OPEN HONESTY: Can Santa Barbara’s four Neighborhood Clinics be saved? New CEO Mark Palmer is hoping by admitting problems and asking for $1.5 million in help, they can be.

Paul Wellman

OPEN HONESTY: Can Santa Barbara’s four Neighborhood Clinics be saved? New CEO Mark Palmer is hoping by admitting problems and asking for $1.5 million in help, they can be.

SOS for Neighborhood Clinics

Medical Merger Looming on the Horizon

Thursday, May 30, 2013
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Mark Palmer may not be the Lone Ranger after all, but given the number of times he refers to silver bullets, he could easily be mistaken for the masked avenger of TV Western fame. But unlike the Lone Ranger, Palmer is quick to point out, “There is no silver bullet.”

In Palmer’s case, he’s talking about Santa Barbara’s network of Neighborhood Clinics, which for the past 40 years have provided low-cost medical service to about 16,000 South Coast patients a year who overwhelmingly are low income and predominantly Latino. Last week, Palmer — a longtime boardmember of the Santa Barbara Neighborhood Clinics — sprung a last-minute press conference to abruptly announce that without a sudden infusion of $1.5 million he would have to pull the plug on the clinics this July.

It was a bold, if jarring, play, and Palmer wasn’t bluffing. The clinics, he said, have not been remotely sustainable for the past five years and lose $200,000 a month. There was no one wrong thing that got the clinics in their current hole, he pointed out, and there’s no single “silver bullet” that will fix them. To keep the clinics afloat, he said, many changes need to be made all at once. But to devise a workable business plan, Palmer said, will take time.

When Palmer assumed the reins of the Neighborhood Clinics a little more than a month ago, he did so almost by default. The clinics’ CEO had just resigned after only a few months at the helm, and the CEO before him had resigned shortly before. Much of what remained of the clinics’ upper-middle management had been let go in layoffs last fall. If anyone was going to save the clinics, it would have to be Palmer, who for 40 years has worked as corporate MacGyver, taking over underperforming high tech companies and figuring out ways to save their bacon. “I love fixing broken things,” he said. Palmer said he was just 27 when he was named CEO for the first time. “I said, ‘I’m in over my head and we’re in trouble, but if you help me we can do it.’ And we did it.”

He’s hoping the same formula will work for the clinics. If not, a whole lot of underserved people could find themselves without any service at all. South Coast emergency rooms — already pinched — would feel the crunch most immediately, and county clinics would have to scramble to accommodate the surge in demand. As Cottage Hospital’s CEO Ron Werft said, “This is a really important safety net,” referring to the clinics. “These people need a place to get care.” Werft estimated that without the clinics, as many as 10,000 patients might seek medical care at emergency rooms. The clinics, Werft said, are not just cheaper, “They’re a better place to provide care.”

Over the years, the Neighborhood Clinics have gotten way behind the financial curve. In 2008, the clinics sold their Isla Vista clinic property — which they spent $750,000 in federal grants fixing up — to the county and have spent the $2.6 million the deal generated. (Since then, they’ve rented the same space back from the county.) They bought an expensive software system to comply with the new federal requirements mandating electronic record keeping, incorrectly predicting that generous philanthropists eager to have their name associated with a software system would cover the costs. In anticipation of the Affordable Care Act, the clinics hired more doctors than could be paid for, let alone that warranted by an increase in patient demand. And the number of clinic patients reporting no health insurance increased by 10 percent — to fully one-third of the clinics’ caseload — just when philanthropic donations plunged. As Palmer noted, “It’s not a sustainable business model.”

Palmer set out to study the secrets of successful clinic operations elsewhere in the state and concluded that Santa Barbara’s fell short in the five ingredients that mattered most. One of the big problems, he claimed, is that the clinics operate under a federal permit held by the Public Health Department. Because of this, he said, the clinics are precluded from applying for federal grants. The successful clinics, he said, derive 10-20 percent of their revenues from such grants. Also because of this obscure legal arrangement, he claimed, the clinics were limited in what they could receive in reimbursement per patient visit from the federal government. Other clinics in the area, he said, receive far more.

The American Indian Medical Clinic, for example, receives $100 more per patient visit. In years past, the clinics paid consultants handsomely to change this legal designation but were rebuffed by the federal health authorities. Palmer is hoping the second time might prove the charm. But if it takes merging with the American Indian Health & Services — or perhaps the Community Health Centers of San Luis Obispo — Palmer said he would be open to that as well. In fact, Palmer said the director of the American Indian Medical Clinic gave him a letter of intent indicating an interest in pursuing such a merger. At issue was the cost of underwriting the due diligence.

While county health officials have expressed some skepticism about Palmer’s legal analysis — and whether they think such a change would actually open the door to higher visit reimbursement rates — it’s clear that many of Santa Barbara’s movers and shakers in the nonprofit world strongly suspect such a merger is necessary. Ron Gallo of the Santa Barbara Foundation said it was more important that the clinic services survive than it was that the clinics do in their current manifestation. Privately, some in the nonprofit were harsher, speaking about “throwing good money after bad.” Palmer made it plain that organizational change was the first, second, and third choice on the menu. Some programs would have to be cut or trimmed at the same time the clinics increase the number of people they serve. And much more would have to be done to get the word out in the community about what good the clinics do. “We’re definitely not saying, ‘Give me food every month and we’re not going to do anything,’” he exclaimed.

What exactly the clinics can — and are willing to — do will become more apparent June 10 when the private consultant, paid for by Cottage Hospital, releases his report on possible options for the clinics to become more financially sustainable. The report will also detail the likely impacts closure of the clinics would have on the South Coast medical community. Figuring all this out, Palmer said, should take six months. And that will cost just a few dollars below $1.5 million.


Independent Discussion Guidelines

Wow, Sounds as though the Santa Barbara Clinic's were built to fail, kept out of the Government funding programs was a deliberate action on the part of those who started the program.

dou4now (anonymous profile)
May 30, 2013 at 7:26 a.m. (Suggest removal)

Personally, I really wish they would close, along with most of the other Santa Barbara-based charities that are paid for with Montecito-based money in search of tax breaks, social status, and good karma. Like in Santa Monica during the 1980s and 90s, charities like the Neighborhood Clinic are a big reason why SB attracts and retains its legions of poor, uneducated, unskilled, and homeless. As these nonprofits have proliferated in SB, so have gangs, crime, violence, and urban blight (have you walked down the scary cesspool that is State Street lately? Our city council should be ashamed to show their faces n public.).

banjo (anonymous profile)
May 30, 2013 at 9:08 a.m. (Suggest removal)

They started out as anti-establishment, drug overdose, STD clinics in the free-wheeling anti-establishment 1960's hippie era.

Their mission evolved decades later to be very good low-income neighborhood clinics, which now is part of our local health care establishment.

They serve the community at large, rather than rebel against it. Time for their fundamental structure and intent to change to conform to their new service delivery realities.

foofighter (anonymous profile)
May 30, 2013 at 9:08 a.m. (Suggest removal)

Wow foofighter, one and half we agree so far this morning - kudos.

I still maintain that Santa Barbara has a choice between saving the clinics; or letting the clinics close and be known as the city who thought parties and parades were more important than the health of its citizens.

In addition, how much tax revenue could the city possibly get from something like Fiesta that offsets costs? Are the bars taxing drinks? I know the street vendors don't charge tax on anything.

Ken_Volok (anonymous profile)
May 30, 2013 at 12:01 p.m. (Suggest removal)

Now there is something Ken said that I agree on-
Street vendors don't charge or pay sales tax on anything-
Neither do mobile auto detailers,gardeners,bouncy bin operators and the like;safe to say though that they are plugged into every social welfare benefit out there-the ones us tax payers can't touch.
EBT-SUV's and Section 8'scalades for them-and well worn Honda Oddyssey's for the rest of us suckers-or commute by bike like Nick Welsh and hope you don't get mowed over by said SUV.

garfish (anonymous profile)
May 30, 2013 at 1:29 p.m. (Suggest removal)

If you read/comment around here long enough you eventually agree with everybody so it's no use getting angry and flaming each other.

Ken_Volok (anonymous profile)
May 30, 2013 at 2:55 p.m. (Suggest removal)

I am a hard working man that works at a good company from 8-5, on call for the community 24hrs as a volunteer for trauma, Volunteer instructor for the county two days a week and Volunteer at a local church and My wife has two jobs and also volunteers.

We recently took custody of our two nephews after BOTH of their parents in 2011. We don't have insurance for them and the clinic help us ALOT! If it wasnt for the clinic, I dont know what I would do because the system has failed us so far. So please understand that they help ANYONE who is in need.

arodriguez (anonymous profile)
May 31, 2013 at 1:04 p.m. (Suggest removal)

Everyone in Santa Barbara County should do whatever they have to to keep these Clinics open and also to make sure Samsum clinic is FREE FROM THAT PLACE CALLED
" COTTAGE " HOSP . I watched as a Nurse miss treated 2 people i knew . One as a direct result of her actions passed away and was , as was i literally knocked over by this nurse and another because of the poor staffing in the E.R. BOTH HAPPENED ONE YEAR AGO THIS WEEK ! Make sure if you or a loved one need medical attention and can get them anywhere but SANTA BARBARA COTTAGE HOSP ! If you dont have a car or a way to get them to a different hosp . GET SOME ONE WHO CAN HELP YOU ! Its important to keep these independent clinics open and out of the hands of the SANTA BARBARA COTTAGE HOSP . P.S. if you ever need to get a lawyer that will fight that place good luck . find one out of the area ! AND GOOD LUCK AT THAT ! A FEW SUITS ARE STILL PENDING AGAINST THE HOSP AND ITS STAFF AND A FEW OF ITS NURSE ! THERE IS ONE Nurse in particle that should have been jailed after what she said and did to one of the 2 people that died in that hosp because of her actions ! . SHE WAS "TOO BUSY DOING PAPERWORK ", TO ATTEND TO " THAT PERSON " & and made another statement , " .. WILL BE DEAD BEFORE MORNING ANYWAY , SO WHY SHOULD I WASTE MY TIME ." WHEN I TRIED TO CALL THE POLICE THAT NURSE CALLED FOR SECURITY AND THEY SURROUNDED ME SO I COULD NOT GET TO A OUTSIDE PHONE !!! so lets work on keeping as many people the RICH AND POOR OUT OF THE HANDS OF
" COTTAGE " I know other people that use a not so nice term for other people . Ever get a letter from a hosp full of lies with no HOSP LETTER HEAD I DID !

mpluke11 (anonymous profile)
May 31, 2013 at 7:33 p.m. (Suggest removal)

C'mon guys, just accept the reality I adopted a while back: If it can't be "cured" with a bottle of aspirin, a bag 'o weed or a good sharp knife, I'm done! (For cancer, I might be willing to try "natural" cures like laetrile, bean sprouts or baking soda, but chemo and radium are out - we all have to die someday, but no one should have to endure that sort of torture.)

spiritwalker (anonymous profile)
June 2, 2013 at 4:46 a.m. (Suggest removal)

A thought always at the back of one's mind. One can put up a fight, take the treatments, recover or die. Or one can refuse the treatment, take the chance and live with it - or not.

Until one is actually in this life shattering position, it is impossible to know which way you will to go.

samuel (anonymous profile)
June 3, 2013 at 6:41 a.m. (Suggest removal)

Yes, it's easy for me to be stoic while I'm (relatively) healthy, but knowing that many people are subjected to radiation and chemo when their oncologist knows that there's virtually NO chance that the treatments will result in ANY measurable benefit, I seriously doubt that I would ever agree to them - I hope I never have to find out!

spiritwalker (anonymous profile)
June 3, 2013 at 9:09 a.m. (Suggest removal)

I understand. Considering your information this decision is worth looking into. Guess this is the gamble. I too hope neither of us have to face this decision.

I wonder if this a situation where spousal and family pressure would make a difference? From observing others, I know they never want to say goodbye.

Yes, many times I have said "never" and had to eat those words!

samuel (anonymous profile)
June 3, 2013 at 10:34 a.m. (Suggest removal)

Cottage Should Fund Them

Once that study comes out and is gone over I bet that it would be cheaper for Cottage Inc. to donate most the operating costs and write-off the donation rather than having to absorb the lost revenue their ERs will see.

SmileySam (anonymous profile)
June 3, 2013 at 11:03 a.m. (Suggest removal)

What is the name of the consultant who was hired? Though I understand that Cottage has a big financial stake in this matter, what is their angle in all of this for THEM to fund the study? Aside from the fact that Cottage can AFFORD to pay for the study (how much was it, BTW?), my experience with Cottage is that when they hire a consultant to do a "survey" there is an implicit "unspoken agreement" in advance as to what the outcome will be. Cottage always does what is best for Cottage, and if that also serves the community in a positive way, so much the better.

Who vetted this firm and when, how much were they paid, and what EXACTLY did the RFP and, ultimately, the contract agree to study and to what end? Were they hired by Cottage with the input of the SBNC Board?

From what I read and know personally about he SBNC, they have been having management issues for several years. I know why the American Indian Clinic gets $100 per visit more than SBNC, and merging with SBNC will not transfer that rate to all the new patients. The rate that the Indian Clinic is based upon the number of "Federally-Qualified" health care visits by the number of "documented" Native Americans that are treated annually by the clinic. Actually, the SBNC has a reimbursement rate 3-4 what a normal PCP gets from Medi-Cal, and they get reimbursed the same rate that all doctors get from Medicare.

I have been privy to the manner in which the FQHC rate (reimbursement for Medi-Cal patients) was calculated for both clinics, and it is a minor "miracle" that the SBNC has as good a rate as they do. I have also been privy to watching how the upper management of the SBNC operates, and this last minute, "the sky is falling, help us avoid disaster", is just the latest in a line of bad management decisions, some of which are mentioned in the article.

The public needs to keep an eye on how this "plays out". The good of the community should trump the good of Cottage Health System. The County of SB Public Health Dept. should weigh in on this issue, as they have as much or more at stake than Cottage. This is a big deal!

Gandalf47 (anonymous profile)
June 6, 2013 at 2:13 p.m. (Suggest removal)

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