Supervisors Decry St. Rose CEO’s Lack Of Transparency Over Financial Status

BOS ROUNDUP
Mar. 14, 2012 | Alameda County Supervisor Keith Carson said the head of struggling St. Rose Hospital lied to the board last year about the financial status of the Hayward facility.

During a marathon five-hour board of supervisors meeting Tuesday afternoon in Oakland, it was also revealed St. Rose CEO Michael Mahoney was the person who first initiated contact with controversial Southern California health care provider, Prime Healthcare, to purchase the hospital if it were to fall into bankruptcy.

The board, though, unanimously approved allocating $2 million in funding to keep the doors open at St. Rose. Officials from the hospital said Tuesday without the infusion of cash, the facility had only weeks to live, but urged for a vastly larger pool of funding in the future just to break even.

Included was also approval for seeking a joint powers agreement between the county, St. Rose and the Washington Township Healthcare District in Fremont, despite continued frustration, the board said, with a lack of transparency emanating from St. Rose over the past nine months.

“Mike lied to us. He sat here and lied to us,” Carson pointedly said of St. Rose’s CEO Michael Mahoney. At a county health committee hearing last year, Carson recounted a specific exchange with Mahoney. “We asked him what the financial status was in the morning. It’s perfect. We’ve got money. We’re good,” said Carson. “That afternoon we got a letter saying we need money. We can’t make payroll.”

Supervisor Wilma Chan was less blunt, but agreed with the sentiment. “The leadership had said everything was going fine, the efficiencies had been realized,” said Chan. “Things were getting better. Things were going to be fine and yet after that we heard several times in private conservations–not in the public–that there were still huge operating deficits and there was a danger of bankruptcy or failure.”

“It has been frustrating to our board because of the lack of transparency and conflicting information that we have received about the financials,” added Chan. During a county health committee hearing on Monday, Chan asked for details on whom had reached out to Prime Healthcare. On Tuesday morning, Alex Briscoe, the director of Alameda County Healthcare Services, revealed it was Mahoney who had called officials at Prime on his own. Later, the chief turnaround officer hired by the county to fix St. Rose, testified the contact was made at the urging of a restructuring law firm affiliated with St. Rose. “I don’t think it was necessary to invite Prime to the table on that,” said Chan. “There are other ways of dealing with [potential bankruptcy]”

Despite a belief the inclusion of Prime Healthcare, an organization currently battling allegations it overcharged Medicare, is nothing more than an attempt by St. Rose to up the ante for procuring additional financing, the interim officials charged with quickly turning around the hospital’s fortune said Tuesday the facility is running on empty.

Mac Nakayama, a consultant tapped by the board of supervisors last January, said “My assessment is with its poor cash position with an inability to pay vendors just to operate normally, it would be very difficult for this hospital to continue beyond the next few weeks.” Tracy Teller, the interim chief financial officer at St. Rose said it would need between $17-$18 million over the next six months for payables, payroll and to make scheduled bond payments. Teller later said the facility is losing between $800,000 and $1 million per month.

“This partnership that we’re going to be putting together, of course, is very dedicated to keeping the hospital open,” said Chan, “but it doesn’t have limitless resources.” She later said the county nor any other known entity can afford to pay nearly $1 million-a-month to maintain St. Rose.

Even then, Nakayama said St. Rose’s future would still be clouded with a annual infusion of cash. “I believe operationally, even if we had everything running perfectly, this hospital would have a tough time breaking even. It will always need an infusion of cash from somewhere.”

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