Response to the Audit
Tulare Local Healthcare District
September 20, 2018
Ms. Elaine M. Howle, CPA
California State Auditor
621 Capitol Mall, Suite 1200
Sacramento, CA 95814
RE: Tulare Regional Medical Center Special Legislative Audit
Dear Ms. Howle:
In behalf of the Tulare Local Health Care District Board of Directors, the Board and Management of Tulare Regional Medical Center is submitting our response to your draft report received on September 14, 2018. We appreciate the opportunity to provide response to this draft as this document was discussed at the Board’s Special District Board meeting last night, September 19, 2018. We have taken extraordinary steps to secure this draft without any unauthorized review taking place.
First, we wish to thank Supervisor Rick Power for his professional approach to this very challenging project. We realize that many pressures exist from many different sources and Rick kept his team focused and centered. Second, the Board, management, and the Board’s legal counsel are very concerned with your team’s effort regarding Chapter 2 of the Report. While we understand that your agency has been given the responsibility to assess the processes of reopening the hospital, we are aghast at some of the conclusions and tone of this chapter. While it is not our responsibility to worry about the integrity of your report, major concern is present as to the capability and capacity of your team analyzing a hospital process that is being executed by a health system and professionals that have been performing this function for many years. Many of the conclusions presented in Chapter 2 defy the audit principles that in our thinking is the basis of accurate auditing. Arriving at conclusions at a specific period of time is fine but to assume without any factual basis or understanding of hospital preparedness that the processes that are on-going will not effectuate opening is unconscionable and is misleading to the public.
Please consider our concerns in the attached Response. It appears to our Team that addressing this issue in Chapter 2 based on the evaluation of a specific period of time and a simple sentence that identifies that this process is ongoing and will be evaluated by CDPH would be factual and understandable. To conclude that the reopening is “uncertain” without any factual evidence, is unacceptable to our thinking and practice.
Thank you for your team’s effort and the opportunity to provide our thoughts. Please contact me if you have any questions.
Larry A. Blitz
Response to the Special Legislative Audit Report (9/14/’18)
_PP. 4 – 1st Paragraph – “Nevertheless, the district faces licensing issues that make it unclear whether the District will be able to reopen as currently scheduled.”
The District included all of the known costs to reestablish relationships with vendors at the time of submitting such information to the audit team. Each week based on need our team vendors may be identified as to particular issues with credit and shipping. At this point, no known supplies are being withheld due to vendor issues.
pp. 39 1st paragraph – The Auditor’s comments regarding this paragraph neglects the important fact that at this reading, the hospital is not open, supplies are being purchased and stocked, and a comprehensive plan that evidentially the Auditors do not understand is being exercised with no barriers to opening present. The State Legislative Auditors are attempting to analyze our Team’s efforts in reopening the hospital without management and operation knowledge of hospitals and procedures that are comprehensive and complete. Your team is not at our planning meetings and to assume that because you do not have an audit sheet that in your format provides you with desired answers that our team is not performing is very troubling. The District considers equipment issues every day as equipment is a necessary component of reopening and patient care. To assume that this is not the case is insulting and leads us to believe that the our work needs to be designed solely for an audit. Our work is designed to accomplish action plans and is constructed to do so in many different actions.
Paragraph 2 PP. 39 – 40 - Again, our Team’s process designed for reopening is not constructed as an auditable exercise. We are confident of proven successful processes that will ensure reopening at our desired date. What the Audit does not take into consideration is that this very expedited process to reopen is an ongoing process that may take us up to a few days before the opening. There are thousands of issues that are successfully being handled and it is very troubling that this part of the audit concentrates on processes that are unfamiliar to those who are not a part of our staff. All of the Pharmacy challenges are resolved and reported. Under what experience does the audit team have the right or knowledge to presume that these tasks will not be completed. In addition, if certain tasks are not completed, the Hospital Team will quickly correct and if needed, extend the license until resolution is complete. The implication provided in this report subjective conclusions without the necesary information to arrive at these conclusions. Your team is warning that we may have too many hurdles to clear. This conclusion is without any substantive basis.
This report is written at a certain time that would discover that all that is necessary tasks needed to be completed are in progress. It is unconscioable that a conclusion can be made that the required tasks will not be concluded. What is the informed basis for this conclusion? This in our view is unsubstatiated uniformed conclusions that present very misleading information. We do not believe that is an audit role. especially when the audit team does not have the experience to evaluate this reopening function.
CALIFORNIA STATE AUDITOR’S COMMENTS ON THE RESPONSE FROM THE TULARE LOCAL HEALTHCARE DISTRICT
To provide clarity and perspective, we are commenting on the district’s response to the audit. The numbers below correspond to the numbers we have placed in the margin of its response.
In several of its comments, the district questions our capability and experience to evaluate its processes, and the integrity of our conclusions in Chapter 2. We conducted this audit in accordance with generally accepted government auditing standards. These standards require that we obtain sufficient, appropriate evidence to provide a reasonable basis for findings and conclusions. Therefore, we stand by our conclusions.
The district is mischaracterizing our conclusions. We do not state that its processes will not effectuate opening. In Chapter 2, we state that the district is making progress in its effort to reopen but note that the district did not have a comprehensive plan, and we describe our concerns with its progress and ability to meet its planned reopening by mid-October 2018.
The district’s statement that we conclude that the reopening is “uncertain” is taken out of context. We state that it is uncertain if the district will reopen the medical center by mid-October 2018 as it plans.
The district’s response uses page number references from a draft copy of our report. Since we provided the district the draft copy, page numbers have shifted.
In its response, the district refers to Adventist Health System (Adventist) and Wipfli LLP (Wipfli). Adventist is the district’s new manager, which it contracted with in early September 2018 to manage the medical center. Wipfli is the interim management consultant the district contracted with in November 2017 to assist in reopening the medical center.
We do not know what the district means by “special audit requirements.” We had numerous discussions with district staff and interim management beginning in spring 2018 regarding its plans for reopening, in which we asked for any documentation that would demonstrate its plans for reopening.
We are unclear why the district believes it is impossible to include pre-petition debt as part of the budget. The district could include an estimate for each of the vendors it has identified as necessary based on the amounts it owes to them. As we discuss here, the district’s documentation shows that it has not yet established contracts with more than 100 vendors that are necessary for the medical center to reopen, and those vendors are owed $1.1 million in pre-petition debt. If the district has not yet determined whether these vendors require payment of pre-petition debt, it would be prudent for the district to include an estimate of such debt in the event that the vendors require payment. The district also contends that all services necessary to reopen the hospital will be present, but as mentioned above, the district’s documentation does not support that it has contracts with the vendors who would provide the services. Therefore, we also disagree with the district’s assertion that inferring delays are possible is a false prophesy. As we indicate here, the district still has an extensive amount of vendors with which to negotiate contracts and given the limited time remaining before its planned mid-October 2018 reopening date, it may not have the supplies or services necessary to reopen.
The district’s disagreement with our recommendation to request an extension of its license suspension is disingenuous. The district’s response, dated September 20, 2018, states that the board does not choose to extend the license. However, on October 1, 2018, we learned that the district’s interim CEO had sent a letter, dated September 7, 2018, to Public Health requesting an extension of the suspension. Public Health approved the district’s request on September 19, 2018. Because these events took place before the district provided its response to our audit, we are perplexed as to why the district did not inform us of its request and why it expressed disagreement in its response with our recommendation that it make this request. We are disappointed that the district chose not to be forthright about its request for an extension. Nonetheless, we are pleased that the district obtained the extension, as we had recommended in our draft report to the district, and therefore we removed that recommendation from our final report.
The district’s response regarding a situation not being auditable is shortsighted. We reviewed the status of the district’s license suspension extension because it is a step that may be necessary to reopen the medical center.
We disagree with the district’s assertion that “it is impossible for an audit team to discover a methodology that can find assurance that survey results will be compliant.” As we discuss here, we reviewed daily meeting documentation provided by the district in late August 2018 and compared it against state and federal regulations to assess the district’s progress toward addressing the licensing requirements. The daily meeting documentation indicates some tasks the district has not completed, such as taking an inventory of equipment for many departments. We based our conclusions on the documentation provided, which indicates that there are still outstanding areas the district must address within the next few weeks if it expects to reopen by mid-October 2018. The district’s contention that it is simply not realistic for us to expect that information about the district’s efforts to reopen the medical center would be documented is concerning. It is questionable how executive leadership in any organization, let alone a medical center with eight service areas, can have any assurance regarding progress in meeting deadlines for such a major project without written documentation.
The district provided no support for this assertion. In addition, as we state in comment 7, the district’s documentation shows that it still has not contracted with more than 100 vendors it has identified as necessary to reopen the medical center. As we mention in comment 10, the district’s daily meeting documentation indicates it is still in the process of taking an inventory of equipment for many of its departments. Therefore, it may not have identified all of the equipment and supplies that it needs. Thus, there may be equipment and supplies the district needs and cannot obtain due to the extensive number of vendors with which it has not yet contracted.
The district indicates that we do not understand the comprehensive plan it is exercising. However, as we discuss here, the district did not have a comprehensive plan for reopening. Rather, the district described its planning as the amount of daily meetings it is conducting and provided daily meeting documentation. We reviewed the documentation provided and discuss our concerns with the information here.
The district’s comment regarding an “audit sheet” is incorrect and mischaracterizes our work. We requested any form of documentation demonstrating its efforts to reopen the medical center on numerous occasions and did not limit our requests to a particular format. Further, we do not assume that the district is not considering equipment issues. As we discuss here, the district is taking inventories of equipment. Our concerns with the documentation provided are discussed in our comment 10.
The district’s statements mischaracterize our report conclusions. We do not state that the district will not complete tasks. Here we state that we are concerned that the district may not meet all the requirements to reopen the medical center by mid-October 2018, not whether these requirements will be met or not.