A Contra Costa County, Calif., grand jury has recommended that the long-troubled Los Medanos Community Hospital District be dissolved because of financial mismanagement.
In a scathing three-page report made public June 4, the grand jury concluded that the district, which covers the cities of Pittsburg and Bay Point about 40 miles northeast of San Francisco, is a "hollow public agency without any demonstrated reason to persist."
The report accuses the district's board of various fiduciary violations, including:
Operating without an approved budget since 1993.
Operating without an accounting system since 1994.
Keeping hospital records on employee and trustees' home computers.
Allowing district board members to approve and sign their own expense claims and reimbursement checks.
The grand jury also said its attempts to receive information from the district were "repeatedly thwarted." Tapes of public meetings provided to the grand jury included footage of a public school meeting, a football game and "bedroom scenes," which sources say consisted of footage of a man undressing in a hotel room.
" `Bedroom scenes' is the best way to describe it . . . I will say that if you subpoenaed the tapes from the district, you would probably get something quite different than what we received," said grand jury foreman John Hunt. He declined further comment on the report.
Tom Driscoll, the district's attorney, denied the district has been withholding information. "It is not geared up to respond to the grand jury's expensive questions and requests," he said, adding that the district has only two part-time office employees.
The 101-bed Los Medanos Community Hospital closed in April 1994 and filed for bankruptcy protection after reporting losses of at least $15 million since the time it went into operation in 1979, although the grand jury report said no conclusive audit of the district has been performed since before the hospital's closure.
In April a bankruptcy judge approved the district's plan to lease the hospital to Contra Costa County for 20 years at $100,000 annually. The county would operate the facility as an outpatient clinic. The deal is pending the filing of a bankruptcy reorganization plan for the district, Driscoll said.
Meanwhile, the district continues to receive $1.5 million in annual taxpayer funding, with nearly $1 million of that used to pay down an $11 million bond issue for facility improvements made in 1977. The report said the remaining $500,000 a year is "expended without accountability to the public." Although the grand jury concluded that some $600,000 was spent between 1994 and 1997 to pay attorney fees, board trustee Jerry Rice said research he has conducted leads him to believe the sum may be more than $2 million.
"The numbers reported to the grand jury were far less," said Rice, a trustee since 1990 and a vocal critic of his colleagues. "Not one penny has gone for healthcare in years."
Rice also has blasted his colleagues for routinely conducting meetings behind closed doors, engaging in conflicts of interest and rejecting far more lucrative buyout offers from private parties in favor of the county offer. He contended that board Chairman Al Prince, employed by Contra Costa County as its services administrator, should have recused himself from voting on the deal.
Prince said Rice's allegations are "rubbish" and that he has separated his county employment from his board post. He added that Pacific Health had not made a viable offer.
Long Beach, Calif.-based Pacific Health Corp., a for-profit operator of hospitals that specializes in reopening closed facilities, made a lease and buyout offer of the hospital last year for considerably more than the county deal, according Jim Young, Pacific Health chief executive officer. The company leases a similar-sized hospital in Tustin, Calif., for $30,000 a month and has a buyout option for $5 million.
"We were told by the board that the land underneath the hospital was worth more being subdivided," Young said.
Under state law, the district board has 90 days to respond to the report. If it agrees with the report, it may vote to dissolve or to put the question of dissolution to the district's voters.