In the news: Salinas Valley Memorial Hospital in a new game – transparency

July 4th, 2011

Editorial, July 1, 2011 – The Salinas Californian

Since its first official meeting decades ago, the Salinas Valley Memorial Hospital board of directors has operated mostly out of public view. This comfort zone has served the board well — until recently.

Now that assorted controversies have thrust the SVMH board into the public spotlight, it behooves board members to keep the public district hospital’s business in the public eye.

Questionable board actions came to light in April when media reports disclosed that recently retired CEO Sam Downing received nearly $5 million in lump-sum payouts approved by the board, in addition to his annual pension of $150,000. Those payouts are well above what executives in comparable positions have received. In the midst of hospital cutbacks, including the layoffs of hundreds of employees, news of Downing’s windfall raised public outrage and questions about board spending. Adding to suspicion about the payout was the way it was structured so as not to trigger Internal Revenue Service attention. What the board did was legal, but secretive and unbefitting a board that reports, ultimately, to voters. Revelation of the payout led to the state Legislature appointing an auditor for the district. The auditor’s report is expected by year’s end.

Meanwhile, labor negotiations have broken down, leading to a one-day strike by 200-plus hospital union members and a two-day lockout by management.

The board hired top-dollar consultants to help structure Downing’s payout and payouts for other managers — another questionable expense. It spent $25,000 on a Sacramento lobbyist to fight the state audit. Close to $1 million more has gone to another management consultant, McKinsey & Co., for a report about the hospital’s prognosis for the future. The board also took great pains to try to keep the existence of that report secret, having its law firm hire the consultant so even the existence of the report could, ideally, be kept from public knowledge.

But this week, that report was leaked to The Salinas Californian. It contains recommendations for major changes, including possibly merging the hospital with a larger health care system and retooling its operations and services to strengthen SVMH’s market position. The report, which also reveals details about the hospital’s current financial condition, is meant to help SVMH survive the recession and meet the requirements of forthcoming national health care reforms.

Hospital officials objected to The Californian publishing stories based on the report. They said its contents fell under attorney-client privilege because the hospital’s law firm hired the consultant. The officials also said the report contained “trade secrets” that shouldn’t be shared with competitors in the regional health care market.

But the hospital board’s actions speak louder than their objections. While board members have — eventually — said they welcome the state audit and broader public scrutiny, they continue to meet and make critical decisions behind closed doors.

Disclosure of Downing’s excessive payout did not come voluntarily from the board but only after news media inquiries. The board went to great lengths to hire financial specialists to keep the IRS off its trail. Several different accounts were used to fund the payout. The bookkeeping maneuvers were legal, but why would a public hospital board want to avoid the checks and balances of government?

Now, with the McKinsey report on public record, it is clear that the board has taken pains to conceal even more of its actions. This is, again, very troubling to those who will be directly impacted by those actions. 

It may anger SVMH officials, but publishing the McKinsey report is in the public’s best interest. It brings to light the process that will likely determine the future of the hospital, which was built with public tax dollars. That process and the information that goes with it must be shared, not hoarded, by elected officials. The hospital’s future is not only about its bottom line but about a valued institution’s place in the Salinas social structure, about the hospital’s quality of services and how patients and taxpayers will continue to be served.

Hospital board President Jim Gattis goes to lengths to remind us that SVMH gets only about 1 percent of its income from public money. But it gets a lot of mileage from its public district designation in the form of tax breaks, etc. And Downing and the board weren’t seeking just a 1 percent share from the public when they placed Measure W, a $392 million bond, on the ballot in August 2008. They wanted considerably more from residents of the hospital district, which stretches from Moss Landing to Gonzales. (The measure failed to achieve the two-thirds majority necessary for passage.)

SVMH board members, accustomed to keeping their cards close to their chest, now find themselves in a new game: transparency. It may be uncomfortable at first, but their role as public servants — elected to serve in the public interest — requires them to operate openly, in full view of their constituents. Except for those exceptions allowed by the California Brown Act, a public agency’s business should be out in the open and subject to scrutiny by taxpayers and citizens. Many, many people in the Salinas area have a vested stake in what happens to their community hospital. As elected officials, the SVMH board is bound by oath and law to keep the public’s business public.

The Salinas Valley is not the only community stressed by the changes under way in the health care system. The entire nation seems disturbed by the uncertainties about how national health care reforms are going to impact delivery of services. Patients, taxpayers, health care professionals and staff all have a profound interest in how Obamacare plays out in their lives. A board that takes that public process behind closed doors breeds suspicion and mistrust. A board committed to involving the public every step of the way is a board that will gain the respect of its community — possibly even the requisite super-majority support for passing a bond, should another one be sought in the future.

Greater public understanding of the challenges SVMH faces can only strengthen support for an institution in which residents already take pride — even if that understanding may weaken support for individual board members.