Consultant to plan restructuring
County entity contracts firm for $3.2 million to tackle $71 million deficit
By Rebecca Vesely, STAFF WRITER, The Oakland Tribune
Article Last Updated: Sunday, February 08, 2004 - 4:02:08 AM PST

The Alameda County Medical Center on Friday retained a consulting firm for an 18-month, $3.2 million contract to turn around the troubled hospital system, which primarily serves the poor.

Cambio Health Solutions, based in Brentwood, Tenn., will draw up and implement a plan to rein in a $71 million deficit. Changes could include management restructuring and service cuts to patients.

Under the terms of the contract, Cambio will receive $182,000 a month for 18 months. The contract, to be finalized within days, will likely include performance requirements and benchmarks to receive full payment, a spokesman for the medical center said.

Cambio is expected to produce an initial restructuring plan by mid-March.

Interim CEO Efton Hall Jr. said in a statement that Cambio is different from previous consultants hired by the medical center.

"Cambio was hired not just to study the Alameda County Medical Center but is charged with implementing actions necessary to right-size the medical center so it can continue to fulfill its mission," Hall said.

Management turnover and a mounting budget deficit have plagued the medical center, which provides health services to the poor. On March 2 voters will decide the fate of Measure A, a half-cent sales tax that would raise $90 million a year to in part underwrite the medical center.

The medical center includes Highland and Fairmont hospitals, John George Psychiatric Pavilion and three clinics in Hayward, Oakland and Newark. Cambio just completed a two-week assessment of the medical center at a cost of $48,500. The consulting firm said inefficiency and lack of confidence in management are just two of many areas for improvement.

Problems are especially apparent at John George. On Wednesday a federal investigation found that facility noncompliant in four of seven areas. The medical center must come up with a comprehensive plan of correction in those areas -- not made public -- within two weeks.

As part of the Cambio contract, 10 consultants will work at the medical center full-time, and a chief implementation officer will report to the medical center's Board of Trustees.

It's not unusual for hospitals to retain turnaround firms. Alta Bates Summit and Children's Hospital Oakland brought in such firms in recent years to help manage budget deficits.

In 2001, just after the merger of Alta Bates and Summit hospitals in Berkeley and Oakland, management retained the Hunter Group to trim a $60 million deficit. At the advice of the Hunter Group, Alta Bates Summit cut about 200 jobs from a work force of 5,000 and consolidated some services. The next year, Alta Bates Summit was $3 million in the black, and by 2003 it made $30 million.

Robert Petrina, chief financial officer at Alta Bates Summit, said a turnaround firm can provide fresh eyes.

"In general, these firms come in with a high level of expertise; they've seen many of these situations all over the country," Petrina said. "Their recommendations are based on the best interests of the organization and not based out of any bias."

Bradley Cleveland, spokesman for SEIU Local 616, said expertise to bring the medical center out of debt is needed immediately. However, consultants aren't enough to get the medical center on track. "Clearly we need a permanent, experienced management team in the long run," he said.

On Tuesday the stewards of three unions representing health care workers at the medical center voted to ask their members to support a vote of no confidence in management. One reason cited was hiring consultants at an "outrageous cost to taxpayers."

It's very rare for a public hospital to retain a turnaround firm, according to the California Association of Public Hospitals, though hiring consultants for some restructuring is not uncommon.

Petrina said he wasn't surprised when he was told Cambio's price tag for the medical center. He declined to say how much Alta Bates Summit paid the Hunter Group.

"This is an expensive proposition," he said. "But you have to look at the benefit you get. How much would you pay for a $90 million turnaround?"

Contact Rebecca Vesely at rvesely@angnewspapers.com.