Tulare hospital could open clinics before hospital, financials shaky yet promising

The Tulare Local Healthcare District could open its clinics before the hospital itself, the district’s board was told Wednesday night.

The plan to reopen the clinics before the hospital was still in the air, the hospital’s interim CEO, Larry Blitz, said, but it was being heavily pursued.

“Supposedly, there’s a rule that you can’t do it. We’re crying hardship, that we really need the clinics, and the community needs the clinics open,” Blitz said.

The decision has been pushed from the California Department of Public Health to the Centers for Medicare and Medicaid Services (CMS), he told the board.

Staff for the clinics would be hired one to two weeks before they were to open, and supplies would be ordered closer to the opening date as well.

“We have the paperwork ready to go, once we understand that we’re ready to go,” he said.

Blitz stated that he and his partners at Wipfli saw significant opportunity in the reopening of the clinics — and that physicians were interested as well.

“There’s a tremendous upside to the clinics, which the last management group didn’t pay any attention to,” Blitz said. “I think that [the clinics] could be a profit center in all of the different areas.”

“When we came here, there were very few M.D.s and D.O.s involved in oversight in the clinics — in fact, it wasn’t even legal,” he said. “We have a number of different groups now that are interested in staffing the clinics. I don’t believe we’re going to have an issue with doctor oversight of the clinics.”

Efforts to reopen the hospital and its emergency room weren’t being sidetracked, though.

“We’re working with three different emergency department groups that are interested in coming here and supplying emergency services. Our goal is to open up the emergency room at the same time the hospital opens — it’s not a requirement, but everybody really wants that, and the community really needs that,” he said.

There was still no concrete date on a reopening, though.

“We’re doing the best we can, but the obstacles just keep jumping up,” Mike Jamaica, a board member, told the public. “We’re hoping, maybe by March or April, or maybe sooner. Just bear with us.”

The Financials

The hospital, once open, could realize significant profits with as little as 40 patients per day, according to the district’s interim management team.

Daniel Heckathorne, the hospital’s interim CFO, presented a forecasted income statement based on numbers from 2016 — as 2017’s haven’t been audited yet.

“We feel that there’s opportunity to save some costs. I think some of the obvious opportunities are — there were some pretty high management fees in the past,” he said, to chuckles from the crowd. “Secondly, we think there’s some areas where the hospital was overstaffed. We compared the staffing that has been at the hospital to the industry standards.”

Paired with other adjustments, the hospital could generate a $10m bottom line.

“We think it can go better than that,” he said. “We think this hospital can do well financially.”

But the road to reopening won’t be easy. The hospital could be out of cash by February.

“We have utilities, we have the maintenance — and, believe it or not, bankruptcy costs a lot of money in legal fees, we have legal action going on, that costs a lot of money,” he said. “We have a new team here that’s trying to get all the reports that are necessary to get the hospital reopened.”

“We’re doing everything we possibly can — we’re looking at Medi-Cal, we’ve gone to the California Hospital Association to get advances on certain money,” Heckathorne said. “We believe we can make it, because we’re doing everything we can. The hospital association — we’ve got another $200k coming in, that’s going to help us out.”

Heckathorne stated that the hospital spends $1.4m per month to operate in its current state. There are “60 or so” people on the payroll, not all working full-time.

“We’ve asked many of those employees to take short paychecks — they’re not getting any benefits, they’re not getting anything else at this point in time,” he said.

Later in the meeting, Kevin Northcraft, the chairman of the board, said that Wipfli’s estimated management costs are $200,000 per month.

Wipfli charged over $8,000 in December to manage the hospital’s website and public relations, causing the board to vote unanimously to shift those responsibilities to volunteers.

Some of the hospital’s “professionals” would also “hold off on some of their payments” as well, he said.

“In terms of getting financing, two types of financing, we’re working vigorously on that, and there’s a lot of things that have to be met in order to qualify with the bankruptcy court,” Heckathorne said. “And we’re in that process.”

Heckathorne additionally stated the best estimate, as of Wednesday, was that the hospital owed $32m in accounts payable.

“If you divided $3m a month into $32m, on average, it’s probably about ten to twelve months of bills that are unpaid. That is why we are in such a very difficult situation. $27m of that number is pre-bankruptcy,” he said.

Additionally, the hospital board voted to not sell the Tulare Hospital Foundation’s current home at 906 Cherry Street.

“It’s not anything we’ve asked for; or, in my mind, even considered,” Northcraft said.

Physician Recruitment

The interim management group recently held a dinner for interested physicians and attracted over 30 physicians, Blitz said. Physicians around the area are being provided with bi-weekly newsletters to keep them updated on the progress being made at the hospital as well.

“The great news is that — remember, the physicians are the foundations of your revenue. If you don’t have the physicians here, you won’t have the revenue,” he said.

A physician steering committee is in the works, he said, which would assist in forming a Medical Executive Committee (MEC) and Medical Staff to begin work at the hospital. The steering committee would also establish guidelines on recruitment and credentialing.

“We have to have the physicians ready to go, we also need an MEC,” Blitz said. “And we’ll have some type of MEC ready to go.”

Outsourcing to Reopen Quickly

Among the more controversial items on the agenda were contracts to outsource accounts receivable functions to Healthcare Resource Group and engage in a co-employment agreement with Southeast Personnel Leasing.

The agreement with Southeast was tabled after attorneys discovered that, at least in writing, the company could have the power to manage employees.

In theory, a co-employment agreement would allow the district to get better rates on workers’ compensation insurance, avoid dealing with payroll, and push other legalities onto a third party. The co-employment provider would be the “employer of record” on tax forms.

The board voted unanimously, however, to engage in agreements with Healthcare Resource Group to handle the hospital’s accounts receivable. The prior vendor, Navigant Cymetrix, claims to be owed $1.7m in outstanding payments from August, 2016 onward.

Heckathorne said that a rough estimate of outstanding accounts receivable was $40m.

The agreements with Healthcare Resource Group (HRG) would involve minimal to no out-of-pocket costs from the district: the company would simply take a percentage of balances collected.

The company would, under the approved agreements, provide “early out, self-pay” and accounts receivable services to the district for percentages ranging from 8% to 18% of the amounts collected.

The potential agreement drew significant criticism in the Voice’s comment section.

“The 3250 accounts are only the self pays, we have the space, we have the computers, why not set up a special collections department right in the hospital and employ the townspeople? WHY go to the state of WASHINGTON,” one commenter wrote. HRG is based in Washington.

One citizen also spoke during the meeting.

“If you read through the self-pay contract, it says that they will look and find if there’s any charitable write-offs,” Jennifer Burcham said, “they’ll fill out the application, but they’ll send it back to the hospital to approve whatever charitable amount, and handle it.”

“If they’re sending it back to the hospital, you have to have people on staff to handle the rebilling of the insurances, to handle everything they’re saying is the [hospital’s] responsibility,” she added.

Heckathorne said that HRG had the people, the software, and the experience to get up and running quickly.

Blitz added that the deal was the best it could find — and that HRG’s offer even surpassed his own expectations. The hospital didn’t have the money to hire on its own people, and HRG was willing to handle the accounts on a percentage basis.

“This is short-term,” Blitz said. “We want to hire existing, local staff if possible. But remember, existing staff right now — whether it’s their fault or not — we’re in a situation where the billing is in disarray.”

The initial agreement is for one year, according to the documents provided.

“There were payments that came in previously — the cash had came into the bank, but the payments weren’t posted onto the patients’ bills,” Heckathorne said. He later stated that staff with Wipfli/HFS Consultants are working to post those payments and readying the data to hand off to HRG.

“We need that money now. And if there are millions of dollars out there, let’s give someone the incentive to collect it,” Blitz said. “This is a really good deal, it’s a short-term deal, and we do want to create a long-term solution by having our own staff.”

Evolutions Resurgent

Derek Jackson, the chairman of the Evolutions Oversight Committee, presented the committee’s first report regarding operations of the gym.

Perhaps more importantly — he presented a check of $11,153 to the board. That profit was after paying the gym’s obligations and the month’s rent in advance.

“I truly believe, personally, that this check will increase, because more and more members are coming back,” he added.

Steve Harrell, a member of the board, noted that members had some concern over leather in equipment needing reupholstering and concerns over bacteria being spread by cuts from leather.

Jayne Presnell, Evolutions’ director, said that most of those repairs should be done by the weekend.

Dennis Mederos, an attorney representing the Evo Management Group, which runs Evolutions, said that the district’s contract with Evo Management gives the board control over capital improvements.

“If you decide you want something repaired, that comes out of profits or reduces the check we just handed you, tell us,” he said. “When you bring that up, remember that it’s the board’s decision.”