Hospital deal in danger as papers suggest breaches
San Francisco Chronicle, 7/3/12
Mayor Ed Lee's deal with California Pacific Medical Center on a $2.5 billion overhaul of its San Francisco medical facilities is in jeopardy after internal financial documents were leaked showing hospital officials considered cutting hundreds of jobs, paying substantially less in charity care than envisioned in the deal, and could close a hospital despite pledging to keep it open.
A medical center spokesman said the documents were "drafts that were discarded and not used." But the revelations made public Monday raised the ire of members on the Board of Supervisors, where the agreement is being considered. Some members are questioning hospital officials' trustworthiness.
The documents and financial models obtained by an anonymous whistle-blower showed that days before an agreement was reached with the mayor, Sutter Health officials considered eliminating 379 full-time positions at California Pacific Medical Center.
The documents also depict a scenario where the Sutter-affiliated medical center would pay much less in charity care than the $86 million annually envisioned in the deal and have the ability to shut down a Mission District hospital serving lower-income residents after four years, despite a pledge to operate it for 20.
'Troubling and startling'
Hospital spokesman Sam Singer called the documents "a red herring," but board President David Chiu found them "incredibly troubling and startling," and said trying to minimize them as unofficial drafts "is really beside the point."
"The real point is that three months ago, even before the terms of this agreement were finalized, they contemplated a scenario in which the financial triggers that govern the most important aspects of the proposed health care agreement were breached," Chiu said at a City Hall news conference to make the documents public. "And despite this information, they allowed these flawed triggers to stay in place" in the deal.
The deal, a portion of which Lee was already trying to rework ahead of a July 17 board meeting, now appears likely to be delayed and modified.
Chiu joined fellow Supervisors Malia Cohen, Christina Olague and David Campos in sending a letter Monday to Dr. Warren Browner, California Pacific Medical Center's chief executive officer, blasting medical officials' behavior as "outrageous and completely inexcusable." The letter called for approvals to be pushed back so the deal can be re-examined.
Majority of supes worried
Two other supervisors, Eric Mar and John Avalos, also voiced concern about the agreement. Combined, they represent a majority on the 11-member board.
Chiu and Cohen called for independent verification of California Pacific Medical Center's books and ironclad guarantees that St. Luke's Hospital in the Mission District will be rebuilt and remain open for 20 years.
"Let's be clear," said Cohen, whose district in the southeastern section of the city is near St. Luke's. "These negotiations must be informed by actual financial information and not just by the word of CPMC's leadership, which we have unfortunately learned is untrustworthy."
The complex hospital deal would allow California Pacific Medical Center to develop three campuses in the city, including rebuilding St. Luke's, and build a huge state-of-the-art hospital and medical office building on Cathedral Hill at Van Ness Avenue and Geary Boulevard.
The medical group is facing a 2020 state deadline to either retrofit or rebuild hospitals to meet seismic safety standards.
The deal Lee struck in March includes what the mayor's administration contends is $1.1 billion in community benefits to help offset the impact of situating a huge hospital at one of the city's busiest intersections, including $20 million for transit projects and $63 million for affordable and other housing programs.
Figures on jobs criticized
Lee has also touted the project as a jobs engine that would create 1,500 construction positions, retain 6,000 existing medical center jobs and add at least 200 permanent spots.
But those and other figures have already been criticized by unionized nurses, hospital workers and community groups who want the mayor to cut a better deal to provide more charity care and jobs for city residents. The deal's potential to drive up taxpayer-funded health care costs for city workers and retirees has also drawn scrutiny.
Last week, supervisors were shocked to learn that the mayor's office was trying to renegotiate the portion of the deal on keeping St. Luke's open, which is vital to several supervisors.
Under the current agreement, California Pacific Medical Center would be allowed to close St. Luke's if the medical center's systemwide operating margin falls below 1 percent for two years in a row.
Just a few months ago, Lee's administration and medical center officials depicted that possibility as only a doomsday scenario where the hospitals were facing a financial meltdown.
But on June 13, Sutter Health officials showed the mayor's staff projections that indicated the trigger point was much closer - figures that have yet to be provided to the Board of Supervisors.
This comes as Sutter Health has been involved in litigation over hospital operations in San Leandro and in Marin County. Last month, an arbitrator awarded Marin General Hospital $21 million after it sued Sutter in August 2010 alleging Sutter illegally funneled $120 million from Marin General before returning the hospital to the Marin Healthcare District's control.
'The mayor wants changes'
"We were hopeful and optimistic that such dealings wouldn't continue here in San Francisco," Chiu said. "Unfortunately, these revelations suggest that there has been an element of deception in Sutter's representations to our city."
Lee is now insisting the deal be revised to ensure St. Luke's stays open, something California Pacific Medical Center officials have yet to agree to.
"The mayor's not interested in these triggers anymore," said his spokeswoman, Christine Falvey. "He wants a contractual agreement to keep St. Luke's open. ... The mayor wants changes."
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