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El Camino sheds light on Los Gatos deal

Original post made on Apr 2, 2009

It will cost El Camino Hospital about $32 million to operate Community Hospital of Los Gatos for 18 months, in addition to the previously announced $45 million purchase price for land and buildings, hospital officials said during a public forum earlier this week.

Read the full story here Web Link posted Thursday, April 2, 2009, 12:59 PM

Comments (10)

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Posted by Bill Krepick
a resident of Blossom Valley
on Apr 2, 2009 at 7:50 pm

The El Camino Hospital (ECH) Board talks a lot about transparency in reporting and respect for their stakeholders but doesn't walk the walk. After deciding to spend $100 million on a failed Los Gatos hospital, Chairman Reeder stated that the Board would not track that investment and would not report its profit and loss on a quarterly basis. Can you name any other business that would spend $100 million and not report results to shareholders and not hold its executives accountable for a return on the investment? The fact is that El Camino Hospital has $400 million in money to spend (thanks to its non-profit status, taxpayer support and below market tax exempt financing) and it has shown it will spend huge amounts of money to add high profile healthcare programs without regard to measuring the return on invesment or the value of those programs in delivering affordable healthcare. The Board's arrogance and mismanagement is an affront to patients and taxpayers. El Camino's 'do whatever it takes' monikor translates into a mind numbing uncontrolled spending mentality that perpetuates our nation's out-of-control healthcare crisis. Hopefully voters will think twice about re-electing any of the current ECH board when their terms expire.


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Posted by Duncan MacMillan
a resident of another community
on Apr 2, 2009 at 10:00 pm

As ECH rushes to reactivate Los Gatos in mid-July, how are they doing on problem #1 - reactivating Mountain View? A comment by CEO Graham at the forum would indicate that opening the brand-new MV has slipped to November. Who is watching the store? Which store? Store #2 (Los Gatos) isn't worth the effort but will certainly cost hundreds of millions. No problem, the taxpayers will never really know how much it makes or doesn't make; how much it will cost; and, with $400 million in the bank, what's a few hundred million here and there anyhow? - right?!


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Posted by E Bow
a resident of another community
on Apr 3, 2009 at 12:12 pm

I wonder if Krepick's rants are motivated by the hospital board's rejection of his letter in 2005 suggesting that they hire him to be the CEO of the hospital?

Having just been fired by Macrovision, the hospital board at the time apparently felt that he was not be the best choice.

He talks about transparency - how about releasing the letter to the public?


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Posted by Vicki Gilfix
a resident of Cuernavaca
on Apr 3, 2009 at 2:44 pm

I have to wonder if Mr.Krepick and Mr. MacMillan attended the same open Forum that I did last Monday night. Unless I missed something, I don't remember anybody saying that ECH is purchasing a business - the operation of the business of Community Hospital of Los Gatos is closing it's doors. I think I heard that by expanding the Hospital site to Los Gatos, we will all be gaining from access to additional beds, additional services, additional medical specialists. Maybe Mr. Bow is on to something.


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Posted by Duncan MacMillan
a resident of another community
on Apr 3, 2009 at 9:47 pm

Vicki: We all attended the same meeting but you may have missed some nuances.

There wasn't a business to buy in Los Gatos, beyond the one that was losing $1 million a month, as run by the for-profit operator who has given up turning it around. At least ECH avoided wasting money on that portion of the "opportunity".

What ECH is buying is property and a building complex, much in need of repair. That will happen on April 11, if they close escrow as mentioned in the meeting. ECH is now actively hiring and spending money from its reserves to outfit the facility - all in the hopes of acquiring physician referrals for beds at Mountain View, more so than filling beds at Los Gatos.

Those Mountain View beds are currently being booked at Good Sam and other area hospitals by Los Gatos physicians. The beds surely aren't being occupied at the Community Hospital of Los Gatos facility. Los Gatos' previous average daily census (occupied bed count) was a whopping 38! It's easy to lose money at that rate and ECH will take considerable time to get back to even that level now that the hospital is winding down to zero beds and will be at that level for at least three (3) months.

ECH is betting that having a Los Gatos "store front" will produce beds in Mountain View. We should all have heard that loud and clear at the forum.

Our point is that the Los Gatos purchase and reactivation was an unwise investment and will be a money pit. It will ultimately come home to roost as yet another multi-hundred million dollar bond issue to meet required 2030 earthquake standards, more likely a complete teardown/rebuild of Los Gatos.

In the meantime, ECH will be throwing operating funds (taken from its cash reserves) into Los Gatos in the hope of winning beds away from Good Sam and other hospitals - again, from where Los Gatos physicians are currently sending their patients.

Good luck on that one and, if you live in the ECH tax district, keep you wallets handy....

Relax for now: you and other taxpayers won't ever know until it is way late in the game because ECH has no intention of reporting the outcomes of its Los Gatos adventure. Even a CPA won't be able to figure it out, based on what ECH intends to report.

ECH should have gone after more beds from the Los Gatos area but it should not have done so by throwing money at a tiny hospital in Los Gatos. Instead of distracting itself with Los Gatos, ECH should have concentrated on the Mountain View hospital . Mountain View will be a state-of-the-art, seismically-safe facility that we helped fund. That best-of-breed hospital should have been the means used to attract beds from the Los Gatos area. It is too late for that as a much more cost-effective strategy, at this point. ECH is both committed to the purchase of Los Gatos and is distracted from a flawless reactivation at Mountain View (now likely-delayed).

At the very least, CEO Graham and board chair Reeder should be made to periodically report the results at Los Gatos and its financial effects on ECH. Only then can we determine whether they should keep their jobs.

As for E. Bow's comment and your attachment to it, that is not worthy of a reply from me. If Bill Krepick doesn't supply a reply to E. Bow, I wouldn't blame him since Bow's innuendo has no place in an economic/business discussion and should be dismissed out of hand.


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Posted by Bill Krepick
a resident of Blossom Valley
on Apr 5, 2009 at 12:24 am

I suggest that "E. Bow" get his/her facts straight before making a comment about a concerned taxpayer's criticism of the El Camino Hospital Board. I retired from Macrovision Corp. at the end of 2005 after an 18 year career which included 10 years as COO and CEO taking the company public and growing it from less than $100 million in market cap to more than $1 billion in 10 years. I would be happy to share my January 2006 letter to the ECH Board in which I applied for the open CEO position, outlined my 30 years of business experience and told the board that my salary requirements were in the $300,000 range - far below the $1 million compensation that the Board seems to think is justified for the ECH CEO position. The Board said they were not interested in a business executive, rather they wanted a long term healthcare administrator for the job. My criticism of the Board and that of at least 121 other taxpayer petitioners has centered around lack of transparency, lack of focus on return on investment, lack of strategic planning, and lack of vision with respect to making healthcare delivery more affordable. You ought to have your facts straight before you suggest that my concern (and that of many other taxpayers) is a rant. If you would be so kind as to provide your true name and address to the MV-Voice - I will arrange to provide you with a copy of my January 2006 letter.


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Posted by USA
a resident of Old Mountain View
on Apr 6, 2009 at 10:01 am

You never really know what goes on in closed meetings that would cause someone to leave a company, but it would appear that this was not a firing.

Web Link


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Posted by Rodger
a resident of Sylvan Park
on Apr 6, 2009 at 10:06 pm

Perhaps I am missing something but why didn't the hospital board obtain permission from the tax payers in the El Camino Hospital district. This seem like fraud to me.


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Posted by Duncan MacMillan
a resident of another community
on Apr 7, 2009 at 11:52 pm

To Roger: This is not a matter of fraud on the part of ECH. It is just that they don't need to be particularly forthcoming on how they are spending cash reserves, according to the law. IF they needed a new bond issue, we would have found out a lot more. It is not illegal to make lousy business decisions, even if they will suck up those reserves and back us into a new bond issue 5 or 10 years from now.

Having consummated their purchase of Los Gatos, now would be a good time for you to attend a board meeting and ask for ongoing reports (financial and marketing reports), now and in the future, on how things are going at Los Gatos.

The board should charge management to report on how the Los Gatos operation is going over time, including such things as how much consulting time/expenses and Mountain View staff time is being spent on that operation. The ECH chart of accounts doesn't exist in a fashion to do so now and will have to be modified to accumulate those charges.

Changing the chart of accounts is no big deal but, without public pressure, you can bet it will be "they didn't ask, so why tell!" After all, what manager would want to report on a bad decision if they aren't required to. Smoke and mirrors, platitudes and the burning desire for 3% growth per year will be about all you and the rest of us will hear, unless pressure is brought to the board.

Beyond costs, some marketing reports should also be provided on a periodic basis: How many NEW Los Gatos area physicians have become affiliated with ECH Mountain View, after the Los Gatos purchase? How much revenue are these NEW doctors generating at Mountain View? Where do Mountain View patients live and how is that changing?

I am afraid it is pretty simple, at this point: The horse has left the barn on this purchase decision and is eating happily on the back 40 (a done deal eating into cash reserves). How much is the Los Gatos horse eating? How much is Mountain View getting to ride on the Los Gatos horse? At what point should the horse be put out in somebody else's pasture or worse?


Go to a board meeting or two and try to get them to be responsible.

...Tilting at windmills? Probably, but try.


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Posted by Robert
a resident of Old Mountain View
on Apr 8, 2009 at 11:15 am

The District Attorney or State Attorney General should investigate the El Camino Hospital Board for fraud and conflicts of interest, including Board members who resigned in the last three years. This plan to provide health care to the residents of Los Gatos is taking away funds provided by the residents of the El Camino Hospital District, funds which they voted for with Measure D. This purchase of Los Gatos Community Hospital will be a one way conduit of funds from this district to the residents of Los Gatos and its surrounding community. If they want a hospital, they should fund it on their own.


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