Warm Heart, Cold Costs


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On the morning of July 31, 1998, Florence McCarthy awakens with temples throbbing. The pain is wincing—but nothing over-the-counter medication can’t abate. Still, she considers staying home from her job as top administrator at Edgemoor Geriatric Hospital.

Who wouldn’t? Begotten in 1923 as a poor farm, Edgemoor is home to disabled and dying patients, most with limited financial means. The Santee hospital is an earthbound purgatory. A migraine seems ample excuse to cash in a sick day.

But McCarthy does not—has not ever—take her duties lightly. Since 1986, she’s consistently shown up for work, inspiring county employees to take pride in maintaining the creaky “hospital of last resort.” Along the way, McCarthy, a lay member of Mother Teresa’s Missionaries of Charity, has won national acclaim and gained widespread local respect.

No, staying in bed is not an option—especially on this day. Her boss, San Diego County Health & Human Services director Dr. Robert Ross, has called for an afternoon meeting. Ross gathers McCarthy and Bob Parsons, associate administrator for finances, in a hospital conference room. An audit is under way, and they are being put on “nondisciplinary” leave, says Ross. He asks for their personnel badges, beepers and keys. He orders them to vacate the premises immediately. They are instructed not to come back on hospital grounds—or to interfere with the audit, as the county charges they have been.

Interim administrator Karen Hogan escorts the shocked pair to the parking lot. McCarthy’s Ford Escort is adjacent to Parsons’ dark green Chevy S-10 truck. McCarthy drives off. Hogan, having seen Parsons putting a box in his truck earlier in the day, asks to see its contents. With staff and patients from units A4 (where patients with severe dementia are housed) and A5 (chronic disease) looking on, Hogan searches the box. It contains only Parsons’ personal papers. Cleared, Parsons departs, too.

Later in the day, according to eyewitness reports, county auditors begin changing locks on doors, padlocking filing cabinets and downloading contents of computer hard drives. Two other members of Edgemoor’s front office also are placed on leave.

“It was quite a show of force,” McCarthy now says. “They even gave our license plate numbers to the security guards. If they wanted to discredit us in the eyes of the staff or the public, they certainly did it.”

The audit is released two months later. County chief administrative officer (CAO) Lawrence B. Prior III narrates the findings in a September 4 press conference.

“Quality of patient care is not now and has never been a concern,” Prior carefully says. “But while patient care remains high, the audit revealed a number of serious problems regarding the hospital’s administrative procedures. We’ve also been concerned about the financial accounting. ... The audit was just a part of our effort to ensure all county operations are efficient, cost-effective and are accountable to our ultimate authority—the taxpayers of San Diego County.”

Sitting at his desk and peering out through gold-rimmed glasses, Prior forcefully highlights the findings. He says $1.5 million was mismanaged. Included in that sum is $780,000 not billed to Medi-Cal, and double-billing of patient care services.

“Where did [the money] go, and what did it do?” Prior wonders aloud. The audit produced several red flags, he says. Questioned about the root of these problems, he becomes animated.

“I want to focus on what they do well,” he says. “A lot of what you see with county employees is that we say, ‘We want you to do good and take care of these patients.’ And what happens is people get so focused on that, they forget that, oh, by the way, there are other things they are supposed to do each and every day. You can’t abrogate your management responsibilities... It’s really good to care about your patients. Oh, by the way, you have to manage your finances along the way.”

Ross fires McCarthy and Parsons shortly after the audit is released. Ross later declines comment: It’s a personnel matter. “However,” he states in a letter, “a county audit released in September showed that $1.5 million in Medi-Cal billings and reimbursements were mismanaged at Edgemoor.”

Who’s really guilty of mismanagement? Here is where factious camps form. Some in McCarthy’s corner see sinister motive behind the audit and her subsequent firing.

“I fully believe there was a deliberate attempt to sully the name of Florence McCarthy,” says Reverend Glenn Allison, executive director of the Ecumenical Council of San Diego County and a member of the Edgemoor Hospital Foundation. “The audit? The audit was flawed. If an auditor handed me something like that about me, I would have said, ‘What do you want, my head on a platter?’”

Former County Supervisor George Bailey agrees. “Somebody else is covering their own skirt,” says the former county supervisor, who represented District 2 from 1984 to 1992. “Florence McCarthy kept things together out there for years. The bookkeeping was done in other departments—not by her. She’s the fall guy.

“Why? I think they wanted to get rid of Edgemoor. Yes, I’m shooting from the hip. But there’s nothing anywhere that says patients were not cared for. There’s no evidence of that. She was running the place as best as she could, given the tools she was allowed... I believe the county is putting greater emphasis on costs than care. In this case, they are not recognizing their social responsibilities.”

Bailey adds: “The recordkeeping was supposed to be under constant review—by the CAO or by an auditor. I know that Florence McCarthy asked for help in this area and didn’t get it. She was left all alone.”

Before the recent county audit, McCarthy received exemplary job evaluations—mismanagement charges came out of the blue, she says. The hospital is audited annually by the state. In 1989, McCarthy says a request for a financial management software program costing $16,000 was denied. Three years ago, she says, the county denied her budget request that Edgemoor billing be moved from the county’s broader Resources & Recovery department to the Health Department’s management services. “That could have ensured more hands-on oversight,” she says. (The county claims, in a prepared written statement, to have “received no request, either formally or informally, from Mrs. McCarthy for help with financial records.”)

Many Edgemoor supporters believe the county set out to discredit McCarthy so Edgemoor could be torn down to make way for development. The hospital occupies 43 acres of county-owned property. Those acres are part of a larger tract slated to become the Santee Town Center. In theory, if McCarthy and Edgemoor’s reputation were tarnished, it might become easier to tear down the hospital. The county would then make money selling the land. And with reason not to do a sorely needed hospital reconstruction, save up to $50 million.

“I think Prior wanted to create Trash Plant II,” says Reverend Allison, referring to the county’s sale of the San Marcos trash plant for $189 million soon after Prior came on board as CAO in 1996. Revenues from that sale created a $50 million budget surplus for the once cash-strapped county. “That was a stellar example of how privatization saved money. But when Prior looked at Edgemoor, he didn’t take human lives into account.”

Prior declined a formal interview. But he has publicly stated it is not his motive to tear down the hospital and sell the property. “This is simply not true,” he says. “Our plans for the Santee Town Center property have been in the works for 10 years… The current application before the city [of Santee] calls for Edgemoor to remain right where it is.”

Yes, now it does. But in what Prior calls a coincidence, his office sent an amendment to the Town Center plan—dated June 22, 1998—proposing to rezone the property under the hospital. Though the county owns the land, the city of Santee controls the zoning. Santee officials balked at the amendment.

“The county sent an application to look at the rezoning of the Edgemoor property to residential,” says Santee Mayor Jack Dale. “We sent that back. We perceived it inappropriate to make any of those decisions until [the county has] made a decision on the future of Edgemoor.”

“The future of Edgemoor.” If only the hospital foundation’s reconstruction fund increased a dollar every time that phrase has been uttered. It’s a sad, drawn-out saga.

Edgemoor is not the only county healthcare entity in dire straits. In November, The San Diego Union-Tribune shined light on the woes of the county’s entire mental health services system, which, on the recommendation of Prior, was recently turned over to a private company. Under Prior’s vaunted privatization plan, service promptly declined.

But the Edgemoor story—capped by the firing of McCarthy—represents perhaps the most pointed example of a publicly mandated service subjected to governmental procrastination, disregard and disrespect.

alk of tearing down the hospital was a source of high tension last year for Edgemoor staff, patients and their families. As director of Health & Human Services, Dr. Robert Ross could have assumed the mantle of front-line hospital booster. But he coolly announced closing the facility was among options being considered. Then a questionable consultant’s report by SubAcute of America Inc., contracted by the CAO’s office, indicated two out of three patients at the hospital could be housed at lesser-care facilities. The tension heightened exponentially when McCarthy was axed.

Some background: San Diego County purchased the 375-acre “Edgemoor Farm” in 1923. It was the county’s poor farm. It gradually became a home for the aged and indigent. Nurses came on staff. Farming was phased out by 1955, and the facility became licensed as a public medical institution. In 1960, Edgemoor became California’s first specialty geriatric hospital.

Since then, the buildings have been slowly falling apart. According to one County Grand Jury report, “Water and power utilities are provided via outdated systems ... core problems such as narrow hallways take away any consideration of upgrading the existing buildings. The toilet facilities are inadequate; water is not available in the rooms; oxygen cannot be administered in all patient rooms...” Edgemoor remains open only because of federal waivers.

During the early 1980s, problems had stretched beyond structural. State licensing officials fined the hospital for operational lapses. The U.S. Justice Department stepped in after inspectors leveled claims of patient abuse, lack of supervision, inadequate care and lack of infection control.

McCarthy was hired in 1986. Her first day on the job, she was handed a $25,000 citation for a prior wrongful death at the hospital. It was for a patient who died after a nasal-gastric tube was accidentally inserted into his lungs instead of stomach. The hospital was facing decertification from Medi-Cal.

It was an inauspicious start. But almost immediately —and in spite of the outdated buildings—McCarthy began to make a difference.

“She came in and said, ‘We’re going to have a senior prom,” remembers Clara Baity, Edgemoor’s associate administrator for clinical services. For the annual event, patients dress up in borrowed gowns and tuxedos. Prom kings and queens are elected and fêted.

“She was the one who thought up the choir,” says Nancy Voorheis, a longtime hospital social worker. “Who else would think that people who were so horribly disabled—people you had to hoist up onto the stage —could form a choir? But Florence McCarthy knew they could do it.”

A high-maintenance census occupies about 200 of Edgemoor's 322 beds. Patients have suffered severe trauma, have Huntington’s disease, AIDS, tuberculosis and other maladies that cause incontinence or require tube feeding and around-the-clock monitoring.

Like McCarthy, Diane Routhieaux knows patients are more than simple cost units. When she married her husband, Frank, 14 years ago, she never expected he’d wind

up at Edgemoor with Huntington’s disease. Frank brightens when he sees his 12-year-old daughter during a recent visit. But Diane says it’s doubtful he knows that she’s his child.

Audrey Dall’s husband, Harold, also suffers from Huntington’s, a disorienting and fatal nervous system disorder. “Before coming to Edgemoor, he was a very active man,” she says. “He did sports, especially downhill skiing.” Now he’s nodding off while Audrey speaks.

Nate Cohen is a patient. An endearing character, Cohen came to the hospital after a pole lanced his head during a near-fatal car accident. His heart is frail; his soul, Herculean. “There is love here,” he says of Edgemoor.

Arnold Jolivet was shot in the back and left unable to walk. He hopes physical therapy will give him legs again. “This place is a last resort,” says Jolivet, as he rolls his wheelchair to a stop in a shaded park area on the hospital campus. “It’s the last hope. Your family may love you, but sometimes they can’t take care of you. Here, they take care of you.”

Under McCarthy, Edgemoor became one of just six facilities in the United States recognized for superior care for Huntington’s patients. A national survey places Edgemoor in the top 5 percent for care, citing it as a facility having the highest patient acuity rate (that is, the most acute-care patients) with the fewest problems.

High praise for McCarthy also comes from Paul Simms, the county’s former deputy director for community health services. From 1986 to 1996 he was McCarthy’s immediate supervisor. “We were looking for

a leader who would put the patients before bureaucracy,” he says. “One who would know the names of the patients.”

Simms—also fired by the county—was one of several speakers at a November 20 dinner held at the Carlton Oaks Country Club to honor McCarthy. After relating an emotional story about McCarthy’s euphoria for a patient who beat the odds through rehabilitation and was able to walk again, Simms tells the dinner crowd he was willing to entrust a member of his own family to the care available at Edgemoor.

“I tried to put my grandmom in [Edgemoor],” he says. “But they said she might get special interest.” He pauses. “Just like everybody else there.”

Another who lauds McCarthy at the testimonial dinner is District 2 County Supervisor Dianne Jacob. “The love at Edgemoor is second to none—Florence, you taught that,” she says.

Later during the dinner, a proclamation from Santee Mayor Jack Dale is read. It declares November 20 “Florence McCarthy Day.” Also read is a letter from out-going Governor Pete Wilson. He commends her for a dozen years of service.

A commendation from the governor… and a pink slip from the county’s Dr. Ross? What’s wrong with this picture?

he allegations in the county’s audit are very serious. As Prior noted during his press conference, the San Diego District Attorney’s office was alerted. (A D.A. spokesperson says the D.A.’s office has not been asked to conduct a criminal review.)

The state’s Sacramento-based Medical Care Services agency has since taken the unusual step of conducting a review of the county’s audit. It is ongoing. “That audit caused great consternation here,” says Medical Care Services deputy director Doug Porter. “The accusations are something we take very seriously.”

McCarthy disputes most of the audit findings. “I just can’t understand where these charges came from,” she says.

First, there was the charge of nonfiling of $780,000 in Medi-Cal reimbursements. That was for some 50 patients, a few dating back to October 1997. Porter says some of those reimbursements have now been approved. A majority were not, but the county may still be paid in full by Medi-Cal for all services rendered and in question, says Porter.

So was this mismanagement? At the time of the audit, the one-year window that exists for filing Medi-Cal reimbursement had not yet lapsed, notes Porter. This is a key argument in the claim that the county’s audit prematurely accused Edgemoor’s administrators of poor management.

“Generally, we care a lot about cash flow; at least I do,” rebuts Prior, answering the question during a public appearance. “If you don’t manage your cash flow, you’re never going to be able to make payroll. So when you sit on a receivable, that’s bad for business. An excuse that ‘Gosh, we can sit on these for another year’ is a bad financial practice.”

Then there was the county’s allegation of Medi-Cal double-billing. According to a knowledgeable observer, that charge came from a “misunderstanding. The people who did the audit don’t understand the billing waiver granted to Edgemoor,” says Patricia Fox, section chief for the state’s Department of Health Services.

“The county’s audit definitely misunderstood our waiver rate,” says fired Edgemoor administrator Bob Parsons.

About 98 percent of Edgemoor patients receive Medi-Cal. But because it’s classified as a Distinct Part-Skilled Nursing Facility —and patients need greater levels of care —Edgemoor receives higher-than-average Medi-Cal reimbursements. Most nursing homes receive less than $100 per patient per day. Edgemoor is reimbursed $214/patient/day, as well as a daily ancillary service rate of $7.89/patient/day.

It is the ancillary service rate that was called into question. Parsons says Edgemoor gets the $7.89 rate to pay for medical services provided by county-employed doctors, therapists and pharmacists. However, non-county-employed specialists who treat Edgemoor patients bill Medi-Cal separately. This practice—in place since 1974, says Parsons—is what the county audit deemed double-billing.

Parsons is right; and here is where direct evidence shows a county audit finding to be incorrect.

In a letter addressed to Ross and dated September 11, 1998, the state’s Department of Health acknowledges that Edgemoor’s ancillary rate “does not include the cost of optometry, dental and podiatry services.” Those specialists may bill Medi-Cal on their own.

Attempts to interview county officials responsible for the audit proved surprisingly difficult. Insisting all county interview subjects be questioned as a group, and then saying such a group interview was impossible to arrange until after deadline, Prior’s office finally offered to respond only to written questions, which allowed no follow-up.

But in a prepared statement, the county pointed to information received from the state’s chief of long-term care, Nancy Hayward, as proof that double-billing occurred. Hayward also declined comment.

There were other, seemingly lesser, monetary allegations. But the most damning aspect of the county’s audit—to Prior and especially to Medi-Cal’s Porter—is the charge that Edgemoor management failed to perform prescribed efforts to place its patients in lesser-care, less-costly facilities. Regulation requires 250 calls (10 calls a day for 25 days) be made attempting to place patients in hospitals with lower Medi-Cal reimbursement rates.

The county has phone records showing these calls were not made. And the audit turned up copies of call sheets in patients’ records that falsely indicated the calls had been made.

Here’s where two others placed on leave with McCarthy and Parsons enter the picture. Leonore Monroy was Edgemoor’s patient services coordinator. Part of her duty was to supervise Mary Kendricks, the admissions clerk whose job was to make the 250 phone calls. After the audit was released, Monroy resigned. She could not be reached for comment. Kendricks, who had been at Edgemoor for 35 years—including the past seven as admissions clerk—was demoted and reassigned to the county’s social services department in La Mesa.

McCarthy says Kendricks always indicated to her that she was making the required calls. “She was always on the phone in her office,” says McCarthy. Reached by telephone at her new county job, Kendricks says only, “It’s too painful, I don’t want to relive it.”

No one denies that the chore of making 250 patient placement calls is daunting. Indeed, a portion of a 1992-93 Grand Jury report on Edgemoor notes: “One discharge placement coordinator from an acute-care facility, who daily faces the problem of trying to find long-term care for patients, told us he frequently hears the refrain ‘No fatties, no feeders, no incontinents and no Medi-Cal.’”

Nonetheless, both McCarthy and Parsons now believe the call list rule was broken. Parsons—who has requested a Civil Service Commission hearing on his firing—says this is the one legitimate charge made by the county. The irony, he notes, is that McCarthy, Monroy and he lost their jobs, and the person found to have abdicated her duties was retained.

Not making the calls could have resulted in people staying at Edgemoor instead of lower care/cost facilities. But the following is also key for McCarthy supporters: That situation has not been observed by the state. “Our preliminary report shows that the patients at Edgemoor need the high level of care that’s provided,” says Porter.

o McCarthy is no longer at its helm. But the future of Edgemoor—there’s that phrase again—still must be decided.

Some Edgemoor backers are enthused by Supervisor Jacob’s latecoming proposal for a public/private partnership to build a new multilevel care facility on the land where Edgemoor now sits. A delayed report (from the county administrators’ “Tiger Team”) on Edgemoor is scheduled for presentation to the County Board of Supervisors in February.

The Tiger Team report was supposed to come out last summer. Prior pushed back its release in light of the release of the infamous Edgemoor audit. The Tiger Team originally was going to consider six options. Then it was narrowed to three. Upset that the remaining options didn’t include building a new hospital, Reverend Allison, then a Tiger Team member, demanded the three other choices be put back on the list. The options were added. Allison was removed from the Tiger Team.

The new Jacob-backed public/private venture has been dubbed Option Seven. An official public inquiry into interest from the private sector to participate in the plan has been ongoing. Jacob notes that the land does not need to be rezoned residential for Option Seven to come to fruition.

It cannot be overstated that there is a long history of lip service surrounding reconstruction of Edgemoor. There it was in the 1992-93 Grand Jury report: “A public/ private sector joint venture can materially contribute to accomplishing [a reconstructed hospital].”

Words. No action.

On December 2, McCarthy started a new job. She’s administrator of a private, 86-

bed skilled nursing facility in National City —hardly as dire a situation as Edgemoor.

Indirectly or not, McCarthy has followed a request from Supervisor Jacob. Speaking at that November 20 testimonial dinner, Jacob implored McCarthy not to leave the region. “I will give you a tour of the new health campus at Edgemoor,” Jacob promised—if and when her Option Seven plan comes to fruition.

McCarthy politely says that would be just great. (Walk McCarthy’s mile and decide if you’d be so gracious.)

McCarthy’s acquiescence to her ouster is a reflection of her affiliation with the Missionaries of Charity. And it is interesting to note that the late Mother Teresa twice wrote to indicate her desire for a continuation of Edgemoor’s services. McCarthy holds a signed letter from the likely saint, dated June 12, 1997, that’s addressed to the County of San Diego Board of Supervisors and cc’ed to CAO Lawrence B. Prior III:

“I have heard about the dedicated service being given to the sick and suffering at Edgemoor Geriatric Hospital. My sisters visit the patients every week. They are deeply impressed by the dedication and compassion of the nurses, doctors and all who staff the facility... I will be very grateful to you if you could do all you can to keep this hospital open to serve the poorest of the poor.”

Again, it’s February when the county will officially confer on the future of Edgemoor. District 4 Supervisor Ron Roberts has stated emphatically that the future includes a continuation of the service Edgemoor provides. He adds that no date for closure of the hospital has been decreed.

“If the county has to kick in for some one-time expenditures, yes, the resources are there,” says Supervisor Jacob. But rebuilding a new Edgemoor without help from the private sector will “be hard to fight for,” she adds. “There is a long list of services Edgemoor is competing with.”

So the hospital’s future is still uncertain. You’d think this isn’t McCarthy’s problem anymore. Wouldn’t you?

“The patients and staff at Edgemoor are constantly in my prayers,” says McCarthy. “More than anybody else, I hope they know I didn’t do anything wrong. And that I love them. They are beautiful to me, and it was an honor to serve them.”

Who’s Funding County Healthcare Programs?

Neglect of Edgemoor Geriatric Hospital seems obvious to the hospital’s supporters. But obstacles faced by the hospital and its former administrators may be indicative of a bigger-picture situation, says one expert.

President and CEO of the Healthcare Association of San Diego & Imperial Counties, Gary Stephany spent 33 years as a county employee. Before taking the helm of the Healthcare Association, he was acting county chief administrative officer (CAO). He held the job from January to September 1996 (after David Janssen left the post and before Lawrence B. Prior III was hired).

The larger problem Stephany points to is the distribution of what are called “realignment funds” given by the state to counties. Realignment funds come from sales tax revenue and vehicle registration fees. The money is earmarked for mental health, social services and public healthcare. Realignment funds account for a significant portion of the county’s Health & Human Services agency annual budget.

It was 1991 when this state money was classified as “realignment” funding. Before then, San Diego, the state’s second-largest county, received the second-lowest amount of such monies. When Governor Pete Wilson revamped the system, San Diego’s share rose dramatically.

But funding for public healthcare and social services has not risen, claims Stephany. “Money in the county’s budget is being shifted from healthcare,” he says. “When I was CAO, I did it. It’s the same thing Janssen did and that Prior is doing. But it’s not realignment money that’s being moved. It’s general fund money.”

Stephany notes that he always consulted county counsel before redistributing program funding. “It’s not against the law to do this,” he says. “But it does create a moral dilemma.” He says realignment money “is not intended to supplant programs; it was supposed to enhance them.”

In a prepared written response from the county’s administration office—overseen by current CAO Prior—this practice is denied. The county also indicates that the practice wouldn’t present a moral dilemma. However, two county supervisors—Ron Roberts and Dianne Jacob—say the county has indeed been back-filling healthcare services in this manner.

Supervisor Jacob says realignment money “has supplanted some costs. But realignment money goes for what it is supposed to do. As a board member, I want to adequately fund programs people need and deserve. It’s a tough balance. People want parks and libraries and law enforcement, too.”

In the written response, Prior’s office denies a claim by Stephany that law enforcement, in particular, has been the beneficiary of general fund money pulled from healthcare programs as realignment funding increased. In fiscal year 1997-98, such a reshuffling resulted in a multimillion-dollar windfall for the Sheriff’s Department, says Stephany. County administration denies this; Supervisor Jacob does not.

While elected officials and county staff get their stories straight, Stephany’s assessment is blunt. “Healthcare providers should be making healthcare decisions. Not accountants.” —R.D

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