The Tulare Local Healthcare District officially supports State Sen. Jean Fuller’s (16th District) request for an audit of the district’s prior bond expenditures after a 3-2 vote following significant discussion.
The board also received an update on the reopening of Tulare Regional Medical Center — the hospital still needs funding before a reopening date could be set, the hospital’s interim CEO said.
Debating The Audit
Board members Xavier Avila and Stephen Harrell voted against confirming the audit, while chairman Kevin Northcraft and members Mike Jamaica and Senovia Gutierrez voted in favor of it.
The board’s attorney, Nikki Cunningham, advised the board, the audit could reveal information that would put the healthcare district in a negative position — if, for example, prior management had been found to misuse bond funds.
A representative from Fuller’s office stated the initial request would cover:
- How Healthcare Conglomerate Associates, the hospital’s former management company, spent bond proceeds,
- Oversight in place for the spending of the bonds,
- The management structures of the district, its hospital, and its former management company,
- The “process and the flow” of the district’s 2005 General Obligation Bond funds
The representative noted that the scope could be narrowed after the initial request.
“If they find something in there, which they very well may, that could have a financial impact on the district,” she said.
Cunningham noted that she was not specialized bond counsel, but gave the example of findings which could cause the bonds to lose their tax-exempt status.
“If that happens, there’s the potential that the bond-holders could sue the district for the loss that they suffered,” Cunningham said.
Avila and Harrell both said the risk of a financial penalty caused them to vote against the confirmation.
While they both agreed that the public needs to know if there was any misuse of bond money, they also worried that any penalties could shutter the hospital.
Avila initially moved to support Fuller’s request, but rescinded his motion after Cunningham noted potential risks.
“I’m all in favor of transparency and all that, but I think we have a bigger obligation — as much of a financial hit that this hospital has took, it’s still closed, it’s still not open,” Avila said. “Once we get going — it’s too risky. I’m certainly not against the audit, but we should certainly discuss it with counsel before we take that step.”
Northcraft noted that if the board missed the January date to submit their support, they would have to wait until 2019.
Alberto Aguilar, a former member of the district’s bond oversight committee, implored the board to support the audit.
“I think [the auditors] will be able to prove the bond money was not spent the way it should have been spent,” Aguilar said.
Northcraft and Gutierrez spoke in favor of the audit. Avila asked if the hospital could afford any potential financial hit. That led audience members to interject.
“Can we not afford it?,” Jennifer Burcham, and others, asked from the audience.
“I have a fiduciary duty to look after this hospital – and I’m dying to know just as much as you; but, that big unknown, you’re looking at an $85m bond – it could come back and impact this institution pretty bad later on,” Avila told the audience. “We cannot take a multimillion dollar hit later on.”
Mike Jamaica initially didn’t vote — at one point, Northcraft asked if he would like to abstain — but later, he voted in favor of the motion.
Avila later spoke to clarify his position.
“My number one concern is not money — my number one concern is the people that use the hospital,” he said. “And if hospitals don’t have money, they can’t run and serve the people.”
Larry Blitz, the hospital’s interim CEO, gave a short update — the hospital now has a sufficient amount of staff to reopen.
“We have enough staff for the opening, and we’re working on the staff for the ramp-up,” he said.
He and Dan Heckathorne, the hospital’s interim CFO, are working on funding and potential budgets, and weekly meetings with the California Department of Public Health continue to be held, Blitz said.
He also stated a “Community-Doctor Meeting” was being planned for January.
“We are inviting the community to come and talk about our vision, where we’re going,” Blitz said, “and we’re really excited about that, and the doctors seem to be excited about that.”
While Blitz and his team are working on securing funding, a reopening can’t happen until financing is secured, he said, and a January 1 re-opening date isn’t on the horizon.
“When we’re able to secure funding, then we will have a timeline in regards to opening,” Blitz said.
Additionally, the board was provided with an update on the Evolutions gym — though the Evolutions Oversight Committee was not officially providing a report, Joseph Soares provided one on behalf of the Evo Management Company.
“We’ve had some loss of members, but nothing like what we were fearing,” Soares said.
Soares told the board that Evolutions has retained a majority of its membership, with approximately 5,600 members still at the gym.
“I think you’ll be very pleased when you get [the committee’s] report in January,” Soares said.
The board made no public decision on an unsolicited offer to purchase a vacant parcel of land next to Evolutions, nor did it report any decision from its closed session meeting.
“We have not determined that it is surplus property that we have no future needs for,” Northcraft said, “nor have we determined what process we want to use if we want to market that.”
Northcraft was unable to provide the Voice with any information on the party making an offer on the parcel, but stated during open session that the party would purchase the property for approximately $2.2m.
Any sale of the vacant land would be complicated by a Deed of Trust filed against Evolutions and its adjacent parcel by Healthcare Conglomerate Associates in the days before the Tulare Local Healthcare District filed bankruptcy.