Board of Directors Fails To Protect LVMC Assets While Promoting Champion Center:
Board of Directors Responsible for Champion Center Debacle: Raymond Down, Jr., Mary Sharp, Roger McConnell, Linual White Jr., David McAninch, III, MD
“Let’s be clear, our need to conceal what we did takes priority over the public’s right to know what we did. Remember, we never admit that we did anything wrong.”
Champion Center Debacle:
* Board of Directors provided false information when applying for a $19,090,000 loan by claiming that Medicare would pay for patient treatment at the Champion Center. Medicare did not support the facility license that the Board obtained. In addition, the Board provided misleading and false financial projections of revenue from leasing the Champion Center space as a morgue (See Exit Plan)
* Board did not follow best public sector procurement practices in selecting a business partner
* Board failed to maintain “high-quality” health services per District’s Mission Statement. CMS rated Lompoc hospital below-average for 2016, 2017, 2018
* CEO and the administrator of the Champion Center, Steve Collier, representing the Board, provided no credible explanation why four different Medical Directors, under contract, abandoned the Champion Center one after another in 2 1/2 years.
* CEO, representing the Board, claimed they were “baffled” by the failure of the Champion Center, even though the Board was briefed orally & in writing at about 30 monthly Board meetings over 2 1/2 years
* CEO, representing the Board, claimed there is no “document” in existence that explains why the Champion Center went bust
* CEO, representing the Board, blocked access to public records by requiring an exorbitant $8,750 advance payment for a small number of pages of correspondence concerning problems at the Champion Center. Did not respond to public records act request for emails about the Champion Center
* Even with an IT department, the CEO, representing the Board, claimed costly special software must be created by an outside contractor in order to retrieve correspondence about problems at the Champion Center.
* Board failed to fulfill fiduciary duty and protect the assets of the District. Lost roughly $9 million operating the Champion Center & owes roughly $27 million for a loan with payments of over $1 million per year until 2042
By Bob Aller
(Latest revisions on 6.15.2018)
Drawings by Nina Gvozdeva
In November 2014 the Lompoc Valley Medical Center (LVMC) opened the 80-bed Champion Center campus. The Center was a treatment facility for patients with substance abuse and related medical conditions. LVMC is a healthcare District and a local government entity.
Just over 2 1/2 years later, in June 2017, the District’s Board of Directors closed the Center.
Key decisions made by the Board of Directors appear to have triggered the Champion Center debacle. Each member of the Board of Directors had a “fiduciary responsibility for protecting and enhancing the District’s assets.”
Nevertheless, LVMC incurred a significant loss of cash, ($11 million in operating and start-up expenses), and a construction loan debt that included reimbursement for LVMC expenditures (approximately $27 million). These financially troubling developments strongly suggest that Board members failed to fulfill their fiduciary duties.
However, the District CEO offered a much different take on the defunct Champion Center. His view was reported in the Lompoc Record: “he doesn’t have any regrets about the way it was handled.” The CEO, (scheduled to retire in 2018 after a new CEO is hired), appears to claim no mistakes were made by himself, other administrators or the Board of Directors.
This review examines a cluster of facts that contradict the CEO’s claim.
First, the District’s Mission Statement claims the District will provide “high-quality” health services. However, CMS published ratings for 2016, 2017, 2018 indicating that Lompoc hospital provides below-average, low-quality health services.
“The most important guideline for a board on all decision making is the mission statement. If the mission is not central at every board meeting, it is easy to lose focus on the true purpose of the organization, according to Boardsource.
The Boards’ Mission was to provide “high-quality” health services. They failed that task.
Instead of improving quality of care, the Board chose to start a new business with no prior experience in that business. It appears the Board made a series of business blunders leading to the failure of the Champion Center.
Finally, the Board made repeated efforts to cover up what they did by blocking access to public records detailing what they did.
Lompoc Valley Medical Center – A Local Government Healthcare District:
California healthcare districts, called special districts or districts, were first enabled under the California Local Hospital District Law in 1945. With a large number of wounded soldiers returning from WWII, healthcare districts facilitated the construction of needed hospitals in rural communities like Lompoc. A Board of Directors was specified as the legally responsible entity for each District.
In California, there are 78 “special health care districts,” including the Lompoc Valley Medical Center (LVMC). LVMC has its own Board of Directors that is responsible for all activities.
Special District Hospitals Sometimes Have Inadequate Oversight:
Many special district hospitals are reportedly well run, but some special district hospitals have been shown to be sub-standard. The Sacramento Bee reported on general problems with special districts: “The media lacks the manpower to cover them… The result: countless clusters of calcified government that can become little fiefdoms for those in power.” A New York Times editorial characterized special districts: …” small, secretive government bodies with the powers to tax and collect fees and to hire well-connected cousins, uncles and sons-in-law….”
Over the years reports of scandals involving nepotism, financial conflicts of interest, and poor or negligent management have surfaced. While the public and the press usually pay little critical attention to special districts, twelve California special district hospitals have gone bankrupt between 1996 and 2014.
The Tulare (CA) Regional Medical Center (District hospital) closed its doors in October 2017 and in April 2018, the FBI raided the home of the former CEO, seizing documents related to management of the hospital. That’s not good.
Most recently, the Coalinga Regional Medical Center (District hospital) announced that it will close by June 15, 2018.
Lompoc Hospital – A History Of Poor Performance:
Lompoc hospital’s reputation for poor “quality of care” has been widely known for many years within the healthcare community and local residents. In 2016-2018 the Centers for Medicare and Medicaid Services (CMS) formally rated Lompoc hospital in the lower 15.7% of hospitals nationwide.
As the only special district hospital in Santa Barbara County, LVMC received the lowest CMS hospital rating in the County. Meanwhile, Cottage Santa Barbara was ranked by CMS in the upper 2.2% of hospitals nationwide. That disparity for hospital care reflects directly on the quality of management and Board oversight at the two hospitals.
Many Lompoc residents routinely travel to Cottage and other hospitals due to safety and quality-of-care concerns. (County healthcare data show that roughly 50% of Lompoc residents leave town to go to other hospitals.)
In February 2017, serious safety issues at Lompoc hospital were highlighted. A random inspection of the hospital by CMS resulted in a 128-page Validation Survey that detailed potentially fatal pathogens loose in the hospital pharmacy. A high degree of negligence was found since the pharmacy staff had previously discovered the pathogens but did nothing to eradicate them. In addition, there were other serious systemic deficiencies.
The CMS Validation Survey concluded that the hospital was not safe: “…the hospital failed to effectively govern the activities and conduct of the hospital’s operation in order to provide safe and quality healthcare…”
The CMS Report pointed to the failure of the Board of Directors. In addition, the Report put the hospital’s financial support from CMS in jeopardy. However, in customary fashion, the District put their spin on the CMS report. Instead of acknowledging a need for improvement, the District trivialized and discounted the CMS Validation Survey in a report in the hometown press: “the quality of care here is tremendous.” The hospital did pass a revisit survey to retain CMS financial support. Nevertheless, for years there have been reports of deficient quality of care at Lompoc hospital.
Grade “F” – Lompoc Rated Among 34 Lowest Rated Hospitals In America:
In 2015 Lompoc hospital received an F grade from the major independent hospital rating service, Leapfrog. An F grade meant that Lompoc hospital was rated by Leapfrog among the 34 lowest rated hospitals among about 2,000 rated hospitals. (Leapfrog is supported by Aetna, Anthem, Cigna, United Healthcare, Health Net of California and other healthcare companies.)
Johns Hopkins Armstrong Institute for Patient Safety Explains Significance of Leapfrog Hospital Ratings:
When Lompoc hospital received an F grade from Leapfrog, nearby Marian hospital received an A grade. The difference between an A and an F, according to the Johns Hopkins Armstrong Institute for Patient Safety, meant that there was a 49.8% greater chance of dying at Lompoc compared to Marian hospital. That’s not comforting!
Lompoc Hospital COO Denies Deficient Quality of Care:
The Lompoc hospital Chief Operating Officer (COO), Naishadh Buch, (a pharmacist by training), responded to a Lompoc Record reporter’s questions about a 2014 Leapfrog safety grade of D for the hospital.
In that interview, Mr. Buch said: “We know that the quality of care that we provide, like I said, is world-class.”
The COO’s claim that Lompoc hospital care was “world-class” was tellingly contradicted by Leapfrog. From 2012 through 2014 Lompoc hospital received a series of straight “D” grades from Leapfrog. Claiming a “D” grade is “world-class” is a statement untethered to reality.
Lompoc Hospital Safety Grades From Leapfrog
Fall 2012: D
Spring 2013: D
Fall 2013: D
Spring 2014: D
Fall 2014: D
Rationale For Champion Center: “Unmet Community Need”
While the hospital was receiving D grades, the District’s Board was busy approving the operation of the Champion Center. The Board claimed that there was an “unmet community need for chemical dependency services” that aligned with the District’s mission. However, the Board provided scant information about the “unmet community need” and no detailed marketing plan on how the Champion Center would effectively advertise and draw patients to the Center.
Missing Definitive Marketing Plan In Feasibility Study
Though the District had supposedly invested about $2 million to develop the Champion Center project prior to receiving the loan, they had somehow overlooked developing and presenting a definitive marketing plan that would lay out the strategy and background research that supported the marketing plan.
Made False Claim To Loan Entities Asserting That Medicare Would Provide Financial Support
The Board went through the loan application process providing false information that seems to have gone unnoticed by the loan entities. In any event, the Board successfully borrowed $19,090,000 to remodel the old, vacant Lompoc hospital and construct the 80-bed Champion Center. To operate the Center, the Board would incur a $3 million annual expense.
Starting a new business is fraught with risks. According to Forbes, 90% of start-ups fail. In addition, those risks often rise when the principal party has no previous experience in the new business.
Champion Center Provided 80 Beds But Most Remained Empty:
The Champion Center opened in November 2014. It housed 34 acute medical detoxification inpatient beds, 16 residential beds, and 30 sober-living beds. With 80 beds and 68,000 square feet, the Champion Center was, indeed, a large facility. The District apparently believed if you build it they will come! But extensive marketing efforts resulted in dismal results. The Champion Center claimed they tried, but the patients didn’t come.
In 2015 it was estimated that 21.7 million people in the U.S. needed treatment for substance abuse. But only a very tiny fraction of those in need chose the Champion Center. The expected revenue stream never flowed. If there was an “unmet community need,” the District’s efforts failed to meet that need.
Marketing Strategy For “Heroes Program” Fizzles:
According to statements made by District administrators, the initial marketing strategy for the facility was to offer chemical dependency and PTSD treatment exclusively for first responders. That group included law enforcement, fire departments, and especially military personnel.
Jim White, the spokesman for the District, had described this marketing approach as a one-of-kind concept… the only one in the U.S. He called it the “Heroes Program.” He explained that a police officer struggling with drug addiction would probably not feel safe in a group with a person he or she might have locked up for possession. He said that conversations were underway with Vandenberg Air Force Base and the Los Angeles Police Department and with multiple police and fire departments.
However, discussions with the Vandenberg medical staff, and representatives of the LA Police Dept. and multiple police and fire departments appeared to fizzle. The District has not provided a full explanation of why the marketing plan for the “Heroes Program” flopped. It seems more likely than not that the Board failed to do adequate homework.
District Lost Over $9 Million Before Closing, Owes $27 Million For Loan:
With 80 beds, the Champion Center averaged about 11 admissions a month. Most beds were left standing empty. By June 2017, the Board had lost $9 million in operating expenses according to the CEO. With no signs the Center might succeed in the near future, the District’s Board tossed in the towel to permanently close the Champion Center.
The District had invested over $2 million in start-up expenses, according to the Feasibility Study. On top of the $9 million operating loss, the District still owes roughly $27 million on the Cal-Mortgage bond construction loan. Annual payments of over $1 million are required through 2042, according to a Debt Service schedule.
This financially disastrous outcome can reasonably be attributed to the failure of the Board to provide effective oversight. The buck stops with the Board!
Prediction Of 80% Champion Center Occupancy Was Dead Wrong!
In 2012, in order to obtain a loan for construction of the facility, the District produced a 288–page “Official Statement” (PDF), The Official Statement included a Market and Financial Feasibility Study for the proposed Champion Center. The Feasibility Study (See p. 179 +) was prepared by the Camden Group, a healthcare consulting firm. However, the Feasibility Study was based in large part on information provided by the District and its partner. In fact, the Feasibility Study stated: “The potential volume (of patients) …was based on service area trends, projected use rates, and interviews with members of the Management team, the Board and representatives of AMS.”
Projected 80% Occupancy Was Much Lower:
Using data provided by the District and AMS, the Camden Group projected an 80% occupancy rate. But that never happened. Instead of an 80% occupancy rate, the Champion Center was much lower. The actual occupancy rate can only be determined if the District released the number of days that each patient stayed at the facility.
Did the Camden Group produce a Feasibility Report based on flawed data?
Did the Camden Group fail to conduct independent research to verify the conclusions of the Feasibility Study?
District Entered Into A Partnership That Failed:
On April 20, 2012, before the Feasibility Study was produced by the Camden Group, the District had entered into a management services agreement with Addiction Medicine Services (AMS). AMS is a for-profit corporation with a detox facility in Hemet, California (pop. 84,281). The agreement for compensation to AMS included a monthly management fee of $96,506. The District also agreed to provide a percentage of adjusted gross revenue as profit for AMS. AMS was set to receive a profit not to exceed $3,294,700 million dollars in the first year.
That profit would have been impressive for AMS, especially since AMS made no capital investment. By fixing a profit cap of $3,294,700 for AMS, the Board apparently assumed the Champion Center could or would become a cash cow.
It’s noteworthy that a Dunn & Bradstreet Comprehensive Report on Addiction Medicine Services in March 2012, before the agreement with AMS was executed, reported that AMS received a Credit Score Class of 4 on a 1 to 5 scale with 5 being worst. (LVMC received a Credit Score Class of 1.)
Why Did Addiction Medicine Services Refuse D&B Request for Financial Information?
D&B also reported they were “unable to obtain sufficient financial information from this company to calculate business ratios. Our check of additional outside sources also found no information available on its financial performance.”
A California procurement expert, after reviewing the facts, suggested it’s likely the District did not follow the best public sector procurement practices in choosing AMS as a partner.
Why Did The Board Approve This Venture?
For some reason, the District never credited anyone for the idea to borrow $19 million and open a substance abuse treatment center in Lompoc. It seems quite possible that the business concept was proposed by AMS.
Looking back, the Champion Center debacle raises a fundamental question.
What motivated the Board to embark on a business venture where both the Board and the District’s staff had absolutely no experience? At the same time, the hospital was performing at a “D” level, unable to achieve the District’s Mission Statement goal of “high-quality” health care.
In addition, there were over 1,100 substance abuse treatment centers in Southern California.
CEO Claims District “Baffled” At Failure Of Champion Center:
When the Champion Center went belly up the CEO was interviewed: “We were kind of baffled” about why it failed. Yet, the Board meeting agendas reveal that the Board received monthly oral and written status reports for over 2 1/2 years or they received about 30 Champion Center status reviews. The Champion Center administrator and owner of AMS, Steve Collier, provided the reports himself. Why would the Board be “baffled” after about 30 status reports over 2 1/2 years? Did the CEO infer that Mr. Collier’s reports were misleading?
What were some of the possible reasons for going under?
Medicare Denied Coverage To Champion Center:
One contributing reason for the failed venture was that CMS denied financial support. A letter of denial is dated July 14, 2016. “This letter is to inform you that the Champion Center’s application for enrollment in Medicare as a provider, specifically as an acute care hospital or as a Chemical Dependency Recovery Hospital, is denied.” The CMS reason for denial was quite simple. …“Chemical Dependency Recovery Hospital” is not a recognized category of provider in the Medicare program…” The Board had obtained a facility license from California that was not covered by Medicare for reimbursement of patient services. Chemical Dependency Recovery Hospitals did not receive reimbursement for patient services from Medicare for the years 2013, 2014, 2015, 2016, and 2017.
Why did the District provide false information when applying for a $19 million loan?
The Board retained a Century City, California law firm with expertise in healthcare to plead for approval to CMS. The law firm stated in a letter to CMS that the Champion Center would go out of business without Medicare support. The law firm failed to gain Medicare approval for a simple reason. Medicare did not support Chemical Dependency Recovery Hospitals. That had been the case for years.
Yet, the Camden Group’s Feasibility Study had indicated that Medicare would approve the Champion Center for patient insurance coverage. The Camden Group said it “relied upon AMS’ experience and the scope of benefits covered by each payer type (e.g. Medicare, Tricare, Commercial, and Self-Pay) for chemical dependency services.” (p. 225, Official Statement)
Was the Camden Group misinformed by the District and/or AMS?
Medicare & Medicaid Commonly Support Treatment of Substance Abuse:
The Department of Health and Human Services conducted a National Survey of Substance Abuse Treatment Services (N-SSATS): 2013. A total of 14,630 facilities completed the survey. 33% of the facilities accepted Medicare and 59% accepted Medicaid. The Lompoc hospital CEO discussed Lompoc hospitals’ reliance on Medicare and Medicaid in an interview in the Lompoc Record on May 15, 2017. He pointed out that the hospital would close if it lost Medicare and Medicaid support. “About 75 percent of LVMC’s business is done through Medicare and Medi-Cal, so continuing without those would not be sustainable.” The failure to obtain Medicare coverage for the Champion Center was one of the factors that apparently dealt a serious blow to the Champion Center. Although, the Champion Center appears to have had other serious inadequacies.
Why Did Three Successive Medical Directors Jump Ship?
The Champion Center Administrator, Steve Collier, claimed that the loss of a medical director led to the closing.
It’s particularly curious that during a period of fewer than three years, the Champion Center hired three different Medical Directors. All of them left within a year. The first two Medical Directors, (Drs. Greenberg & Golden), had impressive credentials and an esteemed track record for treating substance abuse. All three doctors may have concluded that the Champion Center was sinking fast.
Why did Drs. Greenberg, Golden, and Rubino abandon the Champion Center? (Note: The hospital acknowledged a fourth Medical Director, Dr. Harry Goldwasser.
(In correspondence the District CEO indicated “pending litigation” with Medical Director Denise Rubino. Dr. Rubino is also cited in 2016 medical practice litigation in Mississippi.)
CEO Claims Insurance Took Too Long & Affordable Care Act Created Competition:
The CEO provided some specific comments about the failure of the Champion Center in the Santa Ynez Valley News of August 1, 2017.
First, the CEO said things were delayed for about another six months when officials learned that health insurers don’t immediately load contracts once they are approved. The CEO acknowledged that staff didn’t know there were delays in obtaining insurance coverage. Yet, common sense suggests routine insurance practices should have been widely known by the management of the Champion Center.
Second, the CEO claimed the Affordable Care Act created increased competition for the Champion Center. The CEO’s claim raises a simple question. If the Center sought to be competitive with other detox centers, why didn’t it offer Affordable Care Act coverage? The CEO did not explain why the Champion Center did not offer Affordable Care Act coverage.
“It was a combination of things, and just bad timing probably,” said the CEO.
The CEO attributes the business failure of the Champion Center to “bad timing” and “a combination of things.” This vague explanation appears to be an attempt to cloak the real reasons for the business failure.
Board Was Legally Responsible For Champion Center Debacle:
At all times during the short lifespan of the Champion Center, the Districts’ Board was legally responsible. The Official Healthcare District Statement in 2012 indicated the “Board has ultimate responsibility for the quality of patient care, District policies, strategic planning, as well as fiduciary responsibility for protecting and enhancing the District’s assets.”
The LVMC website lists “Stewardship” as one of the District’s core values.
- Stewardship – responsible management of the resources entrusted to us
Professional Experience of Some Board Members:
Did some Board members have experience in financial planning? It seems so. The President of the Board, Raymond Down, Jr., is a former president of Lompoc Community Bank. Board member Mary Sharp, a CPA, has her own accounting firm in Lompoc. Finally, board member Roger McConnell is a Registered Financial Advisor in Lompoc. The sinking of the Champion Center is made all the more puzzling because of the qualifications of some of the Board members.
How and why did the Board fail in its duties?
Was The LVMC Board of Directors A Zombie Board?
The term Zombie Board was introduced by authors Sterling Huang and Gilles Hilary in their 2013 research paper Zombie Boards: Board Tenure and Firm Performance. This study, (last revised March 2018), showed that if Board members stay on the job more than 11 years the performance of the enterprise declines.
The data showed that nine years was the ideal period for a Board member. Nine years was the average tenure for Board members with the best-performing companies.
One of the key reasons for declining company performance is that long-tenured Board members become too close to management and lose their objectivity. Observers explain that these social relationships lead to Board members serving the interests of management, ahead of serving the interests of the public.
In the case of LVMC, the Chair of the Board, Raymond Down, was first appointed in 1972, or 45 years ago. That’s well beyond what’s considered appropriate by current standards. But Mr. Down is not alone as a Board member who has been on the Board for a very long time.
Nepotism May Have Impacted Performance Of Administration & Zombie Board:
In February 2017, when CMS reported that the Lompoc hospital pharmacy had not eradicated potentially fatal pathogens known to the pharmacy, the issue of nepotism arose. The Pharmacy Director, responsible for the failure to eradicate the pathogens, had been handed the job of Pharmacy Director when his father was the Chair of the Board of Directors. Were their other more qualified applicants when the Board Chair’s son was appointed to the position of Director of the Pharmacy? Thus, the appearance of a possible conflict of interest existed. (Following the CMS Report, the Director of the Pharmacy was replaced.)
In addition, one of the Board members during the Champion Center debacle had a spouse earning a six-figure salary at the hospital. The Board member’s family income was apparently partially dependent on the hospital. Perhaps that Board member had some ideas to make improvements but did not want to make waves with the administration.
These are just two examples among others.
Was The Board Subject To Objective Performance Evaluations?
While the hospital regularly evaluates its employees, it seems unlikely the Lompoc Board of Directors was subjected to regular Board evaluations. Without objective evaluations, any deficiencies in the operation of the Board couldn’t be identified. A Zombie Board is not likely to emerge from its bleak status as a Zombie Board.
The Need For A Culture of Open Discussion:
The failure of the Lompoc Board raises the specter that management and Board leadership may have discouraged dissent. Perhaps crucial topics were never fully vetted. It seems possible the Board may have acted like a rubber-stamp for District administrators. It’s reported that’s a common occurrence with poorly performing Boards.
One Lone Board Member Might Have Saved The Day:
It only takes one Board member to make a difference.
A former Chairman of the Board of Medtronic reported an incident where one Board member forced his company to reconsider a near unanimous decision. That Board member held out vigorously to oppose Medtronic’s intention to acquire a manufacturer of drug delivery systems. He argued forcefully that it would take Medtronic into a business they knew nothing about. His argument was successful and the planned acquisition of the company was dropped.
What if just one of the Lompoc Board members had argued strongly that going into a business where the District had no experience was not a prudent idea? That voice might have saved millions of dollars of debt for the District.
Precisely Why Did The Lompoc Champion Center Go Belly Up?
It strains credibility to accept the CEO’s claim that the Board and the District’s management were “baffled” by the failure of the Champion Center. After all, the Champion Center’s team included the Board of Directors, the administrator and experienced staff of AMS, and the District administrators. Consultants included the Camden Group, the District’s independent accounting firm, and substance abuse treatment experts. Collectively, one can reasonably assume that this group understood precisely what went wrong!
Is There A Document That Explains What Went Wrong?
Since the District is a local government entity, we submitted a California Public Records Act request. We asked for any document that describes the reasons for the failure of the Champion Center. It seemed reasonable and logical that the District would have documented what went wrong so lessons could be learned.
The CEO responded: “There is no such document in existence…”
That seems unlikely.
Next, we sent another Public Records Act request. This time we asked to inspect correspondence and emails between the District and the Camden Group after the Feasibility Study was produced. (The Camden Group wrote the Feasibility Study that made predictions that didn’t pan out.) The CEO responded. He didn’t claim that there were no such documents in existence. Instead, he made it crystal clear that it would be quite costly to obtain the documents. How costly?
District Required Advance Payment Of $8,750 To Review A Few Letters:
The CEO stated that a software development expense of roughly $8,750 has to be paid before viewing the correspondence. But the CEO added a caveat. The District could still determine that the documents are exempt from disclosure. In addition, the CEO did not respond to the request to view emails between the Camden Group and the District. Of course, everyone knows no special software is needed to retrieve emails.
The Board was making it unlikely these public records would see the light of day. The Board must have had their reasons.
To repeat. the Board required $8,750 in estimated costs to retrieve correspondence stored digitally under the supervision of the District’s IT department. Really!
Public’s Right To Know Enshrined in California Constitution:
The public’s right to know what’s happening in government appears in Article 1 of the California Constitution.
“The people have the right to instruct their representatives, petition government for redress of grievances… the right of access to information concerning the conduct of the people’s business, and, therefore…the writings of public officials and agencies shall be open to public scrutiny.”
Why would the Board attempt to conceal documents about the Champion Center when they knew the public has a right to those documents?
An Exit Plan Was Required To Qualify For The $19,090,000 Loan:
In the event the Champion Center failed as a business the District was required to report how it would convert the facility into revenue. Before obtaining the loan, in 2012. the District submitted an “Exit Plan” to the office of California Statewide Health Planning and Development, Cal-Mortgage Loan Insurance Division.
The Exit Plan specified how the Champion Center facility space would be leased out to various enterprises to produce revenue if the venture failed. The Champion Center closed nearly a year ago. According to the District, as of May 2018, none of the space has been leased.
The “Exit Plan” described Exit Option 1 as follows: “…”I have already been approached by the County Sheriff inquiring if this (morgue) is a possibility and expressing an interest in the space. Assuming a lease payment of $1.00/sq.ft., this lease would generate approximately $132,000 of revenue annually.
I was curious whether the District’s projected revenue of $132,000 for leasing space to the Sheriff as a morgue was realistic. To follow up, I submitted a California Public Records Act request to the Santa Barbara County Sheriff’s office. I asked for a document showing the total dollar amount that was spent by the Sheriff’s department for Lompoc morgue services in 2017.
Sheriff Spends $1,100 a Year for Morgue Services in Lompoc:
The Santa Barbara County Sheriff’s office provided a “Vendor Disbursement” form listing Starbuck-Lind Mortuary as the firm providing morgue services for 2017. The form showed that the Sheriff’s Department disbursed $1,100 for morgue services for the year 2017. That’s all. Just $1,100. Yet, the District claimed that leasing Champion Center space to the Sheriff’s office for a morgue would earn $132,000 annually.
District Claims Sheriff Would Pay District $132,000:
The difference between $1,100 and $132,000 doesn’t seem like an oversight or an understandable human error. It seems more like exaggeration on a grand scale, a misrepresentation, or even worse. (See Exit Plan)
It’s well-known that lending institutions are not pleased when they learn an applicant has furnished misleading or false information when applying for a loan. The Board either knew or should have known they were supplying false information for a $19,090,000 loan. As long as the District continues to make it’s loan payments everything will be fine. But if the District has difficulty making payments of over $1 million a year through 2042, the loan entities may want to learn more about the submission of false information to obtain the loan.
Why did the Board of Directors (Raymond Down, Jr., Mary Sharp, Roger McConnell, Linual White Jr., David McAninch, III, MD) approve these improper actions?
Rather than acknowledge responsibility for their actions, the Board chose to have the CEO blame the failure of the Champion Center on shifting winds and timing.
The Mission of Lompoc Valley Medical Center is to provide “high-quality” health services. CMS rated the hospital for three years in a row (2016, 2017, 2018) as below-average. It appears that means the hospital is providing “low-quality” health services.
In summary, the Board has failed in significant ways to do their job. The Board failed to protect the assets of the District and fulfill the Mission of this local government entity.
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