US Tri-City Medical Center deal still not complete

Plans made in the fall had UC San Diego Health running financially distressed Tri-City Medical Center in Oceanside by the end of March, but the deal still is not complete.

Does this mean that the potential pact between the public university and the public health care district is doomed? Executives involved say no, though the particulars of a final arrangement, one that officials say the University of California Board of Regents is willing to approve, may not be exactly what was discussed last fall.

“We’re 100 percent committed to getting this done,” Patricia Maysent, UC San Diego Health’s chief executive officer, said in an interview on April 9. “It may not look exactly like what we talked about before. It might shift a little bit, but we really want to get this done so that we can stabilize that North County hospital and those communities.”

The original plan was for UC San Diego to assume Tri-City’s assets and debt, running the medical center through a joint powers authority controlled by the university, with minority representation from Tri-City.

As its name implies, Tri-City serves Carlsbad, Oceanside and Vista from its main campus on state Route 78. The nearest full-service hospitals to its core services area are 15 miles away in Encinitas and San Marcos, making the facility especially important in emergencies. Tri-City is far from alone in suffering severe financial distress following the COVID-19 pandemic. According to a 2023 report from the California Hospital Association, one in five California hospitals are at a risk of closure, though most are in rural areas.

North County, though, faces its own critical moment with local health care services as both Tri-City, and neighboring Palomar Health, are currently weathering severe financial headwinds.

UCSD’s interest in Tri-City, and in the purchase of Alvarado Hospital in La Mesa last year, is to reduce visits to its very busy main hospitals in La Jolla and Hillcrest which, unlike smaller outlying medical facilities, have recently seen significant increases in patient load.

The hope, Maysent said in an interview last year, is that working with Tri-City can persuade UCSD patients from coastal North County to stay near home rather than driving so far south for care.

But the agreement approved by Tri-City’s board of directors on Oct. 26, 2023, was contingent upon UCSD performing due diligence to understand Tri-City’s financial and physical condition. That process has now been underway for nearly six months without resolution. What has caused this work, which amounts to reading reams of financial documents, take longer than anticipated?

A cyber attack in November that severely affected Tri-City’s operations for a week did not help. And, Maysent added, it has taken time for analysts to fully understand the state of its finances and the hospital’s physical plant.

“We had to do a review of the facilities and get not just planning but also costing information for what the facility needs, and not just for seismic (repairs) but also just general facility upgrades,” Maysent said. “This is the case with all of these distressed hospitals. They’ve stopped making investments in the infrastructure a long time ago because it’s the first thing you stop doing when you’ve got to make payroll.”

Tri-City has seen a gradual erosion of its capabilities due to ongoing budget difficulties, closing its psychiatric unit in 2018 citing the expense of federally mandated upgrades, and suspending its maternity unit in 2023 when several local community clinics shifted their business to Palomar Health. Like all stand-alone hospitals, Tri-City lost employees during the fierce post-pandemic competition for licensed medical providers, finding itself hiring expensive “traveler” nurses and other specialists to backfill its workforce even as inflation pushed the cost of supplies and drugs ever higher.

With its financial reserves dwindling, Tri-City’s board requested proposals from full-service health care systems in mid-2023, receiving proposals from UCSD and Sharp HealthCare. Its latest financial statement shows that it has been an extremely rough fiscal year. From July through December, a recent financial report shows that Tri-City’s operations lost between $2.9 million and $5.8 million per month, adding up to a $24.6 million loss for the year so far.

However, results in January and February look better, with revenue exceeding expenses by about $1.5 million.

Dr. Gene Ma, Tri-City’s chief executive officer, said the start of 2024 is the first time in at least two years that the hospital has had a positive margin in two consecutive months.

“I think March is going to be similar,” Ma said. “I don’t know that people expect us to turn around this quickly and have a cash-flowing organization at this point.”

The executive said he believes a turnaround is underway while acknowledging that many will remain skeptical until a longer-term trend is visible in monthly financial reports. He said that recent positive results, preceded as they were by such a long period of red ink, spurred a fresh round of financial analysis from UCSD, contributing to a longer-than-anticipated due diligence period.

“They sent a team to dive into our financials and make sure that they were spot on, no inconsistencies, that our forecasts for the rest of the year looked good,” Ma said. “They found that we didn’t make assumptions that they disagreed with, and they were able to validate that we’re hitting all of our targets.”

But it will take a significant and sustained turnaround to square Tri-City with its creditors. The hospital’s balance sheet lists $97 million in accounts payable, a number that is said to have reached $90 million as of June 30, 2023, nearly one year ago.

This sum represents the total in unpaid bills for goods and services still owed to companies and individuals. Vendors are not infinitely patient — they will not wait forever to get paid — and some have already run out of patience.

The San Diego County Superior Court docket lists several civil lawsuits alleging lack of payment, including one filed Nov. 21, 2023, by Flexcare Inc. that claims Tri-City owes it nearly $2 million on 551 unpaid invoices for contract clinical workers. In its court complaint, Flexcare says it pulled its 13 remaining clinical workers on July 21, 2023, due to lack of payment. Two other staffing companies have also filed suit with similar allegations, though over much smaller amounts. Legal claims for nonpayment go beyond staffing companies. US Foods, a company that distributes a wide variety of consumable products, sued on Oct. 30 claiming that Tri-City owes it $162,838 in unpaid invoices.

Ma said in an email Wednesday that he expects the $97 million in accounts receivable to fall as Tri-City is able to bring in more cash than it spends each month. Though some have sued to force payment, he said most are willing to be flexible, accepting payment plans to gradually settle debts.

“The vendors are working with us because our improved cash position is showing them a pathway to resolve and create these payment plans,” Ma said.

It remains to be seen whether unpaid bills will be an impediment to the Regents approving the arrangement between UCSD and Tri-City. Maysent had no comment on the matter.

But operating at a loss for so long, and getting sideways with many vendors, begs questions about the quality of care that Tri-City is able to deliver.

The California Department of Public Health accepts complaints about every hospital in the state, and lists a total of 45 for Tri-City in 2023, a dozen more than the state average of 33 per similarly-sized facility tallied last year. While some claims made in complaints were substantiated, most were not found to be valid. Fourteen were said to be “substantiated without deficiencies.” Additional detail on specific complaints is not available unless deficiencies are found.

The most-recent enforcement action taken against the facility by the state were in 2021 when inspectors found that some record-keeping requirements were not followed.

Tri-City currently is rated three of five stars in the federal government’s hospital rating system.

The hospital’s nursing staff is represented by the California Nurses Association, one of the most-powerful labor unions in the state and one that is never afraid to call out management. In fact, the CNA did just that in 2021 with nurses protesting outside the hospital that staffing levels were too low. At the time, though, similar protests were happening at many hospitals as health care workers, burnt out from working during the pandemic, left their jobs or cut back on hours.

Cathy Cronce, a registered nurse who said she has worked at Tri-City since 1981, a union member and a member of the hospital’s professional practice committee, an organization that meets monthly with management to hash out patient safety concerns, said she believes that the professional staff has pulled together to maintain quality.

“As nurses, we’re always doing our best to keep the patients safe,” Cronce said.

But that’s not to say cracks are not showing. Nurses working 12-hour shifts are not always getting their breaks and, she said, are sometimes assigned more patients than California’s nurse-to-patient ratios allow. There was also, she added, a recent vote of no confidence in management by emergency department nurses who were unhappy with last-minute decisions to “flex” shifts, meaning they were told not to report to work on some occasions.

“It seems like the emergency room is always busy, I mean, you hear about long waits and stuff,” Cronce said.

Overall, though, she said that staffing has recently gotten better with a surge in hiring that seems to hint that many do still feel the UCSD deal will happen.

“Some of the nurses who have been at the new-hire orientations, they already work at UCSD, but maybe they live up here (in North County),” Cronce said. “So they’re trying to get their foot in the door up here, hoping that, if we get taken over by UCSD, they’ll have a job that’s closer to home.”

While he did not respond to a request for comment on the vote of no confidence or nursing ratio violations, Ma said that an improved staffing picture has meant that Tri-City has been on bypass — a temporary curtailment of ambulance deliveries — less frequently in recent months. That statement could not be immediately verified with the county health department, which runs the region’s emergency medical system. However, tracking data on the number of patients who took longer than 120 minutes to be transferred from an ambulance to Tri-City hospital was listed at 1.69 percent of all ambulance patients in March, the ninth-highest number reported by all hospitals in the county in that month and significantly below the February and January numbers of 2.69 percent and 3.79 percent respectively. The San Diego Union-Tribune