Alameda County Medical Center Approves $23 Million in Budget Cuts

J. Douglas Allen-Taylor
Friday May 12, 2006

The Alameda County Medical Center moved this week to stop the budget bleeding at the county’s financially troubled hospital system, with trustees voting unanimously to approve more than $23 million in immediate budget reductions. 

The savings, recommended by the center’s Chief Executive Officer Wright Lassiter, will be made in part by staff reductions, but the bulk of the reductions are in efficiency savings. No service cuts or department shutdowns are part of the budget reduction plan passed by the board this week. 

The medical center operates several public medical facilities in Alameda County, including Highland Hospital in Oakland, Fairmont Hospital and John George Psychiatric Pavilion in San Leandro, and several clinics. 

Only $5.9 million of the ACMC cuts will come through staff reductions, trustees and medical center staff were told on Tuesday. Those will result in the loss of between 68 and 84 full-time-equivalent employees at ACMC, out of a total workforce of more than 2,000. Those staff reductions will begin taking place within 60 days. 

“You almost never want to make recommendations on staff reductions,” Lassiter said. “The process is never a pleasant one.” 

In addition, he added, “The medical center needs to recognize its role as employers.” 

At the same time, Lassiter assured trustees and and staff members at a crowded Fairmont Hospital cafeteria meeting on Tuesday that the budget reductions will result in no loss of services, but will come from implementing efficiency and cost-savings recommendations made during the system’s recently completed “margin audit” process. 

That “margin audit” process, carried out internally by the medical center, involved an extensive series of staff meetings and cost-saving investigations and collection and evaluation of staff suggestions over a 14-week period. 

One of those cost-saving measures was highlighted at Tuesday’s trustee meeting by ACMC Chief Operating Officer Bill Manns, who held up two nearly-identical kits for drawing blood from the umbilical cords of newborns. One of them, which Manns said was presently being used by the medical center, cost $96.50 apiece. The second, which the center is now switching to, costs 29 cents. 

Calling this the “poster child” for past inefficiency at the medical center, Manns said that switch alone will result in $322,000 a year in savings to the center. 

ACMC is currently running at a deficit of more than a million dollars a month, with a projected operating deficit of $11.5 million for the current fiscal year, expected to rise to a $28.7 million deficit in the fiscal year beginning July 1. The $23 million in budget cuts would leave ACMC $6.2 million short of breaking even next year. 

“I don’t want a break even budget,” Lassiter said. 

Noting that he wanted a $1.6 million surplus for FY 2006-07, he said that the center was still $7.8 million short of its goal. That could mean more layoffs, as well as service and program cuts, including ACMC’s operation of the medical facilities at the Alameda County Juvenile Hall. Lassiter said his office is currently doing a six-month evaluation on that program, with a report scheduled to come back to the board in January. 

“Although we’re not recommending reductions in any services at this time,” Lassiter said, “I want to caution the board there is still work to be done.” 

Included in Lassiter’s and Manns’ presentation to the trustee meeting was a not-so-subtle dig at Cambio Health Solutions, the Tennessee-based management consultants that managed the medical center from early 2004 until Wright was hired as CEO last September. Included in a PowerPoint show and printout handed out by Wright and was a chart comparing the staff cutbacks recommended by Cambio before they left (266 FTEs) with the cutbacks now recommended by the current management team (68). The largest difference was in acute care, with Cambio recommending 128 FTE cutbacks and the current management recommending 8. 

While the budget reduction plan sailed through the nine member trustee board with no dissent, it met with mixed reaction from ACMC union representatives and local public health advocates. 

In a letter released to trustees at Tuesday’s meeting, Vote Health organization Chair Kay Eisenhower said that the solution for the medical center’s lies with Alameda County government, not with the medical center. 

Vote Health is a Bay Area health activist organization that regularly monitors the medical center. 

“Vote Health is well aware that Alameda County has been underfunding its CMSP [County Medical Services Program] contract with ACMC and the Juvenile Hall clinic for some time,” Eisenhower wrote. “A significant portion of next year’s projected ACMC deficit of $30 million is attributable to this failure. … Vote Health urges your Board to request full funding from Alameda for the CMSP contract and the Juvenile Hall clinic.” 

Service Employees International Union Local 616 representative Brad Cleveland explained in a telephone interview that Alameda County is required by state law to provide indigent medical care, and does so through the medical center under the CMSP. 

But Cleveland said that, while the medical center is projecting indigent care costs of $117 million this fiscal year rising to $130 million next year, Alameda County only provides $67 million to the medical center, $34 million of which he called “pass-through money” that actually comes from the state and not out of county-generated revenue. 

Cleveland said that the medical center is forced to come up with the remainder of the indigent care costs from its own budget, even though the state mandate for that service puts the responsibility on the county. 

“That puts the medical center in an untenable position,” Cleveland said. 

SEIU Local 616 represents 1,300 registered nurses, hospital clerical staff, and allied health care professionals at the medical center. 

While calling any talk of layoffs “discouraging,” Cleveland praised ACMC management for “focusing on new revenues and cuts in expenses rather than layoffs. We just don’t want to see people go out the door. We appreciate their move to make the medical center more efficient.” 

Cleveland said that the union would work with medical center administrative officials to “minimize any layoffs” by identifying vacant positions where staff members slated for layoffs can be transferred. 

Cleveland was not present at Tuesday’s trustee meeting and said he had not yet seen details of the proposed staff cuts. 

Another union official, SEIU United Healthcare Workers Assistant Director Charlie Ridgell, used the budget reduction meeting to take a blast at former ACMC managers Cambio. 

“Where is Cambio now?” Ridgell told trustees. “You paid them $5 million to turn around the finances at the medical center, and now Lassiter has to come in and do it.” 

Ridgell said that medical center trustees “should have the courage to sue Cambio” for the contracted services the organization failed to provide.