The much anticipated Kaufman Hall Study finally arrived, albeit the summary only. So what do we now know? Just as a refresher, this Kaufman Hall study was commissioned by Preston Hollow, the bond holder for ECRMC in an effort to determine if merging the districts was feasible. As such, it is a proprietary work product subject to Preston Hollow to authorize its release to the public. Additionally, this is why PMHD chose not to disclose proprietary information as Kaufman Hall’s work was done on behalf of ECRMC and ECRMC had not signed a letter of intent (LOI) as requested.
Kaufman Hall’s Los Angeles office reviewed 2022 data pertaining to patient utilization, demographics and financial performance and made the following conclusions with a two scenario model based on the metric that measures “days of cash on hand”. This metric is used as a determining factor for the sustainability of hospitals. In order to achieve “long term sustainability”, maintaining 150 days of cash on hand is the standard. For “short term sustainability”, 100 days of cash on hand is the standard. You may remember we have focused on the cash on hand in prior articles.
- Long Term Sustainability: “Using a cash target of 150 days (cash on hand), the scenarios result in a gap of $8-10 million per year or $48-40 million over 5 years.”
- Short Term Sustainability: “Using a cash target of 100 days, results in a gap of $5 million per year in scenario 1 and no gap in scenario 2, or a gap of $23.1 to a gain of $8.4 million gain over 5 years.”
This provides the data that is needed in order to know the economic impact of merging the two hospitals. The purpose of the Kaufman Hall Study is to determine the economic feasibility of the potential merger. However, this study is not able to provide that direction at the present time due to the following:
- The data will be two years old by the time the Hospital Districts are dissolved.
- The data does not include healthcare impacts from Mexicali Valley or the Snowbird population
- The data does not include revenue and liabilities from Heffernan Memorial Healthcare District
The data reports slow population growth according to national standards and does include population projections due to Lithium Valley development. Additionally, data from the Southern California Association of Governments (SCAG) provided projected population for Imperial County’s population which is approximately 180,000 and is expected to increase to 288,200 by 2035.
- The data includes many assumptions on future performance of UCSD synergies, reduction of outmigration to out of county hospitals, and the financial impact of merging the districts. These are unknowns and cannot be quantified.
- The report does not recommend any funding source to close the gaps.
- The report does not take a position on financial feasibility.
In light of the fact that we now have two incomplete financial feasibility studies, the next logical question what data can the IVHD rely on to make their determinations and begin Merger and Acquisition discussions with ECRMC? They have the additional complication of limited time due to the unrealistic deadlines established in AB918. However, the IVHD proposed to acquire the Kaufman Hall study from Preston Hollow and commission Kaufman Hall to update and expand their data. Given the proprietary information is properly protected with non-disclosure agreements, this could be a positive development in getting IVHD the information they need to conduct the work they have been tasked to complete. During the previous IVHD meeting, it was suggested that an independent financial feasibility study should be done which has the benefit of no affiliations, allegiances or bias with either hospital or district. This should still be on the table for consideration. However, the wolf at the door is time. Getting a new analytical provider on board to complete a new study would create conflicts with the deadlines. My team concern is and has always been, developing policy according to these deadlines is a recipe for disaster. Rushing and cutting corners inevitably leads to mistakes and missteps. Assemblyman Garcia’s and Senator Padilla’s continual opposition to modify these deadlines, is unconscionable and creates unnecessary barriers for the IVHD board.