Hospital Weighs Options

Jan 12, 2012


Salinas Valley Memorial Hospital has been a public hospital for nearly six decades. Today, it’s operating at a loss, and weighing its options. How the hospital got in this position depends on who you ask. 

  It’s a challenging time at Salinas Valley Memorial Hospital.  After two years in the red, it stands to lose about $10 million this fiscal year.  It also recently laid off staff and is being audited by the state for what State Assembly Member Luis Alejo calls a lack of transparency. “The public has a right to know what decisions its making and have easy access to the documents to inform the public about what this hospital is doing,” he says. Decisions like the one that gave former CEO Sam Downing nearly 4 million dollars upon his retirement and, prior to that, an annual salary close to 800,000. “That's twice what Pres. Obama earns running the country, and this is for small hospital district in the Salinas Valley,” Alejo says. 

The audit is still underway, but already Alejo says he’s noticed changes.  The hospital now posts its financials on the web, and the Board ended supplementary pensions for executives, like the one Sam Downing received. What it hasn’t solved is its financial problems, which interim CEO Lowell Johnson chalks up to the economy.“We, like many other businesses, are struggling with volume declines and trying to contain our costs as best we can to live through this recession,” says Johnson.  “Volume declines” – that means fewer patients filling the hospital’s beds.  The cash hemorrhage led its board of directors to seek advice from business consultants about how to save the hospital.   

Millions went to a group called Wellspring Partners, a firm that Johnson has followed to other interim positions.  “If you wrote me a check for $8 million that didn't bounce, and I wrote you a check for $40 million that didn't bounce, would you be getting a good deal? That's exactly what this organization did,” Johnson says. “It wrote Wellspring a check for roughly $8 million, and they helped us find $40 million in improvements. A good buy and wisely done by the Board of Directors.”  Those improvements came in the form of changes in how the hospital operates.  In orthopedic surgery alone, Johnson says they cut costs by 25%.   The consultants also suggested a more drastic option: sell the hospital to a private, for-profit healthcare group. But Johnson says the board has not decided that selling is the way to go, and adds, “I don't even think there's a leaning of what people might want at this point.” 

But union leader John Borsos doesn’t buy it.  Borsos works for the National Union of Healthcare Workers, which represents about 40% of the hospital’s staff.  “My suspicion has always been, going back to December of 2010, that the hospital was positioning itself to sell, not with the interest of keeping it a community-run, community-interested facility,” Borsos says.  To save money, he says the hospital should stop spending millions on outside consultants.  “There is a viable business here, it's just been badly mismanaged,” Borsos says. “The way that you address those problems is you don't sell off the asset that really is held by the community and the public and turn over to a for-profit corporation like HCA or a big multibillion dollar corporation like Sutter health.” 

Interim CEO Lowell Johnson says another option could entail building on its profitable alliances that already exist with Stanford University Hospital.  “We’ve got cardiac surgery, we've got neonatology, we've got perinatology,” Johnson points out. “Our hospital stays as a freestanding public district hospital, and has more relationships with Stanford.”  Whatever happens, Johnson says that voters will have a say in where Salinas Valley Memorial Hospital goes from here. 

SVMH is holding a public meeting on the possibility of affiliating with another hospital.  That’s Thursday, January 12th at 6:30pm in the Cislini Plaza Conference Room at SVMH.  The hospital’s address is 450 East Romie Lane in Salinas.