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Our hospital is designated as an acute care hospital. (Acute care is when you need an extended stay at a hospital in order for medical staff to assist you and your medical needs.) CA regulations require all acute care hospitals be seismically compliant by Jan. 1, 2030. If our hospital is not compliant, it will lose its license to operate.
The current estimate to meet those seismic requirements is $30M. If the next Board chooses this option, it will want to spend money to modernize the hospital which by that time be over 60 years old. My estimate is another $10-$20 million will be needed for this purpose. So, let’s say $45 million.
The next option is to close the hospital, keep the Emergency Room and create a Treat and Transfer facility whereby all inpatient services would be performed at other Adventist’s facilities. This is in fact what Adventist Health desires. AH management has made it perfectly clear that it will not invest a dime into a new hospital and that the future of healthcare is aging in place with the help of telemedicine providers.
The clinic would remain, but we all know how difficult it is to get an appointment there. For this to option to be feasible, the County and the City of Fort Bragg must solve the problem of housing shortage. As near as I can tell, there is no sense of urgency by either entity to do so.
The third option is to build a new, modern hospital. This would be located on the five, unused acres owned by the District. This plot is adjacent to and south of the clinic. What this means is that the new hospital can be constructed without interfering with the operation of the current one. After construction is complete, the current hospital can be converted to a 49-room Skilled Nursing Facility like Sherwood Oaks. Because a SNF is not considered to be acute care, it does not need to meet the same seismic criteria as the hospital.
How many beds should the new hospital have? Let’s first look at the costs. The cost of new hospitals is given in terms of $/bed. Today, that cost has gone up to $4.0 million a bed. So, a ten-bed hospital would cost $40M and a 25 bed one $100M. The District can easily afford to pay for the ten-bed option without any help from AH. Building a 25-bed hospital would require financing which I will explain in a moment.
There are good reasons to choose the 25-bed option. First, it would have more, much needed ER rooms, namely, eight. The remaining beds could be used for local residents who otherwise would be transferred to a hospital with more capacity. For this reason, the Chief of the Medical Staff supports this option. In order to make an informed decision, the Devenney Group has been hired to evaluate these options. An example of their preliminary work is shown in following illustration.
How would the District pay for the new hospital? As shown in the next figure, building a 25-bed hospital would require borrowing money most likely by selling General Obligation Bonds and paying those back over the customary 15 years. The combination of revenues from property tax, the lease with AH and an extension of the parcel tax for another 15 years would make that possible.
The District should get excellent financing terms. By 2029, all of the District’s long term debt will be retired. Combined with a guaranteed way of repaying the bonds, we should be able to get a very low interest rate.
Time is of the essence! The Board Chairs for the last two years have been unable to make any forward progress. Based upon the work of consultants (Devenney Group) the best estimate now of completing a new hospital is December 2031. The last figure shows the schedule which has necessarily been shortened at the front end.
The schedule shows that in order to meet the 2030 deadline, a bond measure must be approved by the voters by June 2024.
In summary, there is a plan in place to keep a hospital on the coast if the new Board acts quickly.
However, there are two threats to this plan. The first is a lack of fiscal discipline by the new Board. Several candidates have expressed strong support for using the District’s accumulating cash to build housing which would leave the District with insufficient resources for a hospital. The other threat is that of Dissolution favored by many local politicians. If the next Board adopts a resolution to dissolve the District as a legal entity, the Local Agency Formation Commission (LAFCO) would do so without a vote of the people. The District’s assets including its cash, property, facilities and tax revenues, would be seized the county Board of Supervisors. You can make your own call on whether this a good idea.
-John Redding, a member of the Mendocino Coast Health Care District (MCHCD) Board of Directors