Costly Consulting OKd for Alameda County Hospitals

As voters mull a sales tax increase that would bolster Alameda County’s sinking public hospital system, health officials have agreed to spend $3.2 million on turnaround consultants.

Alameda County Medical Center trustees have hired Cambio Health Solutions of Tennessee to propose changes that would get the system -- including three hospitals and three clinics -- on a sound financial footing in the next 18 months.

“They’re going to right-size the Alameda County Medical Center,” said Jeff Raleigh, spokesman for the facility. “They’re going to make certain that the revenues and expenses meet up just like any other organization.”

Amid the turmoil, county residents will go to the polls March 2 to vote on a half-cent sales tax increase that would bring in $95 million a year, 75% of which would go to the medical center. A two-thirds vote is required for passage.

The proposal apparently faces no organized opposition, but a ballot argument against Measure A by Lance Montauk, an emergency physician who lives in Berkeley, says the sales tax increase wouldn’t benefit the indigent as much as it would the “fat healthcare industry.” He also accuses county supervisors of frittering away money.

“I’m very hopeful” that the ballot item will pass, said Keith Carson, an Alameda County supervisor. “If it loses, we also could lose lives.”

Carson, vice chairman of the Board of Supervisors’ health committee, conceded that the contract with Cambio was expensive, but said he believed it was necessary.

“I don’t know how you can put a dollar value to that -- to save lives,” Carson said. “What we’re staring in the face now is an organization that’s bleeding to death.”

The medical center, which operates Highland Hospital in Oakland, northern Alameda County’s trauma center, and other facilities, is facing a deficit of more than $65 million.

A year ago, after money problems surfaced, 66 employees were laid off, two clinics were closed and the chief executive officer was ousted in a power struggle between county supervisors and the health authority trustees.

Since then, county supervisors have formed a committee to examine the medical center’s governing structure -- unique in California in that the hospitals and facilities are overseen by a health authority separate from the county Board of Supervisors.

Separately, the health authority is turning to Cambio for help in figuring out what to do.

Unlike consultants who come in, issue reports and then leave, Cambio will put a team of managers in charge of assessing the problems, making changes and then training employees to take over, Carson said.

The firm will compare salaries to those paid by other Bay Area hospitals. A preliminary review by the company already has found that salaries for nursing managers are high, Carson said.

Jim Braley, vice president of Cambio, said salaries and benefits make up 70% of the medical center’s operating costs. In comparison, he said, personnel expenses account for about half of operating costs at other hospitals. “There will be service reductions, but not a gutting of the facility,” Braley said.

He said efforts would be made to use fewer temporary workers and reduce positions by attrition. The medical center has long relied on temporary nurses hired from the registry to cover chronic shortages.

Braley also said his company would renegotiate contracts, which are not based on productivity, with physicians.

In addition, Cambio will work to increase revenues by making sure that all patients, regardless of ability to pay, are charged. The medical center has $28 million in outstanding unbilled charges, Braley said.

He said his firm has worked on helping to turn around similar facilities in California and across the country, including the Daniel Freeman hospitals in the Los Angeles area and medical centers in Memphis, Tenn.; Jacksonville, Fla.; and Phoenix.

Fran Jefferson, executive director of Service Employees International Union Local 616, which represents 1,500 medical center workers, is reserving judgment about Cambio.

On one hand, she is concerned about potential layoffs and cuts. On the other, “something had to happen,” she said. “I do believe, given the state of the medical center and the ineptness of the current administration, the place was dysfunctional.”