Hospital board approves November bond measure

Driven by financial urgency, the board of directors of the Sonoma Valley Hospital have approved their 2009 budget and voted to place a bond measure for infrastructure upgrade–not land–on the November ballot. Because CEO Carl Gerlach and boardmember Bill Boerum were absent at their May 28 meeting, the board decided to delay settling upon the exact amount and proceeds of the bond until the June meeting, when all could be present.
Board chair, Dick Kirk introduced the meeting and budget presentation, highlighting its significance. “This budget is one of the most important that Sonoma Valley Hospital will ever pass, or rather, the first of a series, or–a less palatable option–one of the last, if we don’t move ahead with the business plan and the bond issue.”
He stressed how important a community hospital is to a healthy sense of community and how important it is to listen to the community’s different views. “It’s been obvious, due to different votes, that many in this community want to have a hospital here and there’s been great debate as to the size, the place, and the money that needs to be spent,” he said. Experience has shown that clarity does not come easy, and he urged cooperation on all sides. “I call for patience as well as action.” Then he turned the discussion over to Alden Brosseau, chair of the finance committee, who introduced the budget.
A budget should be simple, said Brosseau, and straightforward. “Anyone managing a household can follow the process, and a fifth grader should be able to follow the math,” he said. “It’s about how much revenue can we expect to generate, and how much expense can we expect to incur.” He then described the grim reality. “Cash is projected to trend downward through 2009 to a dangerously low level,” he said, leaving no funds to apply to the infrastructure, which “could collapse at any time.” He said the finance committee, at its May 27 meeting, had pressed CEO Carl Gerlach and CFO Jim McSweeney to justify the budget and, after two hours of discussion, they had approved it.
McSweeney then rose to the microphone and handed out copies of the budget that “any fifth grader could read,” and said, “we’ve been doing what farmers should never do, living off our seed corn, deferring maintenance for years and years.” Key elements of the budget include a steady growth in outpatient volume, up over 10 percent over last year. He said the increase takes into account the very low volume in 2008. “We’re not expecting volumes to drop back to that level,” he said, “we’re assuming a four percent increase overall.” That is an assumption, not a “known.” Then there will be approximately $200,000 less in Medical, so that’s the second biggest “unknown.”
Expenses are, he said, “all about people.” There have been no salary increases since October, 2006, and that that’s starting to be felt in difficulty recruiting clerical staff. Some increases are therefore necessary to keep a well-functioning staff. The budget has to balance increases to some key employees, such as clerical and nursing, and decreases for others. “I’ll not be working full time next year,” said McSweeney, wryly, “at least not paid full time.”
When he got around to projected cash flow, even without a power point screen, the writing was on the wall. “Cash flow dictates a bond issue sooner rather than later,” he said. “The longer we wait, the longer we sustain the risk of catastrophic physical failure.” The only “safety net,” he said, is a $500,000 line of credit. Therefore, the need for a successful bond measure is urgent.
In deference to the confusion the public expressed in this and in previous meetings as to what the bond money would be used for, boardmember Arnold Riebli said, “I want to make it perfectly clear that the bond measure revenues will not be applied to operating expenses. We have not taken any projected bond money and applied them to operating expenses.”
McSweeney assured him that could not be done, in any case. “It’s against the law.”
Before the board moved to vote approving the budget, boardmember Mike Nugent mentioned recruiting physicians and said how impossible it is in the hospital’s current condition, to spend the money recruiting, or to attract physicians to a hospital in such bad shape. “The only physicians we could recruit right now are people in the witness protection program.” He was laughing, but his message was serious. “If you look at the daily report that I get from the finance department, you’ll see two important lines. One is cash and one is surgical volume. Inpatient surgical volume is down 20 percent from last year. If we had that in-patient surgical volume, we wouldn’t have the problem.” The entire budget is available on the hospital’s website.