It’s been about nine and a half years since voters established a Health Care District (the District) to levy a $298 annual parcel tax to save Alameda Hospital from closure. Recent developments unfortunately indicate the District is scrambling to pay for the hospital’s daily operations.

Alameda Hospital has been operating at a $328,000 per month shortfall ever since it lost Kaiser’s business in April 2010.  In addition to the shortfall, inpatient volumes and other revenues have declined enormously.  As of July 2011, no additional sources of cash reserves are left.

Wound Care Clinic Location

The District hopes to increase its revenues by opening a new wound care clinic in Marina Village Business Park but, in the meantime, has turned to using parcel tax proceeds as security for loans to keep the hospital going.  Half of its $1.5 million line of credit, the part designated for “working capital,” has been wiped out to pay past-due bills owed to the hospital’s critical vendors.  Yet this is only a stopgap measure; the hospital’s payments to vendors are, on average, still 24.5 days past due.  To get payables down to 15 days past due would require another $1.5 million.

The District is counting on December parcel tax receipts to replenish its exhausted working-capital line of credit, but makes troubling qualifications to that claim, stating it may have to resort to other borrowing to pay back the line of credit, which is due in February 2012.  In any case, the District’s CEO and CFO stated in a July 2011 report that alternative financing options “will be necessary in order to provide working capital for the Long-Term Care Expansion projects that are currently being evaluated.”

Meeting minutes reveal that most of the District’s Board of Directors agree that the District will have to borrow money in order to be successful.  One director declared that using the parcel tax revenues as security for a loan will have minimal impact and that Alameda’s debt load is low compared to other hospitals.  Others said their main objective is to keep the hospital open and operating.  But one director has repeatedly voiced concern and opposed the borrowing actions.

It’s unclear when or if the District can increase its revenues sufficiently to service new debt and operate in the black. Competing with Kaiser and Sutter for patients is a gamble.  But continuing to borrow against tax revenues raises concerns that we’re going to end up where we were a decade ago, before the parcel tax—with an unsustainable health care operation.

While we want to have confidence that our District leaders will make wise decisions, there are few consequences for bad ones.  No matter how high the debt, property owners will be on the hook for paying it off through the annual parcel tax – even if the hospital and its expansion projects close.

Our elected Board of Directors owes the public an explanation of their strategy for success.  Without that, we are left wondering if this is turning out to be a noble but failed effort, and a very expensive one at that.

July Report – Line of Credit with the Bank of Alameda

Originally published in Alameda Sun