Mendocino Coast District Hospital Nonprofit Proposal Off The Table!

No white knight rescue for rural hospital funding issues

Marianne McGee

The Ad Hoc Hospital Fee/Structure Committee exploring shifting the Mendocino Coast District Hospital (MCDH) /Mendocino Coast Healthcare Distinct (MCHD) operations to a new nonprofit organization has decided that it is not financially feasible to pursue at this point in time.

The model that MCDH was exploring is a path that no other comparable hospital has completed and the first 30 minutes was listening to the experience of another rural Community Access Hospital (CAH) governed by a Healthcare District Board of Directors. Plumas District Hospital (PDH) explored this option about a year ago and decided to forgo it. Although their financial bottom line was significantly smaller with different fee proportions than MCDH, their Board of Directors concluded it was financially a wash, at best, with many unknown potential political and financial risks in the uncharted waters.

Funding for medical entities is extremely complex and different types of organizations, private, nonprofit or a public healthcare district, have a variety of reimbursements all with diverse formulas and regulations which are frequently modified. In addition to individual insurance company reimbursement rates, patient payments, fundraising, district taxes, Medicare and Medicaid programs, both the state and federal governments have supplemental programs to help the extremely expensive medical systems survive. While some of these programs are directly related to Medicare and Medicaid (MediCal in California), state and federal funding sources addressing financial gaps are subject to budgetary and legislative constraints and shifting priorities. Further confounding these complex circumstances, is the bewildering political landscape which may result in massive monetary mayhem. Given the fact that MCDH is already struggling for survival, it must proceed carefully and fully vet all funding options.

When staff initially investigated shifting to this potential governance transfer a year ago, the funding formulas for a nonprofit hospital with a large number of MediCal outpatient visits appeared to be very lucrative with an estimated 12 million dollar windfall over the three years, 2014-2016. The government is now in the process of turning its previous priorities upside down and is expected to adopt a formula incentivizing hospital inpatient visits and penalize organizations, like MCDH, which receive remunerations from the managed care program. Under these circumstances, MCDH could potentially lose in excess of 12 million dollars over the years 2017-2019.

Reorganizing to the nonprofit model would require MCDH to forego a number of the financial programs and resources it receives as a rural, CAH hospital district. The immediate impact of transitioning now would result in a $50,000 loss this year. Additionally, there is tremendous amount of work and expense along with the same risks that scared Plumas District Hospital out of moving in that direction. The estimate for the transition process is 2 million dollars and that is based on the assumption it would proceed smoothly, with full cooperation and support of all the state agencies that provide oversight. These are the same powerful state agencies that Steve Kobert told the MCDH Board in February have been mislead regarding our facilities repairs and updates over the last 2-5 years, so he is trying to build relationships and regain their trust. It would also require public education, re-branding and the district voter’s approval, thus a no brainer on proceeding.

As President Steve Lund wisely proclaimed “nobody is going to come to Fort Bragg on a white horse to save us, we have to take care of ourselves”. While there is no guarantee that the current programs benefiting MCDH now will remain in place, given the volatile funding crisis at the state and federal level, at this point in time the Ad Hoc Committee will disband and reconvene if circumstances change.

It was clear to Committee members they had done their due diligence to illustrate to the public that all options are being explored prior to submitting a new property tax measure. In the August phone survey voters did voice considerable support for an additional property tax, as well as even stronger support for maintaining Obstetrics and emergency care. This group believes a new tax is critical to the health of the hospital, especially as the earthquake retrofit is staring MCDH down quickly, as well as the monetary losses it deals with.

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