The MCDH Blog

An Update on MCDH’s Financial Recovery Plan
—Posted Tuesday, April 10th, 2012 at 6:12 pm—
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After 3 meetings between MCDH Senior Management and Officials of the United Food and Commercial Workers Labor Union during the past 45 days, I am very sorry to announce that the 2 sides have been unable to reach an agreement on a series of cost reduction strategies proposed by management that we believe would have brought our hospital back to a necessary level of financial stability in the next 15 months and would have preserved the level of services that are currently available at MCDH. 

 Our management team had sought 2 outcomes from these meetings.  First, we wanted to reach an agreement on some specific action steps that we can accomplish within the next 3 months.  At the very least we expected to receive a compromise offer from the UFCW leadership that would still allow us to move forward.  Second, we expected that ultimately the choice of a partnership solution between both sides would be put to a vote by our employees.  Neither of these steps was taken by UFCW. 

We regret that this inability to reach an agreement will have an effect on the services that we provide.  The MCDH Management team proposed the following 4-step plan to financial recovery. 

 

  • An immediate 5% reduction in hourly compensation for all staff.  This would match the 5% reduction that has already been in effect for hospital managers and supervisors for the past 4 weeks. 
  • A repeal of the 3% wage increase that is due to go into effect in July of this year. 
  • A repeal of the 6% employer contribution to the employee’s retirement plan beginning in July of this year.  Employer matches for fiscal years 2011 and 2012 would not be affected.  MCDH would continue to make required contributions into those 2 plan years in June of 2012 and June of 2013. 
  • The implementation of an employee contribution for dependent coverage under the current health plan.  Under this fourth step, MCDH would continue to cover all employees for 100% of the cost of the employee’s health insurance plan.  However, we asked that employees and MCDH share in the cost of dependent coverage.

 

MCDH Administration does not take lightly the gravity of asking our employees to help at this critical time.  Our plan includes having our medical staff contractors share in a 5% reduction as well.  Employees may think that the troubles that MCDH is experiencing are only happening in Fort Bragg and on our Coast.  They are not.  Each of us does not have to look far to see that other hospitals in our region, as well as cities, counties and businesses are also struggling.  We are not alone in this.  MCDH management has implemented several cost savings measures, including a management restructuring, a profitability improvement plan for home health, a labor productivity program and the 5% reduction in management salaries.  All of these steps will save over $1 million for MCDH this year.  However, at the rate that the hospital has been sustaining losses during the most recent winter months, this will not be enough to put MCDH back on solid financial footing.  Our inability to reach an agreement on a financial improvement plan means that management will continue to seek other ways to trim costs from our budget.  I will keep our employees and the community informed, as we continue to pursue ways to return MCDH to profitability.

4 Responses to “An Update on MCDH’s Financial Recovery Plan”

  1. TAMMIE BAIN says:

    First of all I feel it was wrong of ADMINISTRATION to force the managers to take a 5% cut before they seriously looked at and cut the fat at this Hospital. This is the first thing Jon Baker did after Brian Ballard was asked to step down. JON BAKER left this hospital in great shape. It feels like and looks like we are in worse shape then Brian Ballard left us! HOW CAN THIS HAPPEN? Yes I realize the economy is very poor, and insurance reimbursment is down, but REALLY, wheres the accountability? Yes we need to be as one and work together in order to get back on track, but some hard decisions need to be made at the top, WHO WILL DO THIS?
    Bottom line is TWO huge mistakes have taken place (that we know of) with the running of this Hospital which pushed us over the edge. That said its time to get moving and be smart…cutting services that will hurt the community and us is not the answer. Us employee’s are not the cause of this situation. I myself am willing to take some cuts, but not until some logical changes have been made.

    THIS IS SHAMEFUL

  2. GREG ZIEMER says:

    Hi Ray, I would like to talk to you in person about these issues. In the meantime, I ask again, who is accountable for the recent disastorous financial/arcitechtual decisions that have helped in large part to put us in this position? Can these people be held liable?

    I am willing to make sacrifices if and only if, these people are held accountable and if and only if the top heavy administration is cut back on. I do not feel that the people who do the hands on work with our patients, the people who work very hard( housekeeping, material management, nursing including cna’s, radiology, lab, etc.) should suffer financially. These folks do not make the decisions about how the hospital is run, we leave that to hopefully those more qualified. We TRUST in you.

    I will contact you soon about when we can meet. Thanks for your consideration. Greg

  3. ray says:

    Hi Greg, I would welcome the opportunity to speak to you at anytime. It is difficult to diagnose the root cause of MCDH’s financial difficulties because there are so many contributing factors. The “perfect storm” is a good analogy. Because it is on everyone’s mind, I will put up an update later today that identifies the major factors. Here are a few of them: 40-year old aging hospital and aging equipment, new Medicare programs designed to recover hundreds of thousands of dollars previously paid to our hospital, aging and attrition in medical staff, a declining economy resulting in declining utilization. All of this has resulted in costs that have escalated at a faster pace than revenues. Perhaps the straw that has broken our camel’s back has been the incredibly slow winter months. None of these factors was under the control of Hospital Administration and from my perspective I have been working diligently to respond to each of these challenges. I will not say that I have not made mistakes. Of course I have. I would agree with your assessment that we have been top heavy with management in the past. Recent decisions have been to eliminate 3 management positions completely and to reduce others and to reassign others as well. We are now at 19 managers, which I feel is reasonable for a $50 million business. In the final analysis, I accept the blame and accountability for our organization’s difficulties. I would say in my defense that many of these factors could not have been foreseen, and as I said previously could not have been avoided. But I do accept responsibility for not seeing the warning signs a year ago and for not making the changes that we are making now, back then. And finally, whether it is me in the CEO role, or someone else, these changes need to be made now.

  4. ray says:

    Thank you Tammie for your comments and your insight. First of all, I will agree with you Jon Baker did a wonderful job for this hospital and we will forever be in his debt. In the first few years after Jon’s departure and after critical access hospital designation, we took the work that Jon had begun and we improved upon it. When I arrived at MCDH in November of 2006 we had $500,000 in our reserves. Today we have $2,000,000 in our reserves. (That sounds like a lot of money, but it will all be gone in 6 months, if we do not improve the profitabilty of MCDH now). From 2007 to 2009 we had 3 consecutive years of profitability from operations, which had not happened at MCDH for a very long time. At the same time the quality of services at MCDH has received National recognition and we have received many awards. I certainly understand, however, that that was then and this is now. Your question of “how can this happen?” is important for all of us to understand. The answer is that we have changed since 2006. We had no choice. We had to change. Besides the fact that every business must change to survive, we had several factors that have faced us since 2006. We have had to deal with an aging hospital and aging equipment. Our medical staff is also aging and we have lost physicians. Medicare has gotten very agressive about taking money away from MCDH that was earned years ago. And yes, the economy has hit our hospital and virtually every business and public entity, very hard. As a result of all of these factors our costs have escalated faster than our revenues in the past 2 years. The extremely slow winter months have been like the straw that broke the camel’s back. Unfortunately, regardless of what we do today, I predict that Mendocino Coast District Hospital will continue to be at very high risk for closure in future years if we do not make some very large fundamental changes. Although we have an outstanding hospital here that provides medical services unparalleled for a small hospital, it is a fact that small hospitals in rural communities that are governmental (District) and not part of a large hospital system ARE GOING TO STRUGGLE. The hard decisions that you are anticipating will need to be made and they will need to be made very quickly. In fact they are already in progress. Just as you say. We have no choice. I will admit that I have made mistakes. However, I do not know what you mean when you say that 2 huge mistakes have taken place. I am not aware of 2 huge mistakes. Just in case you are referring to the new diagnostic imaging center, I will put an update on why diagnostic imaging is not the cause of our financial difficulties (and in fact improves our financial situation) on the website either today or tomorrow. None of this is about blame. Our employees are not being blamed. And if we insist, it makes the most sense to blame me. It would be nearly impossible to foresee all of the events that have changed our hospital environment in the past 2 years. However, I would agree that we would be better off today if I had seen some of this coming and made these necessary changes a year ago rather than today. Again, regardless of whether the changes were made last year or today, fundamental changes need to take place. Thank you again for taking the time to write your concerns. I appreciate the fact that you close by saying that you are willing to be a part of the solution. I thank you for that.

 

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