Novel Health System Plan Is Faltering

Five years ago, the Alameda County Board of Supervisors got special state legislation to form a new governing body -- the first one like it in California -- to oversee the county’s troubled public health system.

Now, the bold experiment is faltering. Five of the 11 trustees on the Alameda County Medical Center Authority Board recently resigned, the chief executive has been fired and the authority faces a growing deficit now estimated at $63 million.

County officials had hoped a separate entity with its own board could run the hospital system more efficiently, and make it more competitive in a managed-care environment. County supervisors believed the health system, including three hospital centers and three clinics, could be better run by a board dedicated solely to that task.

They also believed a separate oversight agency would have more flexibility if it weren’t part of the civil service system. But in the last few months, the relationship between the two bodies has soured. Each has leveled accusations at the other, culminating in the resignations of the five trustees en masse Sept. 22.

The county contends that the health system’s board never learned to live within its means, although the county has funneled $308 million in loans, cash and other payments into the system during the last five years. And though health system officials closed two clinics in July, displacing 25,000 patients and cutting 106 positions to make up a $12-million deficit, county officials say it was too little, too late. They felt obliged to step in.

Health system center officials say they were hamstrung from the start because the county didn’t give them enough money to run a $450-million-a-year operation, which sees 125,000 mostly uninsured and poor patients a year at the 199-bed Highland Hospital in Oakland; Fairmont Hospital and John George Psychiatric Pavilion, both in San Leandro; and three freestanding clinics.

Tensions intensified last month, when county supervisors removed the health system’s chief executive, Ken Cohen, as a trustee of the authority board, and reduced his ability to make large purchases. In response, the trustees felt they had no choice but to terminate Cohen. They said he had done an excellent job, but was no longer able to work effectively with county supervisors.

Supervisors were later surprised to learn their appointed board of trustees had given Cohen, who receives $245,000 a year, a two-year severance package. This so incensed them that they demanded to see the contract, along with those of other top medical center officials. The supervisors have asked the county counsel to review Cohen’s deal to see if it can be rescinded. Cohen declined to return several calls.

In the meantime, a team sent in August by county Auditor-Controller Pat O’Connell has been poring over the health system’s books. He said he no longer could trust numbers given to him by health system officials and was trying to get a reliable deficit figure. The health system’s own chief financial officer retired in the controversy, and an interim replacement left for a new job.

On Thursday, Efton Hall Jr., a health system administrator, was named interim chief executive. Robert Strawn, a former health system board president who was project manager of the audit team, was chosen as interim chief financial officer. Cohen is to remain on the job until his contract expires -- 60 days after his Sept. 17 termination.

To keep the health system afloat and cover the payroll, county officials have been sending $13 million every two weeks for about the last year and a half. County officials say the health system owes the county $166 million -- much of which they don’t expect to see again.

“Financially speaking, they got into a hole so big it’s threatening the rest of the county,” said Gail Steele, president of the Board of Supervisors. “It affects the other services for vulnerable people.”

She said it was the responsibility of the health system board and the chief executive to adopt a balanced budget -- something she said hadn’t happened in the last three years.

The five former health system board members and top system officials see things differently. When the five trustees abruptly resigned, they sent a blistering, four-page letter to county supervisors, accusing supervisors of failing to give trustees enough money to run the health system, and then blaming trustees and Cohen when things went badly.

“After extensive discussion, we trustees have concluded that we cannot continue to serve on a board that is routinely intimidated and hampered by a more powerful political body that appears unwilling to confront directly the issues that face this county,” the trustees’ letter said.

Trustees attributed the deficit to an increase in the number of uninsured patients, the rising costs of care and a drop in government revenue for public hospitals. “Their approach is contradictory,” said Robert Phillips, one of the trustees who quit after 2 1/2 years on the board. “They want it to be an independent entity, but did not give us the autonomy in terms of resources and support.”