I am often asked “what happened to get MCDH into the situation that it is in right now?” It is very natural for people to want to be able to identify a person, persons or an event that caused such a significant reversal of fortune. In the case of MCDH I feel that it is a number of events that have hit us, particularly in the past 2 years. You could call it a “Perfect Storm” situation. I hope that you will give me a chance to explain “what happened to MCDH.”
I took over as the CEO of Mendocino Coast District Hospital in November of 2006. At that time MCDH was in very good shape in some respects and poor shape in other areas. After suffering a loss exceeding $5 million in fiscal year 2006 (ending June 30, 2006), MCDH was on a very strong path towards recovery. Due to the phenomenal efforts of Jon Baker, Interim CEO and the entire MCDH family, Critical Access Hospital designation had been approved and became effective on October 5, 2006. This ensured that the hospital would have a more stable source of Medicare payments effective immediately at that time. Jon Baker and the staff had also done a great job of identifying some programs that were losing money for MCDH and eliminated them, putting the hospital on a stable course. On the negative side, the hospital was down to only $500,000 in it’s Funded Depreciation account. And just as significant, I soon learned that our (then) 35 year old hospital had some major physical plant deficiencies.
Gus Killion and Linda Dutcher made an appointment to see me shortly after I arrived for the purpose of bringing me up to speed on the hospital’s physical plant issues. I learned from them that (1) MCDH did not meet seismic requirements and that the estimated $5.0 million cost for retrofit was unfunded; (2) The Patient Services Building, although in use, was operating under a Temporary Certificate of Occupancy and that necessary improvements to complete it, were also unfunded; (3) the hospital’s CT scanner needed to be replaced and there was a source of funds for a new one through the Hospital Foundation; (4) However the hospital’s X-Ray Flouroscopy Room and X-Ray room also needed to be replaced and they were unfunded; (5) a replacement of the hospital’s boiler and chiller was also necessary because they were so old. The replacement boiler and chiller had been included in the original project for the Patient Services Building but had been dropped out due to cost. There was no source of funds to replace either of them. I have learned over the years that the hospital’s nurse call system, telephone system, sterilizers and other key equipment are also nearing end of life. The good news for today is that all of these projects have either been completed or have a source of funds available to complete them.
Many of these physical plant needs were so critical that they could have closed our hospital if they were not addressed. And in the case of the X-Ray and Surgery departments, they included equipment that is necessary to preserve crucial revenue for our facility. Some people have speculated that the Diagnostic Imaging Center is the cause of MCDH’s financial problems. That is absolutely not accurate. First of all, due to modular building construction, we were able to replace all of the equipment that was nearing end of life with new equipment in a new building by using construction technology that was faster and less expensive then retrofitting our existing department in the old building. And second, had we done nothing, we would be in worse shape because we would no longer have the ability to provide diagnostic imaging services at this hospital. Or, in other words, the millions of dollars that MCDH derives from diagnostic imaging procedures would be gone AND we would not be able to provide the excellent level of care that our patients need and deserve.
Tomorrow I will continue with Part 2 of changes that have occurred during the past 6 years that have affected our hospital and have contributed to our current financial situation. I will talk about changes in Medicare and Medi-Cal reimbursement, the change in our relationships with our doctors and, of course, the state of the National, State, County and local economy.