Lompoc Valley Medical Center Quality Healthcare Close To Home Lompoc Healthcare District Received Aug - 1 2018*

Published: July 30, 2018 5 pages

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⚠️ Translation Notice: This content has been automatically translated. The original English text is the official version. Translation may contain errors.

⚠️ Este contenido ha sido traducido automáticamente. El texto original en inglés es la versión oficial. La traducción puede contener errores.

Findings and Recommendations 2 findings

At this point only the income from Lompoc Valley Medical Center operations is available to service the debt obligations of the Cal- Mortgage revenue bond, which will require at least a $1 million per year repayment until 2042. LVMC agrees with the finding. The bond repayment will be paid with revenue from the district's assets.

Related Recommendations (2)

R1a

That the Board of Directors of the Lompoc Valley Medical Center report to its constituents how they propose to repay the Cal-Mortgage revenue bond. Response: This will not be implemented because it is not warranted or reasonable. The LVMC Board of Directors is repaying the Cal-Mortgage revenue bond from the revenue of the district's assets. This is not a General Obligation bond that requires approval of the district voters. In a newspaper article published in August 2017, CEO Raggio indicated the district would be able to financially absorb the cost of bond repayment and that it would not "put the district in financial jeopardy." Additionally, information is provided monthly via financial reports that are reviewed at a monthly Finance Committee and LVMC Board meeting. Both meeting agendas are posted at the Lompoc Library and are open to the public.

R1b

That the Board of Directors of the Lompoc Valley Medical Center report to its constituents how the repayment to Cal- Mortgage will affect its existing operations. Response: Has been implemented, with a brief summary. The annual bond payment to Cal-Mortgage, although significant, will not severely impact existing operations. Since the closure of the Champion Center LVMC has evaluated multiple options for retiring the bond debt. Under consideration, and disclosed to the Grand Jury, include sale of the building, leasing the building and/or transitioning existing services/departments into the building which would avoid expansion construction programs identified in LVMC's Master Plan. As seen in past practice, LVMC will inform the community via our website, social media and local media outlets once a decision is made. Additionally, all of the deliberations and decisions regarding the financial impact of the Champion Center on the District take place at our monthly Board meeting. The monthly LVMC Board meeting is open to the public, the California's First District Hospital 1515 E Ocean Ave · Lompoc, CA 93436 · (805) 737-3300 · LompocVMC.com agenda is posted three days in advance, and all actions taken are in open session. Finally, Cal Mortgage requires LVMC to maintain minimum financial indicators since it insures the revenue bonds. Two of those indicators are Debt Service Coverage Ratio (DSCR) and Days Cash on Hand. The minimum requirement to be compliant with the bond covenants are a DSCR of no less than 1.25 and Days Cash on Hand not to drop below 30 days. As of April 2018, LVMC's DSCR is 7.4. LVMC's Days Cash on Hand as of June 19, 2018, is 121 days – both indicators far exceed the Cal Mortgage requirements and also the California Gov. Median DSCR of 2.74 and Days Cash on Hand of 68 days. LVMC is in the best financial position in its history.

The Lompoc Valley Medical Center leadership did not provide a full explanation to its constituents for the failure of the Champion Center. LVMC disagrees wholly with an explanation. The LVMC CEO was never asked by the Grand Jury to provide any information regarding the communication to the community about the closure of the Champion Center. Regardless, information provided via the media and on the district's website and social media sites contained an explanation as to the reason behind the closure. In June 2017, an LVMC press release stated that in "the three years it was open, the Champion Center never met the projections anticipated in its financial pro forma." Additionally, the release noted that "the recruitment and retention of physicians specializing in Addiction Medicine – a requirement for the admission of patients – was an ongoing issue." Furthermore, a Lompoc Record newspaper article "The Rise and Fall of the Champion Center," published Aug. 1, 2017 contained an extensive interview with CEO Raggio, providing further explanation and discussion of the Champion Center's "failure." The story also included information about health insurance firms not loading contracts for the Champion Center into its systems and the passage of the Affordable Care Act creating more mental health funding and thus more competition. See attached exhibit listing media coverage.

Related Recommendations (1)

That the Board of Directors of the Lompoc Valley Medical Center provide a clear and detailed explanation of the failure of the Champion Center to its constituents, consistent with its stated core principle of transparency. Response: Has been implemented, with a brief summary. Upon the closure, a press release was widely distributed explaining that the Champion Center did not meet the projections anticipated in its independently produced financial pro forma. The release was sent electronically to numerous media outlets; posted on social media and on the hospital website. CEO Jim Raggio conducted numerous media interviews for print and television on the closure. Decisions made by the LVMC Board of Directors about the Champion Center were completed with full transparency of a public agency. For 36 months, monthly updates and financial accounting about the Champion Center were discussed, often at length, by the LVMC Board of Directors at a monthly meeting which is open the public. The performance of the Champion Center was a regular board agenda item California's First District Hospital 1515 E Ocean Ave · Lompoc, CA 93436 · (805) 737-3300 · LompocVMC.com included on the publicly-disclosed agendas, with updates every month on the Champion Center's marketing efforts; staffing and finances. A verbal report was delivered monthly by Champion Center Administrator Steve Collier to the Board. Every aspect of the project was available for public review and conducted with complete transparency. Signed, Ray Down, Chairman LVMC Board of Directors MEDIA COVERAGE OF THE CLOSURE OF THE CHAMPION CENTER May 3: Noozhawk.com: "Key Staffing Vacancy leads to Champion Center Unit Closure" May 3, 2017: KSBY, Lompoc's drug treatment center's medical detox unit to close May 6, 2017: Santa Barbara News-Press, "Lompoc Detox Center Shutting down." June 23, 2018: Noozhawk.com, "Lompoc Champion Center to Close After Graduating Final Patient." June 23, 2017: Lompoc Record, "Lompoc's Champion Center closes its doors - possibly for good." Aug. 1, 2017: Lompoc Record, "The Rise and Fall of Lompoc's Champion Center"

* This report's PDF did not contain easily extractable text and required Optical Character Recognition (OCR) for analysis. There may be minor errors in the extracted findings and recommendations due to OCR limitations with scanned documents.