Why would five members of the Board of Directors of the Lompoc Hospital District (a.k.a. Lompoc Valley Medical Center), consider merging with another provider of healthcare services?
The Hospital District, formed in 1946, serves the communities of Lompoc and the surrounding area including Vandenberg Village, Mesa Oaks, Mission Hills, and rural areas between Lompoc and Gaviota.
Being curious, I contacted Steve Popkin, the CEO of the Lompoc Valley Medical Center. I asked the following questions:
“Who originally brought this idea to the attention of the LVMC Board of Directors? Why was this idea put forward; was it because of financial concerns, the competency of the staff or a lack of adequate facilities?
Did LVMC employ a consultant to assist the board and/or provide a recommendation on the development of any merger proposal? If so, was this firm from the state of California or out of state?
Would the consulting firm enjoy any financial gain if the merger was successful?
Did the doctors who practice and/or are employees of the LVMC ever discuss the idea of a merger as a group? If so, did they vote on the issue and what was their opinion of this idea?”
Popkin responded: “The Board of Directors has been very transparent during this process and has encouraged and received input from a variety of stakeholders and community members. If this process continues forward, broad community input will be solicited.”
But he didn’t answer any of my questions, and there has been little — well, almost no — notice to the public at large about this proposal, unless you happen to visit the LVMC website blog, and then there is only one post with none of the specifics.
And Board of Director meeting minutes are not posted on the LVMC website. How’s that for “transparency?”
Getting little information from the current LVMC CEO, I talked with several people who are very familiar with district operations. One was Alice Milligan, who is the president of the Lompoc Hospital District Foundation founded in 1990. This group is a nonprofit that has raised millions of dollars to benefit the district since its formation.
The foundation executive committee, which opposes the merger, provided information that LVMC hired Juniper Advisory Group for $20,000 a month to as documents obtained by the foundation put it “facilitate an independence versus partnership evaluation process.”
Then for their efforts, “if a decision to pursue partnership continues and transaction closes, then a ‘success fee’ of approximately 1.5% of ‘aggregate consideration’ is paid through escrow.”
So, if a merger occurs, Chicago-based Juniper Advisory Group stands to gain a substantial monetary reward for its efforts. Thus, it appears unlikely they could be unbiased in their opinion if their level of income would be higher with a “yes” recommendation than it is with a “no” recommendation.
The foundation also contends that “if the LVMC Board of Directors proceeds with leasing the hospital, the managing entity will have to operate the hospital with $10.6 million less revenue annually as identified in the Clark and Associates Report.”
This could mean a loss of some services as they seek ways to balance the budget. Steve Clark and Associates is a consulting firm in California specializing in healthcare financial management and other healthcare related services.
In addition, they contend: “there is an expectation by the managing entity that any substantial funds given to the LVMC Healthcare District would be granted back to them over a 30-year lease period. For illustrative purposes, if the LVMC Healthcare District receives $60 million in prepaid rent and 5% must be gifted back each year for healthcare services in the District, the entity will use every excuse to get the Board of Directors to grant them more than $3 million each year.”
A successful competitor in any merger would then take over the management and operation of LVMC, which would include leasing all the facilities of the district. The Board of Directors could be reduced to an advisory group instead of being decision makers.
This means any future improvements in the facilities or services would be determined by an out-of-town organization and compete with scores of other projects managed by the same firm.
For example, when LVMC bought a robot to allow specially trained physicians to treat patients remotely, it was the local Board of Directors that approved the purchase. And when the hospital was built several years ago, it was the local Board of Directors that approved placing a bond measure on the ballot so voters could decide the issue.
Under the merger concept locals probably would not have input into the process.
Many physicians who are employed by the district discussed this issue among themselves recently; they overwhelmingly rejected the merger idea. They knew that independent audits and a recent statement by the CEO noted that “LVMC is financially healthy.”
In addition, there are no concerns about the competency of the staff or the adequacy of medical facilities.
Past CEOs have looked at this idea and rejected it.
Why is this idea even being considered? We don’t know, but Popkin is retiring soon, so why doesn’t he leave a decision like this to his successor who will have to deal with the eventual outcome?
So, who will it benefit? The only benefit from the merger plan would be for the folks who were successful in leasing and operating the hospital and the Juniper Advisory Group; and the benefit would be financial to them and unrelated to providing good healthcare services in our area.
At their meeting on Feb. 26, the LVMC Board of Directors will review merger proposals. If you think, like I do, that a merger is a bad idea, contact board members and urge them to turn down the merger.
References:
LVMC blog: https://www.lompocvmc.com/blogs/2023/september/strategic-evaluation-process/
Juniper Advisory Group: https://juniperadvisory.com/
Lompoc Hospital District Foundation: https://www.lompocvmc.com/giving/the-foundation/
Steve Clark and Associates: https://www.scainc.net/
LVMC Board of Directors: https://www.lompocvmc.com/about/board-of-directors/