Part history lesson, part tax return Part history lesson, part tax return (July 15, 2005)

Hospital board spends hours answering questions from League of Women Voters

By Katie Vaughn

Challenged by the local chapter of the League of Women Voters, the El Camino Hospital board of directors made good on its promise to offer more transparency of its proceedings, devoting more than three hours at its July 6 meeting to explaining how it conducts business, governs the hospital and spends money.

Following a letter sent by the League's Los Altos chapter in May, the hospital agreed to hear and comment on questions raised by hospital employees, residents of the hospital district and members of local unions and the League.

All of these groups were represented at the July 6 meeting, where roughly 50 people assembled at one end of the hospital's cafeteria and listened as hospital CEO Lee Domanico presented a lengthy overview of the hospital's organization and functions.

Domanico explained the hospital's complex history -- involving four major structural changes since its inception in 1956 -- and provided details on the hospital's current practice of maintaining both a publicly elected hospital district board and a hospital board, a primary point of misunderstanding between the hospital and the public.

Domanico said the El Camino Hospital District -- not the hospital itself, but the entity which runs it -- operates as a public hospital district, and is therefore subject to the Brown and Public Records acts. As a public entity, he said, it needn't file an IRS Form 990, which provides information on an organization's top five most highly compensated employees as well as the five largest contracts it holds.

In contrast, Domanico said, El Camino Hospital runs as a nonprofit -- specifically, a 501(c)(3) nonprofit public benefit corporation. Although it is not considered a public entity, the fact that the hospital board essentially contains the same people as the district board -- it consists of the five elected members of the district board, plus the CEO -- means it is also subject to the Brown and Public Records acts.

Although nonprofits normally have to file a Form 990, Domanico said a special IRS exemption prevents the hospital from having to do so.

When asked why the hospital couldn't just combine the two boards, chief financial officer Marla Gularte explained that such a move could potentially cost $7 million due to the hospital having to fire and rehire employees, revise and amend pension and benefits contracts and pay for legal advice and filings. Board members added that the only positive outcome of combining the boards would be to remove one layer of confusion over their purposes.

"Shakespeare asked, what's in a name," hospital board chairman Dr. Edward Bough said at the meeting. "In our case, $7 million."

Additional questions arose concerning the upcoming construction of a new, seismically safe campus -- specifically, how the board would award work to contractors and subcontractors.

Jon Friedenberg, vice president of resource development, answered that while the hospital is required to use the process of public bidding to assign jobs paid by Measure D funds, other contracts needn't be negotiated in public.

"That does not mean other processes are secretive or corrupt," he said. "We're not hiring someone's brother-in-law who's never built a house in his life."

Friedenberg said the hospital is not required to offer contracts to the lowest-priced applicant, as in public bidding, but added that the non-public process is still competitive.

Members of the public also inquired about the board's practice of holding closed meetings, which is allowed under the Brown Act in certain circumstances. District resident Bill James, a well-spoken questioner wearing a union button, said that while he understands why the board must sometimes meet in closed session, it should provide more information on what topics are being discussed there, so that the public can provide input. (James later described himself as a patent lawyer in Cupertino who ran for the hospital district board in 2002.) He also suggested the board spend more time in open session.

Bough, the board chairman, said the public must keep in mind that the hospital operates unlike its privately run competitors or public bodies such as city councils.

"I think very few people understand the difference between a city government and a public entity that runs a business," Bough said. "The enterprise aspect changes [how much] time the board spends in closed session."

Another issue that took up a sizable portion of the meeting was the board's level of openness regarding its CEO's salary and benefits. Amid public pressure and a court action filed by the Voice, the hospital promised to start filing a Form 990 and released Domanico's employment contract in March. Domanico voluntarily supplied some details of his compensation package at the board meeting earlier that month.

Board members said the question of whether to make contracts public forces them to apply a 'balancing test" -- an attempt to determine whether releasing the information benefits the public more than it invades the privacy of the employee. But James and others said that's not a question hospital officials have a right to ask. The public, they said, ought to know what top hospital officials earn in order to help gauge the long-term financial health of the hospital.

Friedenberg said that to combat confusion, as well as the idea that the hospital has something to hide, El Camino will make public the Form 990 by its filing deadline of Oct. 15. He added that the hospital is forthcoming with its financial information, as it presents updates on its monthly and year-to-date financial status at each meeting. James said this information fails to satisfy the public's questions.

"In general, the level of information made public at these meetings is superficial," James said. "It usually just [says] the hospital is solvent." He added that board's new practices of posting its agenda online and providing details on what is to be discussed in closed session are helpful.

In his presentation, Domanico suggested the board consider additional actions such as broadcasting its meetings on public access stations and making the minutes of meetings available at local libraries, but did not specify if or when the board will do so.

In the days following the meeting, representatives of both the board and the local League chapter touted the night as a success.

"We really wanted to make the effort to educate people," Bough said. "We're not going to change having closed sessions. But we explained why we have them."

For local League president Ginny Lear, the meeting marks the start of further interaction with the hospital board. While she expressed optimism about the meeting and its outcomes, she said the League will continue to attend hospital meetings and may submit new agenda items as soon as the next meeting on Aug. 3.

"We do have the feeling that this is the beginning of an open dialogue," Lear said. "We're in this for the long haul."

E-mail Katie Vaughn at kvaughn@mv-voice.com

E-mail a friend a link to this story.