Adventist slated to pay $2.3m/yr for Tulare hospital, receives suspension extension

The Tulare Local Healthcare District’s board of directors managed to tie up a number of loose ends by the time its Wednesday night meeting ended.

The board voted in closed session to settle multiple lawsuits and agreed to accept $2.3m per year to lease out Tulare Regional Medical Center to Adventist Health.

Separately, the hospital’s license expiration date has been extended to March 31, 2019. Previously, the hospital needed to open by October 29 or potentially face permanent closure.

The extension wasn’t sought by the district or Adventist, according to Christine Pickering, Adventist’s Regional Director for Communications. Instead, it was a happy byproduct after past due fees were paid off.

Past due state licensure fees were paid off a few weeks ago, Pickering said, and when they were paid off the October 29, 2019 date was moved to March 31, 2019, the hospital’s annual survey review date, she said.

Pickering added that all signs still pointed to the hospital reopening on October 15.

Calls for More Transparency

Members of Citizens for Hospital Accountability, the group which supported multiple board members in their electoral races, spoke to ask the board for more transparency in their dealings with Adventist.

“My concerns do not lie with Adventist, they lie with our District and this Board. Advocacy for our District is perhaps the single most important function of this group of citizens who comprise our Board, and by extension, each and every citizen of our community who is concerned enough to worry as I do about our future as an independent healthcare district. Our community needs leaders, not cheerleaders,” Dr. Patricia Drilling-Phelps, a member of the accountability group and a Tulare dentist, said.

She stated that parts of the lease, which would last up to 30 years, gave her pause — for example, a non-compete agreement with the district, present in the last publicly released portion of the lease.

The agreement would mean that the district could not open new healthcare facilities, such as clinics, limiting its options to raise revenue to fund new healthcare projects and repay debts racked up under prior administrators.

“In order to open the hospital, the Board created Measure H. It is a lease to Adventist Health. The Fair Market Value assessment has not been made public. The public is being asked to vote on November 6 and the lease payments are not known but equally important, neither is the valuation being made public from the third party evaluator, Deloitte,” she added. “This would be considered transparency to have all parts of the valuation made public prior to absentee ballots being mailed. The text of the final lease agreement should also be made public and should be easily accessible prior to the absentee ballots being mailed, which I believe that date is October 8.”

Deanne Martin-Soares, another member of the group, spoke along the same lines.

“We’re less than six weeks away from an election, and we’ve yet to see a fair market value report,” she said. “The district has a great deal of debt as well as future seismic suspenses, and there’s been nothing to support that this agreement will work for the district.”

Xavier Avila, a board member, responded to the comments from the public. He disagreed with the idea that the board wasn’t being as transparent as it could be under the circumstances.

“I think there’s a lot of people that need to realize how far we’ve come, and now we’re getting close to the finish line and we’re being told we need to be transparent. I think Tulare needs some cheerleaders, I think we’re leaders,” he said.

“The level of concern after all we’ve been through, and we’re about to give Tulare a hospital again — and a good hospital — it just seems we should be more positive about that,” he added.

Senovia Gutierrez and Board Chair Kevin Northcraft also responded to portions of comments from the audience.

Later on, Steve Harrell, another board member, stated that it wasn’t legal or allowed under the board’s rules to respond to public comments.

“It may be difficult for some to sit up here and listen to accusations of not being transparent, withholding information, things like that; however, by responding we are in violation of the Brown Act and our own rules set forth under public comment,” Harrell said. “Any comments made by the public not on the agenda, there can be no response from this body during this meeting to those comments. Response or action.”

Northcraft stated that he disagreed.

“Well, we disagree on Robert’s Rules, and we disagree on the Brown Act,” he said.

Lease Price Finalized

The next day, it was announced that the board and Adventist had agreed upon a $2.335m/yr lease payment for the hospital itself and the buildings on its campus.

Adventist would also release the collateral securing a $10m loan provided to the district, which its press release claims the district values at a $200,000 per year savings.

“Adding this amount to the lease rate, the benefit to the district is $2.535 million per year, which is the mid-point of the range provided by Deloitte,” the release states.

“The lease will enable us to pay off debt, including the loan from Adventist Health, reduce our administrative and operating expenses and ultimately improve our community’s health and well-being,” a statement from Northcraft read. “We are very excited about what this means for Tulare.”

The release did not include the full findings of the Deloitte study.

Employee Lease Agreement

Adventist has previously committed to operating Tulare Regional Medical Center as a management partner until voters either approve or reject its bid to lease the hospital.

A key part of that arrangement — who would employ the staff and how they would be paid — was left out of the Interim Management Services Agreement when it was approved by the board.

That’s now been reconciled with an Employee Lease Agreement, which states that the hospital’s employees will be hired on by Adventist and leased back to the district — which would make the transition to an Adventist lease easier for the employees and the district.

Prior to the hospital’s reopening, the district would be invoiced for “services provided by Adventist Health Employees at Adventist Health’s cost,” and the total cost would not exceed the amount budgeted under Adventist’s $10m loan to Tulare.

Officials for Adventist and attorneys for the district didn’t have that figure immediately available at the meeting.

After the hospital reopens under the terms of the Interim Management Services Agreement, Adventist would cover all employee costs, under the nonprofit’s prior commitment to cover operating costs at Tulare.

As reimbursement for its services, the company would collect all of the hospital’s income up to a yet-to-be-specified maximum amount.

Legal Settlements

In a report from closed session, the board announced that it had settled three lawsuits.

One, Gutierrez v. Tulare Local Healthcare District, centered around Senovia Gutierrez’ role as a member of the board. Gutierrez sued the district and members of the board after she was repeatedly denied her seat following her election.

During the period where former board members and the district’s prior management partner claimed she was not a member, meetings were held in which Gutierrez, Jamaica, and Northcraft made decisions that were not honored by HCCA, the district, or the other two board members.

“The stipulation admits that Ms. Gutierrez was properly elected and seated and accepts the validity of all Board actions taken after Ms. Guttierrez was seated.”

Board members also voted to settle two nonpayment lawsuits brought against the district by Specialty Lab and Maxim Healthcare Services.

Specialty Lab was seeking $93,206.26 in unpaid invoices; Maxim Healthcare was seeking $160,645.35.

“The settlement will fully resolve two pre-petition claims in the District’s bankruptcy action in exchange for a monetary payment,” Todd Wynkoop, the hospital district’s attorney, stated.

Finally, ending a saga that lasted over two years, the district voted to reinstate its prior Medical Executive Committee and its bylaws.

The district previously settled with the Tulare Regional Medical Center Medical Staff, which was ousted in January 2016, for a repayment of the group’s legal fees and an agreement to reinstate the group and its bylaws.