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Ignore Davis, Fang, O'Donoghue, and Roselli; here's how renovating Laguna Honda could save taxpayers $500 million

Wednesday, Aug 12 1998
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Most of the severely disabled people who live at Laguna Honda Hospital spend much of their time in bed. Although some engage in therapy and social activities, many of the elderly residents watch television all day, or simply stare into space.

It is, therefore, reasonable to suppose that the vast majority of the hospital's 1,200 patients weren't aware of the strange political storm that raged around them for a few recent weeks, and then cleared overnight. For that matter, most San Francisco citizens are probably still befuddled by the Board of Supervisors' rush to place a $500 million Laguna Honda bond issue on this fall's election ballot -- and then the board's rush not to have a bond issue, all within the space of less than a week.

The hospital bond flip-flop has given rise to much political handicapping. Whose interests would have been served by a November vote? Who killed the bonds? Similarly, there has been a sudden spate of hand-wringing over the fate of Laguna Honda residents, who have been largely ignored by the city's political establishment for years, and who by most accounts receive good care. How will they ever survive, bond proponents moan, without a new, $500 million hospital to serve them?

In recent weeks, almost no public attention has been given to one salient fact: There is no pressing legal or other reason to build a new hospital, and no need to increase the city's debt load to make whatever changes are necessary at Laguna Honda. A few relatively inexpensive renovations -- renovations that probably would be funded directly by the state or federal government -- could allow Laguna Honda to safely and legally serve most of its current population, at less than 20 percent of the cost of a new hospital.

The most recent Laguna Honda fiasco started in June, with the release of two government audits claiming that Laguna Honda is too crowded; that the residents are hopelessly bored; and that the vast majority of the hospital's patients are unjustly restrained by straps and psychotropic drugs.

The allegations of unwarranted restraint are disputed by hospital administrators, and those claims are not actually central to the long-term future of Laguna Honda. The U.S. Health Care Finance Administration generally praises the overall quality of care at Laguna Honda.

But this summer, HCFA threatened to shut down the hospital if it did not limit its population to four patients per room. Because most Laguna Honda residents live in large, open, 30-bed wards -- which qualify as one room under federal regulations -- hospital administrators contend they found themselves in a double bind. The administrators say that if they reduced the population of the wards, they would lose so much federal money the hospital would be forced to close. (Some federal funding for long-term care facilities such as Laguna Honda is doled out proportionately, according to the number of people served.)

On the other hand, administrators claim, if they did not reduce the patient population, they would be shut down for defying the federal order on patients-per-room. The only way out of the double bind, administrators cheerfully chirp, was to build a new $500 million hospital that had all the modern bells and whistles any federal regulator could desire.

Seizing on HCFA's threats -- and public sympathy for the plight of the old and infirm residents of Laguna Honda -- a chorus of political players began screaming for Mayor Willie Brown to put the largest bond issue in San Francisco history on the November ballot. Rushing to save Laguna Honda were political consultant Jack Davis; Ted Fang, publisher of the San Francisco Independent; Joe O'Donoghue, head of the Residential Builders Association and a City Hall lobbyist; and Sal Roselli, business agent for the city's service employee union, SEIU Local 250, and therefore a representative of the union's precinct-walking muscle.

Not long afterward, Mayor Brown reversed his earlier opposition to the rebuilding of Laguna Honda and asked the Board of Supervisors to rush a $500 million hospital bond issue onto the ballot with little discussion of cost or options.

In late July, a poll run by Davis showed that voter sentiment was running against approval of the Laguna Honda bond. (Why such a poll was not taken before the supervisors were asked to act remains a mystery.) Mayor Brown and the supervisors raced backward to remove the bond from the ballot. Attempting to divert the blame for their sudden about-face, most of the bond supporters complained about heartless "tenant groups," who supposedly refused to support the bond issue because some of the cost of the new hospital would have been passed through to tenants as rent increases.

But the political blame-game that followed the collapse of the bond proposal obscured a fundamental question: Is it really necessary to spend $500 million to make Laguna Honda a safe and legal long-term care hospital? The answer, clearly, is no.

From a distance, Laguna Honda's Spanish Revival buildings, built in 1926, resemble a posh hotel grandly sitting amid acres of lush garden. And the magnificent grounds are well-kept in spots. Overall, though, the place has a past-its-prime feel. Concrete patios are cracked and unswept. Abandoned barbecues rust in odd nooks. Windows are dirty and old paint peels off crumbling sills. The place oozes sadness of the morning-after variety and, more to the point, it stinks of deferred maintenance.

The federal and state auditors who recently criticized Laguna Honda did not comment on cosmetics. They were more concerned with crowded wards, the use of drugs and physical restraints to control patients, and a lack of space for sit-down dining and personal storage. The auditors also criticized the hospital's outmoded nursing manuals and what they said was its dearth of interesting recreational activities.

Despite these criticisms, the quality of medical care at Laguna Honda is consistently judged to be excellent by regulators. And, as a one-of-a-kind skilled nursing institution, Laguna Honda has been exempted from the federal government's requirement, adopted in 1980, that hospital rooms contain no more than four patients. Given that Laguna Honda has been operating an open-ward system for decades, hospital administrators ask the reasonable question: "Why are the auditors coming down so hard on us this year? Why not last year?"

One answer is that public health systems across the country are being restructured to interlock with managed care systems run by privately owned health maintenance organizations. Increasingly, the federal government has pressured San Francisco to move a sizable chunk of its $600 million public health budget into new, "public-private partnership" health networks.

Federal dollars that had been funding long-term institutional care for the elderly in governmental facilities are now being channeled toward privately run nursing homes.

But neither the federal push to decrease public health care costs through managed care, nor HCFA's concern about conditions at Laguna Honda, means that Washington wants a new $500 million skilled nursing facility to be built in San Francisco. In fact, federal regulators say that their Laguna Honda concerns can be addressed at far less than the cost of building a new hospital.

"The overcrowding issue at Laguna Honda pops its head up every five or six years," says Janice Caldwell, associate regional administrator for HCFA. Every year for 18 years, Caldwell's office has told Laguna Honda to reduce its ward census. Unfortunately, says Caldwell, Laguna Honda officials have failed to focus on the "baby steps" that could have been taken toward creating smaller wards.

"I never said they had to build a new hospital," Caldwell insists.
Contrary to popular belief, there are several viable alternatives to building a brand-new Laguna Honda. And it is quite possible that renovating the hospital to alleviate HCFA's concerns could be funded by state and federal grants, rather than San Francisco's taxpayers.

In 1990, the state Department of Public Health commissioned a study that showed Laguna Honda's open wards could be reconfigured into 1-, 2-, 3-, and 4-bed rooms, for about $2 million per ward, or a total of $62 million.

Today, hospital officials claim that remodeling the wards would trigger an expensive remodeling of the rest of the hospital to meet current health and safety codes. But public records -- including the codes themselves -- do not support such an argument.

Schematics from the 1990 study show that up to 25 residents could be served by each of Laguna Honda's renovated wards, even as federal dining and storage requirements were met. If such a renovation were undertaken, Laguna Honda's patient population would have to be reduced by about 10 percent. But the hospital is already in the midst of a program that would reduce population by about that much.

Caldwell says she keeps mentioning renovation to San Francisco officials as an acceptable alternative to a new hospital, but they still seem to prefer the new facility.

Laguna Honda's executive administrator, Larry Funk, is dead-set against the ward renovation idea. He says reducing the number of ward patients lethally impacts the funding stream. In reality, the reduction is unlikely to be significant because funding reimbursements are based on overall operating costs, not simple body counts.

The irony of Funk's unbending allegiance to the concept of building a new hospital is that, under a "plan of correction" he has proposed to temporarily assuage HCFA, ward populations would be reduced to 25 patients -- a number that could probably be served by relatively inexpensive renovation of the hospital's open wards.

There are other ironies in the sudden push for a brand-new hospital. Funk admits that deferred maintenance has been the hospital's policy for years; hence the shabbiness of certain areas. In fact, city audits show that money intended for preventative maintenance and capital improvements has been diverted over the years into operating costs. Even so, Laguna Honda remains an extremely solid structure. Its 1-foot-thick, reinforced concrete walls -- and foundation anchored in bedrock -- are proof against all but the most lethal of earthquakes.

Renovating that sturdy facility to ease federal concerns about patient crowding and privacy would cost somewhere between $60 million and $100 million, according to public records. And those funds need not necessarily come from the pockets of San Francisco taxpayers.

Laguna Honda is not currently eligible for state "disproportionate share" health care funds, doled out to cities judged to have above-normal public health needs. But with minimal effort, the state's own records say, Laguna Honda and San Francisco General Hospital could be put under the same medical license, allowing Laguna Honda to seek new capital funding for a renovation plan that might not suit all the political constituencies pushing for a new hospital, but might well save the city's taxpayers half a billion dollars, plus interest.

About The Author

Peter Byrne

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