Editorial: Let SVMH audit shed light
May 16th, 2011
Let the audit begin.
For the moment, everyone is on the same page with respect to Salinas Valley Memorial Hospital and its finances.
Assemblyman Luis Alejo’s call for a state audit has been approved. The hospital leadership says it welcomes the audit. State officials will be here beginning next month to inspect the SVMH books.
The Joint Legislative Audit committee voted 10-2 Wednesday in favor of launching an audit of SVMH to shed light on, among other things, exactly how the hospital was able to afford 22 years of investment toward a nearly $4 million pension payout for CEO Sam Downing, 66, who retired April 30 after a 40-year career. Downing’s sudden retirement came in the wake of media inquiries about his payout and yearly $668,000 salary, making him the third highest-paid public administrator in the state.
Downing’s salary and payout formed the main catalyst for public outrage over SVMH spending and the call for an audit. As audit committee member Sen. Doug La Malfa, R-Butte Co., observed: “The size of Downing’s pension payout is not passing the smell test in the eyes of the public.”
Exactly what an audit will find is up for speculation. But some of Alejo’s claims reflect what a lot of people are wondering about:
- Has SVMH spent exorbitant amounts of money on executive pensions and millions on financial consultants toward that end?
- Was Downing’s payout legal and in line with compensation paid to other public executives, as the hospital claims?
- How have the pension and retirement pay for Downing and other executives figured in the plans to layoff hundreds of employees?
- What will be the effect of these reductions on the quality of patient care?
- Do hospital contributions to nonprofits create a conflict of interest because of board members’ ties to nonprofits receiving SVMH Foundation money?
Meanwhile, the hospital Board of Directors is confident an audit will find all of the fiscal books in order and no conflicts of interest among its members, particularly Rabobank’s relationship with SVMH.
It’s frustrating that this process involves more spending, especially as the state tries to close a multibillion-dollar budget deficit and SVMH is besieged with financial challenges leading to the layoff of hundreds of employees.
SVMH paid $25,000 to a Sacramento lobbyist for about two days of work. Hospital officials said they needed the expertise of someone who could help them navigate through the state committee political process.
Meanwhile, the state estimates it will spend six months and $250,000 to conduct the audit of the Salinas hospital.
To their credit, members of the audit committee raised concerns about the expense but most agreed that it will be money well spent if the audit provides the kind of transparency needed to clear the air over SVMH finances. Some committee members are also hopeful that the audit might even produce results that lead to broader state reforms for how public hospitals and other agencies compensate their CEOs and other administrators.
Assemblywoman Alyson L. Huber, D-El Dorado Hills, said she was prepared to oppose the audit at Wednesday’s meeting. Initially she said it’s a local issue that should be resolved locally. Hindsight: That’s what a more open process by SVMH officials could have provided — a local solution — when they began getting peppered for answers to questions about Downing’s payout from the media and a skeptical public.
Huber later joined Alejo, Assemblyman Bill Monning, D-Monterey, and seven others in approving the audit.
Monning reminded those at the committee meeting that an audit is not a prosecution or an indictment of SVMH.
He’s right. At this point, hope for the best: That only good should come from the audit if it helps SVMH and other public agencies become more transparent in their important work, and possibly leads to changes that benefit all the lives touched by these vital institutions.
We’ll know more in December.