PALOMAR HEALTH TO CONSIDER CONTRACTING WITH MANAGEMENT COMPANY

CEO cites politics, expediency among reasons for proposal

Palomar Health will explore bringing in an outside management services company in a move that its top executive says is about both competing more effectively in an ever-more-crowded health care market and also separating politics from hospital operations.

Elected hospital directors voted 5-2 in their monthly meeting Monday to allow Palomar’s executive team to “identify a potential management services company and negotiate a proposed management services agreement.”

Nothing has been decided. Any proposal would have to be brought back to the full board for public discussion and a public vote. Palomar operates hospitals in Escondido and Poway and is the largest public health care district in the state.

Before the meeting got under way, Diane Hansen, Palomar’s chief executive officer, said that she envisions a contract with a private health care management company that would appoint a separate board of health care experts to operate Palomar’s health care system, which includes two hospitals and an associated medical group.

“The idea would be that the leadership in the organization wouldn’t change,” Hansen said. “The leadership would remain the same, it would simply be hired under this management services agreement.”

She said having a group of professionals responsible for running the health care aspects of Palomar’s operations would be a “more flexible model than what we have today,” which often requires multiple rounds of public discourse to make decisions that private nonprofit health care corporations can make much more quickly.

“We’re talking about being able to be more nimble, to be able to come to the table in a quicker fashion to build strategy and create growth,” Hansen said.

This is not, she insisted, an attempt to sell Palomar or to enter into a long-term lease agreement like the one that has been in place between the Grossmont Healthcare District, which owns Grossmont Hospital, and Sharp HealthCare for decades. Tri-City Medical Center in Oceanside, also operated by a public hospital district board, is currently exploring a joint powers agreement with UC San Diego Health, which would create a new board to operate the facility.

“This board is very intent on us being a stand-alone health care system, and I support that,” Hansen said.

But she acknowledged that this arrangement, if approved, would change the

role of Palomar’s elected board.

“It’s creating that stability for hospital operations, taking that out of the election cycle,” Hansen said.

She said such an arrangement could open up more time for directors to serve as “ambassadors” to the regions that elected them and that directors would still receive quarterly financial reports, approve annual budgets and own the health care district’s assets.

Directors John Clark and Laurie Edwards-Tate, who both faced censure during the same meeting for previous statements made to the media, both voted against the request to explore the possibility of creating a management agreement, asking for more time to review the idea, which they said was sent for review late Friday.

“All I know about these management services organizations is it usually indicates that your hospital’s for sale, and that’s the vehicle for which it’s got to go, and it’s also been shown to be a way to take a board of directors out of oversight that they were elected to do,” Clark said.

But those who voted yes said they were confident that whatever Palomar administration comes up with will be the subject of multiple public and closed-session meetings before any decision is made.

“What we’re doing is we’re allowing the information to be gathered so that we can look at it and discuss and and have open meetings about it,” said board member Theresa Corrales. “We’re not saying yes, we’re going to do it, we’re just ... allowing them to give us information about it.”

Like many health care providers across the nation, Palomar is struggling to cope with increased labor and supply costs that are not being fully offset with increased payments from health insurance companies and government programs.

Despite management’s recent insistence that the Kaiser Permanente opening of a new hospital in nearby San Marcos would not cause significant financial turmoil, Palomar posted quarterly results that showed a $17 million decrease in net income, a significant departure from the organization’s budget, which projected a $7.9 million increase. While an executive said Monday that part of the shortfall had to do with an unanticipated drop in business when the new Kaiser facility opened in August, a projected 50 percent increase in oncology revenue and doubling of cardiology revenue also did not materialize.

Hansen said that recent media coverage of Palomar’s budget shortfalls kept some recruited physicians from bringing business in the expected time frames.

“Some of those things have gone away, and some of them have been delayed by six months,” Hansen said. “So we’re not seeing some of the anticipated growth that we thought was going to happen right away.”

Media coverage was the reason cited for the twin censures that appeared on Monday’s agenda.

Director John Clark has been roundly criticized for a June comment made to the Voice of San Diego news website on budget difficulties in which he expressed concern that public financial disclosures had shifted from a monthly to a quarterly schedule.

Board member Jeffrey Griffith echoed the majority of his colleagues who said they had no confidence in Clark because he did not follow Palomar’s media policy to check any potential statements with management first.

“It cost us money, it cost us talent, and we’ve gotta do better as a board, we’ve gotta work together, we’ve gotta have a unified voice,” Griffith said.

“We have 4,000 employees that rely on us to make good decisions and act like adults.”

But Clark rejected the notion that his words had such an outsize impact.

“You’re alleging that I’m costing the hospital money because doctors didn’t get to work for us because they found out that we have financial problems?” Clark said. “Aren’t you disclosing to these people when you talk to them what kind of shape we’re in financially, or (are you) trying to keep it a secret from them?”

And he rejected the idea that he needed to abide by a media policy.

“Where is the slander in that statement? I’m expressing myself as a publicly-elected official, which I have every right to do,” Clark said. “This has been nothing but an attempt to slander a board member, to make them look bad, because I won’t join your rubberstamp committee that you have; I actually want to ask questions, and I’m elected by the public, and I will speak to the public.”

Director Laurie Edwards-Tate also faced a possible censure Monday for speaking to the media about Palomar’s inclusion of a new “terms of use” agreement on its website which appeared to forbid use, including publishing, of material, posted on its website. Given that Palomar is a public organization, and its website includes public information such as meeting agendas and supporting material, the move drew notice. The director filed a lawsuit asking the courts to stay the censure motion, which was ultimately postponed after Edwards-Tate pointed out that she was not served with the required paperwork.

David Loy, legal director for the First Amendment Coalition, a nonprofit organization that advises the public on free speech rights, confirmed that there is no requirement for elected officials to follow policies that seek to control public statements.

But, he added, the mere act of censoring a colleague for something they say is not, in and of itself, considered a violation of a person’s free speech rights.

“The Supreme Court has held that the mere fact that some elected board members formally censure a fellow board member is not a free speech violation,” Loy said. “That’s simply an expression of their displeasure or disagreement with one of their colleague’s positions.”

But connecting other restrictions to a person’s speech is a different matter.

“If they try to remove you from office or, you know, financially penalize you or deprive you of information that you need to do your job, that’s a different matter,” Loy said.