Hospital Board votes to proceed on county takeover proposal

Hospital Board votes to proceed on county takeover proposal

Michele Ellson

Alameda Hospital’s board unanimously signed off on a proposal Monday to explore a deal that would see Alameda County’s medical system taking over management and operation of the financially ailing hospital, a deal board members said they’re optimistic about despite the circumstances that produced it. The deal could be closed by the end of this year.

Health Care District Board member Robert Deutsch said the he and other hospital staffers have long marveled at the hospital’s ability to survive on its own as the number of freestanding community hospitals has dwindled.

“Unfortunately in 2013, this board and myself have come to the conclusion that the impossible can no longer be pulled off,” Deutsch said.

Board member Jordan Battani said collegial meetings between leaders of the hospital and Alameda Health System – the rebranded Alameda County Medical Center – offered a glimpse of what she hopes will be a productive partnership. She and others said the goal of the deal is to retain an on-Island emergency room that they believe Alamedans value.

“I like to believe that this sets the tone for moving forward,” Battani said of the meetings.

Managers at Alameda Hospital and Alameda Health System have been pursuing the deal for six months, Alameda Hospital Chief Executive Officer Deborah E. Stebbins said. Board president J. Michael McCormick said the hospital board and its management have been seeking out an affiliation or merger deal for more than four years, talking to more than a dozen potential partners in the process.

Chief Financial Officer Kerry Easthope said the deal could generate $15.5 million in revenue for the combined system during its first year, a number that would double by 2018. If the terms of the non-binding letter of intent outlining the proposed deal are finalized, the hospital will get $3 million to pay down overdue bills, and additional funds – or help securing them – to cover costs estimated at $15.5 million for near-term seismic repairs, $7.5 million for deferred maintenance and $1.5 million for an electronic health records that Easthope said must be in place by 2016.

The number of acute care beds filled on an average day is projected to nearly double, from 31 to 59, while the number of outpatient surgeries performed every year would grow from about 2,000 now to 5,500 – with the county medical system’s doctors performing roughly the same number of surgeries physicians with Kaiser Permanente did when they were using Alameda Hospital’s operating rooms.

Alameda Health System Chief Executive Officer Wright L. Lassiter III, who attended Monday’s meeting, said he’s been looking for community hospitals to work with as part of a 2011 board-approved strategy to create a broader network of care across Alameda County.

“This is really about having an expanded strategy that says we’re going to try to consolidate the (system’s) departments into a network. Then we’re going to expand and consolidate independent hospitals, lower cost community hospitals in parts of the community we don’t serve. Alameda makes perfect sense for us,” Lassiter said. Alameda Health System is also pursuing a deal to take over San Leandro Hospital.

Between eight and 10 percent of the health system’s roughly $600 million budget –$50 million to $60 million – comes in the form of a federal subsidy the county system gets because it provides care for a “disproportionate share” of low-income patients and others who lack insurance, Lassiter said. (Another $100-plus million comes from a half-cent sales tax.) But as health care reform efforts roll out in the fall, that money will disappear, he said.

Meanwhile, the county system will be forced to compete with other care systems – primarily Sutter Health and Kaiser Permanente – for these newly insured patients.

“How do we make sure we have more earned revenue, as opposed to supplemental revenue? San Leandro Hospital (and) Alameda can assist us as we work to derive more earned revenue,” Lassiter said, adding that Alameda “doesn’t need to convince the community” the hospital serves it.

A handful of supporters turned out to speak in favor of the proposed deal, including Jim Oddie, district director for Assemblyman Rob Bonta, who served on the hospital board three years earlier.

“Personally, this is a big deal. You guys all need to be commended for the work you’ve done on this,” said Oddie, himself a former member of the hospital’s finance and management committee. “It keeps our hospital open, and helps us to be part of a bigger picture.”

Jeff DelBono, political director of the local firefighters union and a member of the Alameda Labor Council’s executive committee, also offered support for the deal, saying the loss of the hospital would cost hundreds of people their jobs and force the department’s firefighter-paramedics to spend more time off the Island.

“It’d be devastating for the citizens and also for the paramedic service if we lost that emergency room,” DelBono said. “The firefighters association and paramedics absolutely want to see everything done to save the hospital. If that means merging with another hospital and expanding the service, I’m here to support that.”

The Alameda Health System board’s approval of the letter of intent will kick off a 90-day due diligence period; an agreement could be reached by mid-September, according to a timeline provided to the health care district board, and implemented by the end of the year.

A trio of public meetings on the proposal have been scheduled, with the first taking place at 6:30 p.m. June 27 in the Dal Cielo Conference Room at Alameda Hospital, 2070 Clinton Avenue. A second meeting has been scheduled for 9:30 a.m. July 23 at Mastick Senior Center, and a third for 6:30 p.m. July 29 at the Harbor Bay Community Center.

Related: Alameda Hospital in affiliation talks