume the financial burden of
defending the County, and in light of .the statutory obligation
the County has pursuant to Welfare and Institutions Code
17000, DETERMINE whether Critical Issue # 7 has been resolved
to the satisfaction of the Board of Supervisors .
79
.8 . LABOR AND EMPLOYEE RIGHTS ISSUES
Many of the County Hospital 's employees are represented by one or
another of the Unions with which the County has memoranda of
understanding in effect. The County has a legal obligation to
observe those memoranda of understanding as legally binding
contractual obligations. It is absolutely critical to reach
agreement with the Unions and district hospitals on the* transfer
of employeesvested pension rights, . seniority, base salary,
holidays and holiday pay, health plan coverage, shift
differential, bumping rights, promotional, rights, transfer rights
and all other working conditions for which the County has a meet
and confer obligation. This may also extend to working hours
requirements, workload standards, and other terms and conditions
of employment,, which have been negotiated with existing .employee
organizations. In addition, which union is to represent the
County' s employees if they go to work for a district hospital
whose employees are represented by another union may well become
an issue.
Brookside Hospital provided the following combined written
response to what are now critical issues # 8 and # 9 on May 6,
1994 :
"Certain labor `and employee issues may be triggered by a
contractual arrangement between the County 'and Brookside Hospital
and resulting incremental staffing needs . However, many of the
issues. raised by the County will be resolved by labor law and
need not be addressed in detail here. Brookside' s initial
consideration .of the labor' law implications of contracting with
the County has revealed no legal impediments . Brookside has
assured the County that should additional staff be needed due to
thecontractual arrangement it will give priority to County
employees and will cooperate fully with the unions represented by
both entities . " _
Los Medanos Hospital indicated the following in their response to
this issue on May 13, 1994 :
"These• questions .will clearly take time to answer, but we can
make these statements at this time:
80
■We envision the continued employment by the County of County
Staff, deployed for service in the district hospitals in order to
protect vested rights which emanate from County Employment Policy
and collective bargaining agreements not under our control either
now or.°in the future. .
■Is.sues relating to discrepancies in our District's own employment
standards and collective bargaining agreements and .those. of the
County . need to be addressed and resolved by a joint powers
authority which we feel is the best readily available mechanism in
state law to accomplish collaborative hospital operations by each
participating jurisdiction.❑"
u stl xr�s d sou sed.:w th tY�e Dletr�c ; xo pit s
1 . How would the district hospitals, resolve the need to provide
transferability and continuity to County employees' vested pension
rights?
Mt Diablo Medical Center' s written response of May 6 . 1994 :
"County . employees vested . in the County pension plans would
continue to hold those vested benefits, available to them
under the provisions of whatever county plan they are in. If
one. of those employees were re-hired at district .hospital, the
employee would fall under whatever pension arrangement was.
available based upon the employee's collective bargaining
unit: " Vested County employees hired under the Mt. Diablo
Medical Center Retirement Plan could be offered immediate
vesting. Employees rehired under another plan would fall
under the guidelines of that plan. Any divergence from union
plan guidelines would have to be negotiated among the
collective bargaining units.
"Immediate vesting would represent a cost which was , not
included in the district's original proposal. The analysis of
that cost is dependent upon highly variable employee specific
information. . If the. County requires the districts to augment
pension benefits significantly beyond what is existent, the
districts will require the County to fund that requirement. "
81
Discussion of the issue on May 6 , 1994 :
In the discussion of this item it became clear that what is
proposed here is not the same as the reciprocal rights that
employees in a 1937 Act retirement plan have to • transfer
between counties and take their retirement years of service
and entry age with them to their .new, employment.
2 . . How would the district hospitals guarantee that- County employees would
be able to transfer their current County seniority to a district
hospi.tal?
Mt Diablo Medical Center' s written response of May 6 , 1994 :
"We do not anticipate a problem -respecting 'relative seniority
among Merrithew employees . For purposes of bidding on
positions at MDMC, however, we must be bound by the job
posting provisions of our labor agreements, where the position
affected is' ' covered by a collective bargaining agreement.
This would give preference, in-most ..cases, to current MDMC
employees, over current Merrithew employees, irrespective of
seniority, - unless an alternate arrangement can be agreed to in
. the negotiation process described above. Beyond that, first
preference must go to employees of MDMC who have been laid off
or lost benefits due to recent cutbacks, irrespective of their
seniority, vis-a-vis Merrithew employees .
3 . How would the district hospitals resolve issues regarding County
employees' current base salary, amount of vacation and sick leave
accruals, holiday pay and shift differential when theyy transfer to a
district hospital?
4 . How would the district hospitals resolve issues regarding County
employees' promotion, transfer, and bumping rights when they transfer
to a district hospital?
5 . . What are the district hospitals prepared to do to address differences
in workload standards, requirements about working hours (part-time,
permanent-intermittent, shift assignments) and other variations which
may exist between the, County's and the district hospitals.' personnel
practices at present?
82
Mt Diablo Medical Center's written response of May 6, 1994 to
this and the two preceding questions :
"The Medical Center will attempt to ensure as little
disruption as possible for ., the _ Merrithew. employees
transferring to MDMC in terms of compensation, benefits, and
wage-and-hour practices. However, we need to acknowledge that
County employees would become employees of the individual
institution, and therefore, would be governed by collective
bargaining contracts and personnel. policies of these
entities . "
6 . How will disagreements. about which union represents County workers who
transfer to a district hospital be resolved?
Mt' Diablo Medical Center' s written response of May 6 , 1994 :
"Each of MDMC' s current labor agreements contain recognition
language governing the type of work and/or the different
classifications within the specific purview of each collective .
bargaining group. Merrithew employees transferred to MDMC who
perform work within the jurisdiction of one of our unions may
therefore be obligated to be represented by a different union ,
than they are at present. If represented employees at
Merrithew transfer to MDMC positions not subject to collective
bargaining,' both MDMC and Merrithew will need to meet with the
union(s) now representing those employees in order to
determine which union, if . any, should represent those
employees . "
Discussion- of the issue on May 6 , 1994 :
The discussion seemed to make it clear that County employees
would be laid off from the County and that the district
hospitals would then consider whom they would hire back. The
salary paid, the pension plan, benefits, working conditions,
etc. all would be those which currently exist at the district
hospital,, without any real regard for the employee' s previous
situation with the County. Any additional pension benefits or
other considerations which cost the district hospital money
would have to be paid for by the County.
83
.Discussion of the issue on May 13, 1994 :
As a : general comment on both critical issues # 8 and # 9,
Donna Gerber on behalf of" the California Nurses ' Association
(CNA) indicated that this date she had sent a letter to the
County and each of the district hospitals indicating that each
jurisdictionmust meet with CNA before decisions are made
which affect the. Meyers-Mi 1 ias-Brown Act rights of her
members, particularly since CNA represents nurses at all four
hospitals . She indicated that, the letter demands that the
County and the district hospitals cease and desist these
meetings until the four jurisdictions comply with their meet
and confer obligations to CNA. She emphasized that CNA has to
be at the table when these issues are discussed and
negotiated.. ,
Discussion - Labor and Employee Rights Issues:
Brookside Hospital and Mt. Diablo Medical .,Center have indicated
that because of their current ,contractual obligations they are
unable, in most cases,, to . recognize the pension, .seniority, base
salary, holiday, shift, promotional, and other, rights of County
employees established through the collective bargaining process
required by State law.
Brookside Hospital and Mt. 'Diablo Medical Center have indicated
that because of their current contractual obligations they are
unable to address the fact. that many of the County' s employees at
Merrithew Memorial ..Hospital are currently represented by a
different employee union than that which represents employees at
either Brookside Hospital or Mt. Diablo Medical Center.
Staff Recommendations :
67 . 'ACKNOWLEDGE that what the district hospitals; expect that the
County will do is to close Merrithew Memorial Hospital, cancel
1174 positions, lay off the employees occupying those
positions, and after the district hospitals rehire their own
- laid off employees consider hiring a portion of the laid off
County. employees .
84
68 . Due to the requirements of collective bargaining agreements,
ACKNOWLEDGE that the district hospitals indicate that those
County employees who might be hired. would come to work under
the salary, benefits and working conditions of the hospital
which hires them, regardless of any differences between those
benefits and what the employee was receiving at the County.
69 . ACKNOWLEDGE that laid off County employees who are later hired
by one of the district hospitals are unable to receive the
reciprocal rights which they might otherwise have had if they -
had transferred to. another- County' s pension program, thereby
severely penalizing many senior employees who are nearing
- retirement age.
70 . RECOGNIZE the dramatic, detrimental. impact on employees due to
the loss of jobs and variations in salary and benefits which
employees are likely to encounter if the County- closes
Merrithew Memorial Hospitals and contracts with the district
hospital for all services now provided by Merrithew Memorial
Hospital .
85
9 LAYOFF AND TRANSFER OF COUNTY EMPLOYEES
In addition to reaching agreement with the Unions and district
hospitals on the above noted labor relations' issues, the County
has at least a moral responsibility, and quite possibly a legal
problem [pursuant to Government Code § 31000] , with contracting
with one or, more district hospitals for servicesnow being
provided by- County employees if doing so would require the layoff
of County employees as a . direct , consequence of the contracting,
- .unless those County employees are guaranteed-. a job for which they
are qualified at a district hospital . It is essential that this
responsibility be .understood by all parties and be addressed in a
way which protects the County' s legal obligations .
Los Medanos Hospital indicated the following in their response to
this issue on May 13 ,, 1994 :
"These matters will take time to resolve. A joint powers
authority will constitute shared governing of policies bearing on
collaborative hospital operations .
"The expansion of the Contra Costa Health Plan to East and .West
County, with access to hospital based services in each community
will spur increased enrollment of both tax dependent and
commercial enrollees able topay their own premiums, the revenue
thus generated will. obviate the numbers of. layoffs for people '
employed in that plan. '
"When the Congress eventually conveys entitlement to the same.
benefit ' package as everyone else, the County Health Plan .will. be
in a better position to retain in that plan former welfare
eligibles and working poor (County indigents) when tax subsidies
are no longer an issue in reimbursing for their care.... '
"In_ a word, the County Plan will grow and retain people employed ,
to deliver benefits in the plan. "
zestns discussed, w the thea stt. HQpa tail
1 . B6i will.County staff,.who are subject to demotion or. layoff as a result
of a contract with the district`hospitals� be absorbed by the district
hospitals?
86
Mt Diablo Medical Center' s written response of May 6 , 1994 :
"MDMC will attempt to absorb as many Merrithew employees as
possible, once its obligation to its own current and laid ' off
employees are met.. MDMC will work with representatives of
Merrithew employees and management to develop a mutually
agreeable plan for placing Merrithew employees in positions at
MDMC as they become available. "
2 . Will the district hospitals commit to hiring a number of current County
employees which is.proportional to the number of beds in a facility for
which the County is contracting?
Mt Diablo Medical Center' s written response. of May 6 , 1994 :
The consolidation of Merrithew patients into Mt. Diablo
assumes the hiring of additional staff necessary to care for
the -incremental patient load. The number of. staff hired would
be dictated by staffing ratios and requirements at Mt. Diablo.
Aone for one re-hiring Merrithew employees at the districts
would result in massive over staffing , to handle the
consolidated patient loads .
"Based on Merri,thew' s. 1992 OSHPD report, the number of full-
time equivalents (FTE' s) dedicated to the services in
question, excluding the clinics . and administration, were
approximately 716 . Mt. Diablo's initial: . proposal for
assumption of all of Merrithew' s patients called for an
increase of 368 FTE's or about 51% of the dedicated Merrithew
staff . ' Under the joint proposal with' Brookside and Los
Medanos this number dropped to around 165 FTE's at Mt. Diablo.
Without Los Medanos this number may increase by an estimated
15 to 20% .
"Another constraint is the required 're-hiring of any Mt.
Diablo staff who have been laid off and must be recalled
according to the terms. of the collective bargaining
agreements. These rehires would have to supersede the hiring
of any new contractual labor. Therefore, Mt. Diablo could not
commit to adding staff proportional to the number of beds .
Mt. Diablo would commit to restricting hiring to County
87
displaced workers after it had met its own contractual
commitments to collective bargaining. "
3 . Will the district hospitals commit to guaranteeing County employees the
same level of rights as an employee of a district hospital that they
have enjoyed at the County Hospital?
Mt. Diablo Medical Center's written response of May 6 , 1994 :
"MDMC employees ' enjoy` a very competitive salary and benefit
package. Whileit is undoubtedly' different from that
currently offered Merrithew employees, in certain particulars,
we are certain that Merrithew employees will view the
transition positively."
Discussion of the issue on May 6 1994 :
In the discussion of what are now 'Critical .Issues # 8 and # .9,
Mt. Diablo Medical Center noted that they have about 50 laid
off employees they must hire back before considering hiring
any, County employees . Brookside Hospital estimated that it
has about 70' laid off .employees who must. be hired back before
considering hiring any County employees . Mr. Finucane said
that about 950 County employees would have to be laid off.
Supervisor DeSaulnier raised the issue of fairness in regard
to how County employees .would be treated in this type of a
layoff .situation. . It appears , that County employees would bear
the brunt of the layoffs and priority would be given to
previously laid off Mt. Diablo and Brookside employees . This
does not appear to be fair to County employees . Supervisor
DeSaulnier emphasized his position that layoffs should be
proportional among all of the facilities and that existing
County employees should receive a number of the jobs at the
district hospitals which is proportional to the number of- beds . -
the
f bedsthe County is .filling. This does .not appear to be acceptable
to the district hospitals . The impression is that the
district hospitals will keep all of their current staff, and
as the need for marginal increases in their staff occur, they
will first hire back their own , laid off employees and then
hire whatever laid off County employees. they need to maintain
staffing.
88
Mt. Diablo and Brookside staff indicated that the only way
this would work financially is because the district hospitals
could admit patients and have only, -a marginal increase in.
their costs . .There is no question that shutting down
Merrithew. Memorial Hospital ,will cost jobs .
Dr. -Rice noted that Los Medanos has laid off 450 employees.
His conditions include that -Los Medanos - Hospital must . be
reopened to acute care and that some of their employees must
be .rehired.
Paul Katz, on behalf of Local 1, made it clear that Local 1
was not going to stand for having some 350. of their members
lose their jobs .
f
Supervisor Bishop emphasized that she was open to a variety of
possible alternatives . She endorsed Dr. Rice' s call for
having an acute hospital open in Pittsburg and suggested that
we might have a different blended solution than the one which
had been proposed .initially. She also that the number of
County employees involved be rechecked and verified.
Dr. Rice noted that Los Medanos has 21 acres 'available, which
should be sufficient for whatever blended solution is finally
agreed ,to.
Supervisor DeSaulnier reemphasized that his .bottom line was
that the solution had to be fair to all parties . He also
asked that a second matrix be prepared outlining exactly what
classifications of employees and how- many of each would have
to be .laid off in order to close Merrithew Memorial Hospital.
Discussion of the issue on May 13, 1994 :
Supervisor Bishop asked about the matrix of employees that• had
been. requested from County staff. Mr. Finucane indicated that
he had just received the listing. It includes 835 permanent
employees ,and 339. temporary employees who would be affected by
the closure of Merrithew Memorial Hospital . These numbers
include individual employees . They represent about 900 full
time equivalent (FTE) positions . These numbers include
89
employed County physicians, but not contract specialists .
[See Attachment # 38 for the detailed breakdown of these
numbers]
County representatives requested similar information from the
district hospitals, particularly regarding their laid off
employees who would have to hired back before any County
employees could be hired.
Supervisor DeSaulnier again emphasized. the importance of
having a proportional number of County employees go with
County patients -who are admitted to district hospitals . He
again emphasized that he , could not support - an arrangement
where one group benefits. at the expense of another group. Dr.�
Clarke responded that they understand Supervisor DeSaulnier' s
concerns .
Supervisor 'Bishop indicated that it: was terribly problematic
for her if the district hospitals .are going to have to rehire
their laid off employees .before. hiring any County employees.
Ms . Chenoweth responded that they understand they would have
to work through this.
Supervisor DeSaulnier requested copies of the district
hospital ' s .contracts- with their employee unions .
Discussion - Layoff and Transfer of County Employees:
It seems clear, that the district hospitals are obligated by
contract to rehire their own laid off ..employees before they would
L'.
be able to hire any laid off County employees and that they intend
to fully comply with those requirements,.
It also seems clear that the laid off County employees would have
to compete with the 450 laid off Los Medanos employees for whatever
few jobs maybe available after the district hospitals rehire their
own laid off employees.
Because of the seniority and bumping rules which are in place in
the .County, the elimination of . 1174 positions would affect nearly
every employee in the Health Services Department before it was
known which employees would actually go "out the door" . ,
90
There would also be a substantial impact on, most service
departments like Personnel, General Services, Purchasing, County
Counsel, Auditor-Controller and other departments which rely on
revenue from the operating departments (such as Health Services)
for the bulk of their revenue. -
In addition, if the County had to take its share of the defeasance
funds from , the General Fund, this would result in the layoff of
hundreds of additional employees in order to offset as much as a
$10 million defeasance share of cost for the County. The bulk of
these additional layoffs would have to come from the Health
Services . Department, thereby decimating Public Health, Mental
Health outpatient services and the outpatient medical clinics .
It also seems clear that the district hospitals have rejected the
concept of providing fairness to County employees by agreeing to
hire a number of County employees which is proportional to the
number . of patients or beds the County contracts for in each
district hospital . f -
It appears quite likely that hundreds of County employees would be
laid off in order to increase the census at the district hospitals,
without any commitment whatever that any of those employees `would
be hired by the district hospitals at anytime in the reasonably
near future:
Staff Recommendations:
71 . ACKNOWLEDGE that there is only the most remote possibility
that any significant number of laid off County employees would
be hired by the district hospitals after the district
hospitals have rehired, their own 120 laid off employees and,
after the County's laid off employees had to compete with. Los
Medanos ' 450 laid off employees .
72 . ACKNOWLEDGE that the bumping and seniority rules mean that
nearly every, employee in the Health, Services Department would
be impacted by- the closing of Merrithew Memorial Hospital ._
73. ACKNOWLEDGE that there would also be a substantial impact on
most service departments like Personnel, General Services, -
91
Purchasing, County Counsel, Auditor-Controller and other
departments which rely on revenue from the Health Services
Department for significant amounts of their budget.
74 . ACKNOWLEDGE that 'paying even a 1/9 share of the defeasance
costs would result in the layoff of hundreds of additional
employees - in order to offset as much as a $10 million
defeasance share of cost for the County and that the bulk of
these additional layoffs would probably have to. come from the
Health Services Department, thereby decimating Public Health,
Mental Health outpatient services and the outpatient medical
clinics .
75 . ACKNOWLEDGE that in light of Los Medanos ' bankruptcy,
financial problems at Brookside Hospital and at least
temporary financial problems at Mt. Diablo Medical Center, the
acceptance and implementation of the Joint District Hospital
Proposal would result in an inherent inequity for County
employees, apparently solely to benefit the "bottom line" of
the district hospitals .
76,. ACKNOWLEDGE that neither district hospital has indicated any
ability to. support the concept of fairness represented. by, the
proposal that the district hospitals hire County employees in
proportion to the number. of County patients who are admitted
to the district hospitals .
77 : Given that 'Merrithew Memorial Hospital is operating at a
higher occupancy level than the district hospital and is one
of the busiest hospitals in the County, and given the
commitment,` dedication, and professionalism of the employees
at Merrithew Memorial Hospital, and given the 'lack of ' any
sense of fairness in what is being proposed to 'the County,
DETERMINE whether the Board of Supervisors is satisfied with
the responses from the district hospitals on this issue.
92
■ . PART 5 SUMMARY RECOMMENDATION:
Attached as additional background , information for . the Board' s
deliberation are the written comments which were presented to the
Board of Supervisors on April 26, 1994 by Larry .S. Gage, President,
National Association of Public Hospitals . [See Attachment # 39 ]
Also attached is the "per diem" proposal that .was. presented to the
meeting" with three members of the Board of Supervisors and the
district hospitals on May 19, 19.94 . Note that this proposal
apparently requests that the Board of Supervisors provide Mt.
Diablo Medical Center with a per diem rate which covers the entire
cost of the partial replacement, project plus the $13.2 million in
County General Fund money which presently goes to support Merrithew
Memorial Hospital .
Staff Recommendation:
78 . Following the review of the above "Critical Issues" and an
examination of all of the testimony which is presented in this
Report,"DETERMINE whether the Board of Supervisors wishes to:
✓ Terminate the Merrithew Memorial ' Hospital partial
replacement project, and
✓ Direct staff to immediately undertake those actions which
are necessary, to defease the Certificates of
Participation for the Merrithew Memorial Hospital partial ,
replacement project, and
✓ Direct staff to immediately take those actions, which are
necessary .to abandon the Merrithew Memorial Hospital
partial replacement project,. including terminating ,all
existing construction contracts,` and
✓ Direct staff to outline the additional steps which will
need- to be taken in the near future to eliminate the .1174
positions which are held by the employees presently
working at Merrithew Memorial Hospital, close the
hospital as an inpatient facility, and develop contracts
93 ,
hose Paents
to Cage of the County•
5triCt ho5pe5pon5ibilitY
with seethe statutory
wh° a
LIST OF ATTACHMENTS
[Listed-in the order in which they are referenced in the report] .
1 . December 11, 1993 proposal - from the district hospitals .
2 . .January 12, 1994 letter from CEO of Mt. Diablo Medical Center
responding to questions asked on December 11, 1993 and
clarifying the December 11, 1993 proposal .
3 . Copy of a letter dated March 30, 1994 to then-Supervisor Sunne
McPeak from the CEO of Mt. Diablo Medical Center providing a
separate per-diem proposal on behalf of the Mt. Diablo Medical
Center
4 . Copy of a letter dated April 1, 19.94 from the Chairs of the
Boards of Directors of the three hospital districts asking to
address the Board of Supervisors on April 12 (subsequently
rescheduled for. April 26; 1994) .
5. Copy of a letter dated April 4, 1994 from the CEO of Brookside
Hospital to Supervisor tom Powers making a proposal similar to
Mt. Diablo Medical Center' s March 30, 1994 proposal .
6 . Copy of ,a memorandum from Arnold Mazotti and Jean Buckley of
Prager, McCarthy & Sealy regarding their review of the 1977
and . 1990 bond issues for the Los Medanos Community Hospital
District.
7 . Letter of intent, to the receiver: currently managing- Los
Medanos- Community Hospital indicating the interest of the
County in negotiating for the acquisition of Los Medanos
Community Hospital and its assets on terms and conditions
acceptable to the Board of Supervisors and the Bankruptcy
Court.
8 . Copy of,'a letter from Vickie L. Dawes to' Sharon Meyers, Office
for Civil Rights (OCR) , U.S. Department .of Health- & Human
Services, responding to requests from OCR for data relating to
95
the complaint. which was filed and providing other related
information - dated October 8, 1993 .
9 . Copy of a letter from Virginia P. Apodaca, Regional Manager,
OCR, U.S. Department of Health & Human Services, to Victor J.
Westman, County Counsel and Bill Lann Lee, NAACP Legal Defense
& Educational Fund, Inc. , reporting on the results .of its
investigation into the allegations of intentional
discrimination and actions that have ' a disproportionate
adverse impact against Blacks, Asians, and Hispanics regarding
the decision to rebuild the existing public hospital at its
present location in the central part of the County - dated
April 25, 1.994 .
10 . Copy of proposed draft letter of intent (Expanded Operating
Agreement) with' Brookside Hospital regarding expansion of the
County's existing relationship with Brookside Hospital .
11 . Copy of a memorandum from the County Administrator to the
members of the Board of Supervisors enclosing a copy of the
issue paper and questions which were used as the base of.
discussions with the district hospitals - dated May 2, 1994 .
12 . Copy of the response from Mt. Diablo Medical Center to the
questions raised in the County' s Issue Paper - dated May 6,
1994 .
13 . Copy of the response from Brookside Hospital to the questions
raised in the County' s Issue Paper - dated May 1994 .
14 . Copy of the response from Los Medanos Hospital to . the
questions raised in the County' s Issue Paper - dated May 9,
1994 .
15 . Letter and attachments from Steven C. Tremain, Director of
Medical Staff Affairs for Merrithew Memorial Hospital to the
Chiefs of Staff of the three district hospitals, providing the
district hospitals with the list of privileges held by family
practice physicians at Merrithew Memorial Hospital and asking
what privileges these physicians would receive at each. of the
district hospitals. Also attached is a summary of the
privileging process at Merrithew Memorial Hospital .
96
16 . Letter from the Chief of Staff at Los Medanos Community
Hospital responding to questions raised regarding how many of
their family practice physicians have various privileges .
17 . Letter from the Chief of Staff at Brookside Hospital
responding to questions raised regarding how many of their
family practice physicians have various privileges .
18 . Letter from the President-Elect• of the Medical Staff at Mt.
Diablo Medical Center responding to questions raised regarding
how many of their family practice physicians have various
privileges
19 . Copy of a memorandum from Sharon Hiner, M.D. , Director,
Quality Management Department, Merrithew Memorial Hospital to
Frank Puglisi, Jr. , Executive Director, Merrithew, Memorial
Hospital & Clinics commenting on the negotiations with the
District Hospitals regarding medical' staff issues - dated May
3, 1994 .
20 . Letter from the T. Rich McNabb, M.D. , Residency Program
Director at Merrithew Memorial Hospital to Dr.', Tremain
regarding the future of the residency program at Merrithew
Memorial Hospital in case Merrithew Memorial Hospital were to
close.
21 . Letter from the Director, Division of Education, American
Academy of Family Physicians to the Board of Supervisors,
supporting the County' s Family Practice Residency Program.
22 . Copy of a ' letter from Philip J. Bertenthal,. Director of
Litigation and Evelyn Rinzler, Legal Assistant, for the Contra
Costa Legal Services Foundation expressing their concerns
about the County's ability to meet its Welfare & Institutions
Code S 17,000 responsibilities to the indigent i.f . all care is
contracted to. the district hospitals .- dated.-May 13, . 1994 .
23 . Copy of a "White 'Paper on the Need to Partially Replace the
County Hospital" , dated March, 1994 .
97
24 . Copy of data provided. by the Chief Finance Officer for the
County Health Services Department regarding how , the
disproportionate share payments are calculated for°.Merrithew
Memorial Hospital and related information on other
disproportionate share hospitals in California.
25 . Copy of a memorandum . from Kenneth J. Corcoran, " Auditor-
Controller to Phil Batchelor, County Administrator on the
Financial Status of the District Hospitals- dated 'May 1.3,
1994 .
26 . Copy of a memorandum from Art Lathrop, Director, Emergency
Medical Services Agency to Mark Finucane, County Health
Services Director,. attaching information. on the impact of the
Northridge Earthquake on .hospitals and the implications for
hospitals in this County - dated May 6, 1994 . .
27 . Copy of portions of a report prepared by the staff of the
State Office of Emergency Services regarding the damage to
hospitals in the Northridge area as a result of the January
17, 1994 earthquake - dated February 3, 1994 and a -eopy of- the
Executive Summary of , the Interim 'Report on the Northridge
Earthquake prepared by the State Office of Emergency Services
dated April 4, 1994, provided to Contra_ Costa County by Ed
Bortugno, Geologist with the State' Office: of Emergency
Services .
28 . Copy of a letter from John Campbell, Project .Manager, O'Brien-
Kreitzberg to DeRoyce Bell, Director, Hospital Replacement
Project, forwarding O'Brien-Kreitzberg' s survey of the three
district hospitals, alorig -with the report from H.J. Degenkolb
Associates, Structural Engineers, on their structural survey
of the three. district hospitals - dated. May ,..9, . 1994
29 . Copy of selected pages from the "Earthquake Planning Scenario"
fora magnitude 7 .5 earthquake on the Hayward Fault.
30 . Copy of .. a memorandum from County Counsel Victor J. Westman,
commenting..on the legal status of counties versus hospital
districts .
31 . Copy of a Board Order adopted by the Board of Supervisors on
April 26., 1'994 on' the recommendation of - Supervisor Tom
98
Torlakson and Supervisor Jeff Smith . regarding staff follow-up
on , issues related to -the governance of the district hospitals
'and Merrithew Memorial Hospital .
32 .. Copy of letter from Arnold F. Mazotti, Vice-President, Prager,
McCarthy & Sealy, , Investment Bankers, on the estimated cost to
abandon the Merrithew Memorial Hospital Replacement Project
dated May 12, 19.94 . .
33. Copy of letter from Arnold: F. Mazotti, Vice-President, -Prager,
. . McCarthy & Sealy,. Investment Bankers, on investor and rating
agency concerns regarding the status of the Merrithew Memorial
Hospital Replacement Project - dated May 12, 1994 .
34 . Copy` of a memorandum from Kenneth J. Corcoran, Auditor-
Controller, 'to Phil Batchelor, County Administrator, offering
his comments about inquiries he has, received about the
stability of the County's .Certificates of Participation issues
for the Hospital Replacement Project.
35 . Copy of the declaration of Arnold F. Mazotti in opposition to
plaintiffs ' application for preliminary injunction in. the case
of Catherine Latimore, et al v. Contra Costa- County, et al, in
preparation for a hearing in Federal District Court on May 24,
1994 .
36 . Copy of the declaration of -DeRoyce Bell in opposition to
plaintiffs ' application .for preliminary injunction in the case
of Catherine Latimore, et al v. Contra Costa County, et al, in
preparation for a hearing in Federal District Court on May 24,
1994 .
37 . Copy of Health. & Safety Code § 1442 .5, the "Beilenson Hearing"
provisions .
38 . Memo and attachments from Lois Ellison, Personnel Officer for
the Health. Services Department, listing all positions by
classification and number that would have to be eliminated
when Merrithew Memorial Hospital is closed.
99
39 . Copy- of the statement of Larry S. Gage, President, National
Association of Public Hospitals, to the Contra Costa County
Board of Supervisors - dated April 26, 1994 .
40 . Sheet from Mt. Diablo Medical Center dated May 19, 1994 on
their "per diem" proposal .
100
May 11, 1994
RECEOVE®
Tom Powers MAY 1 6 The
Chair, Board of Supervisors
OF
Contra Cost County c�ERx aoAa�OF SUPE�nsoas c���M `' . A�vneiracso�
651 Pine Street ;
CONTRA COSTA CO. z� , °x Academy Of
Martinez,, CA 94553 . E Sam Family
Physicians
Dear Mr: Powers:
8880 Ward Parkway
The American Academyof Family Physicians AAFP is concerned about a proposal b Kansas City, Missouri
Y Y (AAFP) P P Y 64114-2797
the County of Contra Costa, California to fulfill its obligation to the delivery of health (816)333-9700
care services through contracting with local district hospitals in contrast to building the WATS 800-274-2237
FAX 816-822-0580
planned new county hospital in Martinez. The concerns of the AAFP center around
potential unintended consequences on the Family Practice Residency Program at
Merrithew Memorial Hospital. Specifically, disruption of the continuity of care provided
by family practice residents in the Family Practice Center and in the hospital may
threaten the residency program's accreditation status. Should the accreditation status be
threatened, the ability of the residency program to attract the quantity and quality of
applicants which it has historically enjoyed may be compromised, or the viability of the
residency program may be at risk. The AAFP hopes that close attention will be paid in
President
planning by, Contra.-Costa County to issues related to the viability and quality of the. WILLIAM H.COLEMAN,M.D.,Ph.D.
Family Practice Residency Program at Merrithew Memorial Hospital. Scottsboro,Alabama
_ Vice President
EDWARD L.LANGSTON,M.D.
Houston,Texas
The AAFP recognizes that the Family Practice Residency Program at Merrithew President-elect
JAMES R.WEBER,M.D.Memorial Hospital is one of the oldest and most mature family Practice training Programs
Jacksonville,Arkansas
in both California and the nation. With its national reputation, the residency program Board Chair
DOUGLAS E.HENLEY,M.D.
has consistently attracted a quantity and quality of applicant which has served the Fayetteville,North Carolina
program, and the community served by its graduates well. Speaker
CHARLES N.ASWAD,M.D.
Binghamton,New York
If we can be of any assistance to County of Contra Costa in developing its plans for both Vice Speaker
NEIL H.BROOKS,M.D.
patient care services and the training of family physicians, please do not hesitate to Rockville,Connecticut
Treasurer
contact us. JOSEPH C.CZARSTY,M.D.
Oakville,Connecticut
Immediate Past President
Sincerely JOHN M.TUDOR,JR.,M.D.
Salt Lake City,Utah
Executive Vice President
ROBERT GRAHAM,M.D.,CAE
orman B. Kahn, Jr., MD Directors
M .DOYLE,M.D.
Director Neptune,New Jersey
DOUGLAS E.HENLEY,M.D.
Division of Education Fayetteville,North Carolina
GLEN R.JOHNSON,M.D.
Coral Gables,Florida
nbk/Cmy LARRY R.ANDERSON,M.D.
J Wellington,Kansas
PATRICK B.HARR,M.D.
Maryville,Missouri
cc: Mark Finucane, Director, Health Services, Contra Costa County JOHN E.VERHOFF,M.D.
Steven Tremain MD, Medical Staff Director Merrithew Memorial Hospital Columbus,Ohio
P SUSAN BLACK,M.D.
T. Rich McNabb, Director, Family Practice Residency Program, Lowell,Massachusetts
KENNETH L.EVANS,M.D.
Merrithew Memorial Hospital Oklahoma City,Oklahoma
DALE C.MOOUIST,M.D.
Larry R. Anderson, MD, Chair, Commission on Education, AAFP Grand Forks,North Dakota
Daniel J. Ostergaard, MD, VP, Education and Scientific Affairs, AAFP MARY HELEN MORROW,M.D.
(Resident Member)
Cedar Rapids,Iowa
RENEE'MISKIMMIN
(Student Member)
Philadelphia,Pennsylvania .'
"Jj1-44-3
]_NEC ' PITTSBURG ADUET EDUCATION CENTER
;- EDUCATION OPPORTUNITY PROGRESS
20 E.30Th ST..:PITTSBURG,CA 94565ACCREDITED:
TELEPHONE(510)439-2031 �IC�eotau, QmocaY�on 4
�J
FAX(5M 432=8490' cP" and ae
RECEIVED
May 11, 1994
MAY 2 3 �t
Young,rParents Program
n Pittsburg Adult Center
OF SUPERVISORS
COSTA CO. 20 East 10th Street
`- Pittsburg, CA 94565
Contra Costa County Board of Supervisors
651 Pine St
Martinez, CA 94553
Dear Board Members,
We the students of the Young Parents Program wish to express our
concern over the closure of the Los Medanos Hospital, and the
proposed building of a new county hospital in Martinez . Many of us
use the County Hospital. in Martinez, and have appreciated the good
care we and our children have received there. It' s use does,
however, cause problems for us .because of its distance from our
homes, and the fact that we must use public transportation.
We are in favor of the county purchasing the Los Medanos Hospital
and turning it into a county full service hospital. We feel that
since many of the patients using the county facility are from our
area that it-would be an advantage to our community and certainly
to us.
Thanks fnr read i nn niir l o}+-pr OnnCi G'7c,ri nn n„r ciirer,r.rt fir the
purchase by the county of the Los Medanos Hospital .
Sincerely;
Pittsburg Young Parents - _. .�
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