April 25, 2002
by JUDY HODGSON
"Imagine there was a state regulatory agency that told you you had to use gold ink when you print your newspaper, you had to use a certain kind of special paper, you had to devote so many pages of your paper and give them away for free -- and you could charge advertisers no more than this amount. You add up all of that and say, `But that's not enough to even break even.' And the state says, `Tough luck.'
"That's the exact position medicine is in right now in California."
That's the way Dr. David Gans, head of the utilization review committee, describes inadequate MediCal reimbursements, one of several reasons Mad River Community Hospital was forced to lay off 49 full and part-time employees last week, the first layoffs in its 30-year history.
Mad River is not alone in its plight. About two-thirds of the hospitals in the state are currently losing money on patient care, according to the March California Healthcare Association's CHA Special Report.
But while Mad River is not alone in facing falling revenues, it is a unique hospital in some ways and its financial situation is more acute, to use a medical term.
First, it is one of the last independent hospitals -- if not the last private, independent hospital anywhere, according to Doug Shaw, whose family owns the majority of stock in the closely held corporation. It is not part of a chain, like St. Joseph and Redwood Memorial hospitals. It is not funded by public money through special districts, like Jerold Phelps Hospital in Garberville. It cannot rely on donations or foundations to raise money. And it is certainly not tax exempt -- if and when it should happen to make a profit.
It also has zero clout in negotiating contracts with insurers like Blue Cross.
"Blue Cross, for instance, makes a contract with St. Joseph, Sisters of Orange -- a big multi-state hospital chain with lots of hospitals, lots of beds, lots of clout," Gans said. In other words, St. Joseph is paid more by Blue Cross than Mad River for many of the exact same services provided.
Even with all this stacked against it, two years ago the decision was made to expand. Outpatient facilities were opened in Eureka and McKinleyville. Ground was broken in November on the 22,000 square-foot Outpatients Pavilion.
"Originally it was going to be a lab and x-ray, rehabilitation center and medical offices," said Shaw, who is chief executive officer of Mad River. When St. Joseph bought General Hospital, the plan was totally revised to include a large outpatient surgery center with suites for endoscopies, eye surgery and other short-stay procedures.
But after a series of financial setbacks -- including a $150,000 remodel that ballooned into a $400,000 project, $500,000 less that expected in MediCal reimbursements, and a building loan that never materialized -- construction was halted last month and a consultant brought in to cut costs.
Shaw, Gans and consultant Richard Parsons, president of Performance Healthcare Inc. of Danville, Calif., sat down for an interview with the Journal Monday to discuss the hospital's financial crisis and what the plan is to turn it around.
What happened to financing for the new building?
Shaw: "Financing was supposed to be through a loan, but it never materialized. We were told it was in the bag, we're almost there -- but it wasn't.
"The building is going to happen. We're working with three banks right now. The building is a symptom, yes, but it's not why we did this [cut staff]."
Why the layoffs now?
Shaw: "We are prioritizing. We had to stop to put more effort into our ICU [intensive care unit] remodel.
Gans: "OSHPD [California Office of Statewide Health Planning and Development] is literally hell to work with. That project is over a year old and it's only 2,000 square feet. It started out as a cosmetic overhaul for $150,000. Now, 12 months later, it's cost more than $400,000."
How were layoffs determined and what are the implications?
Parsons: "We looked at all the departments. ... We worked with each manager to evaluate the impacts of a theoretical reduction in force. ... We tried to project as best as possible how to continue to draw blood, for instance, without any interruption in services. We didn't make a single decision without considering the implications."
What about direct patient care?
Shaw: "There were no nurses let go. There were a couple reassigned."
Gans: "Laying off nurses doesn't make any sense. If you're trying to save a car, you don't lay off the engine."
How financially stable is the hospital?
Shaw: "It's been difficult, especially the last three years. You can't really say red or black. A cost report can throw you off. The state took $500,000 out of our cash flow last November [MediCal]. ... It's not a science, it's a system. We may owe money, they may owe us money. In this case, we sent our cost reports in and they said you owe us. They don't give you any time to think about it. They just stop paying."
Since private stand-alone hospitals are rare or extinct, have you pursued partnerships?
Shaw: "We are partners with Quest Labs, the largest laboratory organization in the United States. We're in partnership with Tenet Health when we set up the [cardiac] catheterization lab."
What about a merger or outright sale?
Shaw: "We don't have a sign out."
Gans: "As a staff member, I would want to be very, very careful of who we would sell to -- a corporation that is strictly bottom-line, business oriented?"
You've brought in consultants before?
Shaw: "People tell me that, but we are not `over consulted.' Eight years ago we had someone in. And then two years ago there was a company here to help United Indian Health Services. They also helped us with our strategic plan. Two years ago we did a lot and now a lot of things are underway. ... Then came the big crunch."
What does the future look like for health care?
Shaw: "This may be the beginning of a meltdown. I went to a rural health care symposium in Sacramento four weeks ago. Rural hospitals are impacted first."
Gans: "This is a hospital trying to make it in an environment that is toxic for small hospitals. The same thing is happening to doctors. Doctors used to stand alone. If you come to see me and I take bad care of you, I'm the only person to blame. You can sue me, you can get another doctor -- do what you want. Now doctors get out of training a quarter million dollars in debt, frightened, and they go to work for people because they can't afford to open their own practice. Then their ethics are consumed by the ethics and demands of the organization they go to work for."
The North Coast Regional Water Quality Control Board is in violation of the Clean Water Act for failing to limit sediment discharges from Pacific Lumber Co. logging operations, representatives of an environmental group and a watershed protection organization said Tuesday.
Ken Miller of the Humboldt Watershed Council and Cynthia Elkins of the Environmental Protection Information Center said they are considering suing the water board after a marathon two-day, 24-hour-long hearing late last week in Eureka did not result in a strong plan of action to address flooding and water quality problems in Freshwater Creek and the Elk River.
The second week of the federal civil rights lawsuit brought by Earth First! activist Darryl Cherney and the estate of his deceased colleague Judi Bari against the FBI featured dueling accounts by FBI forensic scientists.
Bomb specialist Frank Doyle defended the FBI's initial conclusion that the bomb had been in plain sight before exploding, indicating the two activists were knowingly carrying the device. But Special Agent David Williams said that evidence suggested the bomb had been wrapped in a towel and hidden beneath the driver's seat.
The Cherney/Bari team claims the activists were improperly targeted because of their political views.
Federal Judge Oliver Wanger ruled April 19 that more water should remain within the Trinity River, rather than being diverted south for hydroelectric power and irrigation. The decision comes a year and a half after Bruce Babbitt, then Secretary of the Interior, signed an agreement to return roughly half of the river's water.
As part of a settlement of a suit filed by three Humboldt County environmental groups, the Environmental Protection Agency has agreed to study the impacts of 18 pesticides on endangered species.
Under the settlement, to be signed Friday, EPA will consult with the National Marine Fisheries Service and the U.S. Fish and Wildlife Service on the effects of such pesticides as atrazine, Roundup, and diazinon on listed species.
The suit was filed by the Humboldt Watershed Council, the Environmental Protection Information Center and Californians for Alternatives to Toxics.
"We welcome the EPA's resolve to take these first important steps to protect some of the nation's most highly valued and imperiled species," said Patty Cleary, executive director of CATs.
Environmental groups opposed to the U.S. Forest Service's approach to fighting wildfires won a key victory April 22 when a federal judge halted a logging operation designed to reduce the fire danger in the western Trinity mountains.
The plan involved removing trees killed during the Megram fire in 1999. Environmental groups including the Sierra Club, the Environmental Protection Information Center and the Center for Biological Diversity maintain the plan's real purpose is to harvest timber with little reduction of the fire danger to neighboring communities.
Citing fears that the North Coast will be left out of railroad redevelopment, the Humboldt County Board of Supervisors voted Friday to ask for amendments to a bill currently in the state Legislature.
Assembly Bill 2224 would create a Sonoma-Marin Area Rail Transit District for the purpose of commuter transit on the southern end of the Northwestern Pacific line. The North Coast Railroad Authority has expressed concern that rail freight -- perceived as the heart of any future rail service in Humboldt and Mendocino counties -- is being excluded.
In a letter to the bill's author, the board asks that an operating agreement be created between the NCRA and the new transit district, and that the NCRA be given a seat on the district's board of directors.
Jim Stretch, Rio Dell's interim city manager, announced he is leaving his position next month, paving the way for James Buell, who will occupy the office on a temporary basis.
Rio Dell continues to struggle in its search for a permanent city manager. The city has been looking ever since Loretta Nicklaus was picked as Humboldt County's chief administrative officer last October.
Nelson, New Zealand, Eureka's new sister city, will be receiving a visit from an official delegation in September.
The Eureka City Council voted to send a three-member delegation April 16. The council also stipulated that the delegation's members would have to raise their own funds to cover the cost of the trip.
A lawsuit filed by the Northern California Association of Homebuilders against Pacific Union School District has been settled.
In its lawsuit, the association claimed that the district had illegally imposed a development fee on new construction that added $2.05 per square foot to all new residential construction. Development fees are supposed to pay for school expansion when facilities become overcrowded. The association claimed that Pacific Union was overcrowded because it had intentionally attracted students from outside the district, not because of development within the district.
The settlement stipulates that Pacific Union not collect the fee from those building new residential units until they have reached capacity with students from inside the district.
If you could send a representative object ahead into the future to explain the time you live in, what would it be?
A milkcan, of course.
Well, it makes sense in Ferndale. To celebrate the town's 150th anniversary, a time capsule is being put together inside a seven-gallon milk can for opening in 2152.
Time capsule committee chair Barbara Taubitz said likely objects include copies of local newspapers to show what people talk about in 2002, grocery fliers to document how much items cost and a publicity poster from The Majestic to show what else was going on in Ferndale besides dairy farming.
"Of course, we're open to suggestions," she said. There's just one condition: No electronic media, please. "Most of my research shows that you don't want to put things in that have too much technology, because the technology to read it won't be around in another 150 years."
Ideas? Call Taubitz at 786-4244 or email her at LionHouseFerndale@cox.net.
Following an especially severe episode of vandalism at Humboldt Redwoods State Park, the park rangers are considering an unusual step: placing small infrared cameras in the redwoods.
The cameras may allow park staff to identify the people stealing wood products or damaging restrooms, said Steve Horvitz, superintendent for the Eel River sector of California State Parks.
"More importantly, they can alert us to the fact there are people out there," he said.
The extra surveillance comes after two large redwoods within park boundaries were illegally felled, possibly to harvest their burl. The trees were between 200 and 300 years old.
Horvitz said surveillance techniques had been successfully used in other state parks, but that this marked the first time they were installed in Humboldt Redwoods.
"Unfortunately, vandalism is a common problem," he said. "Our units on the coast generally have more of a problem, but we're beginning to see a trend on the Avenue of the Giants." There have been problems with damage to public restrooms, theft of park property and damaged water lines as well.
"In general it's very difficult to investigate these," Horvitz said. "If we have techniques like this, it increases our ability to investigate. It's not surefire, but it gives as another tool."
When Jackie Brumback got a letter from the IRS this week informing her she might qualify for a tax break for the working poor, she had to giggle.
"I just said, `I don't think so'," laughed the Garberville resident.
That's because a week prior, Brumback had come home and scratched a lottery ticket worth $90,000. "I'm still in shock," she said.
Brumback plans to use some of the money to buy herself a vehicle -- she's always wanted a small truck, she said. And she wants to buy her mother a couch, because the current one is too small. Other than that, she plans on keeping the money for a rainy day. She'll continue her job at Sentry Supermarket.
No luxuries? "Well, I'm going to fly my son out from Colorado," she said. "That'll be a real luxury."
Louisiana-Pacific may be looking to sell its Arcata particle board plant to a Crescent City company.
"We can confirm we are in very preliminary discussions," said Mary Cohn, corporate communications specialist for L-P.
"All we're doing is looking at it," said Dwayne Reichland, president of Hambro Forest Products, in a telephone interview from Crescent City. "There hasn't been anything formal."
There has been a tour of the facility, however. And while neither L-P nor Hambro would confirm any specifics of a possible sale, the Arcata plant would fit the Crescent City company's profile -- Hambro specializes in recycling wood waste into particle board.
Hambro is small and nimble enough to remain profitable in today's rough wood products market, Reichland said.
L-P, on the other hand, has had trouble in recent years. Sales fell 20 percent during 2001 due to lower lumber prices. L-P lost $171.6 million over the last year. The company is not alone; a soft market for forest products has dragged many other timber companies into the red.
Hambro has stayed healthy because it has found a niche -- the small, employee-owned company specializes in flooring for manufactured homes.
"It's a small part of the wood market -- something we can do that [big companies] cannot," Reichland said.
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