Politics & Government

Supervisors Approve $26M Contract with Consultants Hired to Save Hospital

Supervisor Jeff Stone, who represents Murrieta and Temecula, said shuttering RCRMC would result in overburdening area hospitals with patients they could not handle.

A divided Board of Supervisors today approved a $25.85 million contract with a healthcare consulting firm to develop and implement a strategy to prevent the Riverside County Regional Medical Center from falling into financial ruin.

On a 3-1 vote, with Supervisor Kevin Jeffries dissenting and Supervisor John Benoit on vacation, the board awarded the contract to Chicago-based Huron Consulting Inc., which will devote up to 50 analysts and other experts to identifying a variety of cost-saving measures and long-term goals for bringing the Moreno Valley hospital back into the black financially.

Simultaneously, the board approved a $1.2 million contract with veteran healthcare strategist Lowell W. Johnson to serve as RCRMC's interim chief of operations, putting reforms into effect.

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It was the Johnson contract that Jeffries disliked. The supervisor expressed displeasure that the Department of Human Resources revised the contract over the weekend to reflect a mandatory $155,000 contribution that the county will have to make on behalf of Johnson into the California Public Employees' Retirement System, even though he will be serving in a short-term capacity of less than two years.

County CEO Jay Orr told the board that there was no time to waste in repairing RCRMC, noting that the medical center serves as a "safety net" for tens of thousands of county residents who depend on receiving treatment there.

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"Abandoning or selling the hospital at this time is not realistic," Orr said. "A  turnaround is a complex process that requires special expertise that the county alone cannot implement quickly, if at all. There are few firms that can do this kind of work. But Huron delivers or exceeds what it promises."

Orr said inpatient admissions to RCRMC average 24,000 annually, while outpatient processing is around 124,000 annually. He said the 39-bed emergency room sees 100,000 people rotate through every year.

The RCRMC has been operating in the red since early last year and is close to accumulating losses at a rate of $1 million a week, according to county officials. Orr said the current cash shortage stands at $86 million.

Around three-dozen Huron consultants were brought aboard in May to conduct an audit and reported to the board in September that a number of efficiencies and policy reforms could be put into effect that would close the hospital's funding gap.

Huron consultants said they have a strategic plan to return the hospital to self-sufficiency and position it for revenue growth, projecting that if initiatives are successfully implemented, RCRMC could end the 2014-15 fiscal year with $70 million in receipts.

Details of the plan were vague. However, county Executive Office officials pointed out that Huron had already identified a pharmacy benefits discount program expected to net the county $8 million to $10 million in savings in the current fiscal year.

Supervisor Marion Ashley described RCRMC as a "jewel that is tarnished."

"We have to restore the sparkle to this jewel," he said. "We have to do this for the people of Riverside County. We must have a major public hospital in the county."

Supervisor John Tavaglione noted that there are only 15 public hospitals in the state, and they are critical to the "large urban" populations they serve.

"Riverside County is the fastest-growing county in the state," Tavaglione said. "We need a major medical facility."

Supervisor Jeff Stone said shuttering RCRMC would result in overburdening area hospitals with patients they could not handle.

"We cannot afford to lose any more hospitals in this region," Stone said. "This is a large, large contract, but we don't have much of a choice. We know this hospital can perform better financially. We know it can grow clinically. The contract with Huron is needed for us to navigate some very complicated healthcare laws."

During a board hearing on Sept. 10, then-RCRMC Director Doug Bagley explained that the medical center's shortfall stemmed from county and state actions. The hospital began hemorrhaging funds when the board imposed across- the-board cuts as part of a 2009 general fund deficit control plan, Bagley said.

Further exacerbating the situation is the rising cost of operating an infirmary for a growing number of jail inmates -- an expense for which the hospital has not been adequately compensated, according to Bagley.

He said treating patients under the care of the county Department of Mental Health is another largely unreimbursed expense. Treating uninsured patients who rarely pay their bills has significantly taxed the hospital's resources, too, Bagley said.

According to Orr, the Great Recession of 2008-12 led to a surge in demand for medical care at RCRMC.

The 111-page contract has an exit clause allowing the county to opt out if at any time officials determine that Huron is not meeting expectations.

Executive Office documents note that Huron has a number of past satisfied clients, including UC Irvine, Natividad Medical Center in Monterey and the Salinas Valley Memorial Health Care System. In the case of Natividad, Huron helped turn $25 million in operating losses into $6.6 million in revenue gains, according to the county.

—City News Service


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