Alameda County Officials Learn the Depth of Fiscal Problems at St. Rose Hospital

OAKLAND | Sept. 2, 2011 | Hayward’s St. Rose Hospital is borrowing from Peter to pay Paul as its increasingly dire financial situation becomes clearer to county officials already struggling to maintain its underfunded health care system.

A preliminary fiscal and operational audit of St. Rose urges the hospital’s management to institute improvements to its business process, cost containment and revenue streams.

The currently liquidity crisis became serious July 7 when St. Rose’s management requested $5 million in emergency funds from the Alameda County Board of Supervisors. Questions over the hospital’s operation and the logistics of noticing a board meeting during the August recess led to a denial of the request.

A week later, the hospital’s creditor, Cal Mortgage, extended a $3 million line of credit on the condition St. Rose procured a comprehensive audit. A full report is due in November. After St. Rose’s bid to become an independent operator in 2005, it received two years later a $43 million loan from Cal Mortgage.

On July 27, St. Rose management also asked the Eden Township Healthcare District for a $3 million short-term loan, it stated at the time, was needed to remedy a billing snafu stemming from a recently installed computer system. The inability to bill Medicare and Medicaid for work completed for over a five weeks period only exacerbated the hospital’s cash-flow problems. Alex Briscoe, the director of the Alameda County Healthcare Agency, said the billing problem has not been entirely fixed, but has recently become more than manageable.

Serious concern over possibility St. Rose could have fallen out of loan compliance initially pushed Briscoe to ask for the Aug. 30 special meeting of the board. If the hospital’s ability to pay its loan obligations came into question, he said, there was fear the Office of Statewide Health Planning and Development (OSHPD) could have instituted its right to takeover the facility and make changes to its management structure. Briscoe says the current situation is far better than he initially anticipated, but acknowledges significant problem still lie ahead.

“I think it’s very safe to say St. Rose Hospital in its current form is not viable without county support,” said Briscoe. Whichever method county officials choose to support the facility, it may not include county cash, at least, for the moment.

Alameda County Supervisor Scott Haggerty questioned whether St. Rose’s plea to financial help is merely a move for leverage in negotiating more county dollars. “Sometimes people come to us,” Haggerty said, “and they shut things down because they know it would be an unpopular thing to do and that we come in on the white horse, do a big favor and fix it.”

Briscoe says the preliminary audit specifically urges against the county giving St. Rose a quick fix. Instead, it focuses on long-term approaches for turning around its finances. Among the suggestions are staff cuts, the audit says will save over $6 million annually. St. Rose’s nurse-to-staff ratio, the audit says, is too high for a facility of its size necessitating a reduction in labor. Briscoe agrees with the assessment and says because St. Rose is a non-union shop its management will face fewer obstacles in forcing layoffs.

Despite last year’s landmark health care reform bill, the struggle to provide health care to the poor and indigent in Alameda County persists. “I’m concerned about the longer term impact all of the challenges we’re starting to get at different times has over our over-arching system,” said Alameda County Supervisor Keith Carson. As a higher percentage of the county’s aging demographic continues to grow, said Briscoe, so will pressure on local officials to provide care.

One of the long-term solutions to bringing economic health to the county’s health services, Briscoe told the board is to find new public revenue streams and explore consolidation similar to St. Rose’s bid to operate San Leandro Hospital. The preliminary audit backs St. Rose CEO Michael Mahoney’s plan to become part of the Eden Township Healthcare District increasing St. Rose’s ability to qualify for bigger chunks of federal matching funds. It also allows the facility the options of offering parcel taxes in conjunction with the District to increase revenues in the future

Categories: Alameda County Board, Alameda County Health Services, Alex Briscoe, Eden Township, Hayward, health care, Keith Carson, S.L. Hospital, St. Rose, tax

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