San Francisco Chronicle: Leaked financial documents threaten CPMC deal
July 2nd, 2012
John Cote, SF Chronicle
Mayor Ed Lee’s deal with California Pacific Medical Center on a $2.5 billion overhaul of their medical facilities in the city, including building two new hospitals, took a new hit Monday after an anonymous whistleblower released internal financial documents that cast doubt on key pillars of the deal.
Lee has heralded the agreement, which includes building a 555-bed hospital at the intersection of Van Ness Avenue and Geary Boulevard, as a jobs creator that will ensure the city’s medical future.
The documents, though, show that the Sutter Health-affiliated medical group contemplated just days before the deal was announced in March the possibility of eliminating 379-full time positions at California Pacific Medical Center by 2018 to achieve $63 million in savings, an amount that grows to $70 million by 2022.
The documents, which include long-term financial projections for Sutter Health’s West Bay Region, also indicate that California Pacific Medical Center’s charity care commitment, which has clauses tying it to financial performance, could be substantially less than the called for in the deal.
The Sutter Health affiliate, in public statements about the deal with the city, has said that it “is making an unprecedented commitment” to operate a rebuilt St. Luke’s Hospital serving lower-income residents in the city’s Mission District for the next 20 years.
But the documents depict a scenario where the medical group could actually close St. Luke’s in 2020, less than four years after its projected re-opening in fall of 2016, under an escape clause in the deal.
Their release comes after it was revealed last week that Lee’s administration is renegotiating the portion of the agreement dealing with St. Luke’s because new financial projections showed it could be closed much earlier than the agreed upon 20 years.
Sam Singer, a communications specialist hired by California Pacific Medical Center, dismissed the newly released documents as “drafts that were discarded and not used.”
“This is a genuine red herring,” Singer said. “They are drafts; they have no meaning in reality. … They were discarded because they were not correct.”
But it appears that the documents are of concern to at least a key group of supervisors that represent swing votes on the Board of Supervisors, where the agreement is currently being considered.
Four supervisors — David Chiu, Malia Cohen, Christina Olague and David Campos — sent a letter Monday to Dr. Warren Browner, California Medical Center’s CEO, saying:
“CPMC has not only failed to explain to us the apparently drastic change in its finances, but to the best of our knowledge has not given city staff all the facts and figures they need to understand the problem fully and address its implications for the security of St. Luke’s and the other elements of the agreement. This is outrageous and completely inexcusable.”
The letter also calls for approvals of the deal to be pushed back beyond the July 17 date currently slated for a vote before the full board.
“The point is that three months ago, even before the terms of the agreement were finalized, you contemplated a scenario in which the financial triggers governing the most important of CPMC’s proposed healthcare commitments were badly breached, and hundreds of jobs were lost, based on accounting methods you may still plan to use. Despite this, you left these flawed triggers in place, and failed to disclose to City staff or to us the potential for these extraordinary changes against operating income… or their negative impacts.”