AV Hospital Hires New CEO

Antelope Valley Hospital’s board of directors has hired a new chief executive to move the Lancaster hospital in a new direction after years of financial and operational instability. On Dec. 23, the board ousted former chief executive John Rossfeld and former chief operating officer Ron Bingham. In the same meeting, the governing body terminated the hospital’s agreement with Alecto Healthcare Services, the Irvine management company hired to oversee operations and the employer of both Rossfeld and Bingham. The three-year contract with Alecto was approved in November 2015. It provided the management company $1.5 million annually to cover executive salaries as well 1.25 percent of net operating revenue. Because the agreement was terminated early, the hospital must pay more than $6 million in severance fees for ending the contract “without cause.” In the breach, the board has hired new Chief Executive Michael Wall. Previously, Wall was executive director of Head & Neck Associates of Orange County in Mission Viejo and prior to that was chief executive of St. John’s Health Center/John Wayne Cancer Institute in Santa Monica following a quiet shake-up of its board and leadership team. He was also chief executive of Dignity Health Northridge Hospital Medical Center for 12 years. “I don’t look back; I only look forward,” Wall told the Business Journal. “What really matters is how do we improve our organization, how do we make people feel empowered and how do I reinvest strategically where we need to invest?” Board issues Alecto was hired to help solve leadership and finance issues at the hospital. Former board chairman Dr. Doddanna Krishna said in a statement at the time that Alecto brought “an extensive background in health care quality, financial stewardship and innovative program development.” During its year in charge, Alecto along with former chief financial officer Paul Brydon helped refinance the hospital’s debt with a fixed-rate public bond issue that eliminated a $55 million balloon payment due this year. The new bonds, totaling $140 million, will reach maturity in 2046. However, newly elected Chairman Dr. Don Parazo cited other problems with the management company that led to the nixed contract. “There were issues within the community about how employees were being treated,” he said. “Issues with things they were doing – specifically how the nurses’ strike was handled – and how certain contracts were handled.” In September, union nurses held a one-day strike, the first of its kind in the hospital’s history, in protest of their unresolved contract, which expired in July 2015. One of the main points of contention for the contract regarded wages, said Mark Bradshaw, corporate council for Alecto, in a December interview with the Business Journal. Just last month, a new contract was put in place after approval by the board and ratification by the union. Meanwhile, two of the hospital’s longtime nurses, Kristina Hong and Mateo Olivarez, campaigned to join the hospital’s board. They were both elected and now serve alongside other current members Dr. Mukund Shah, who has worked for Antelope Valley Hospital for more than 35 years; Dr. Abdallah Farrukh, who used to be chief of staff at the hospital; and Parazo, who practices at High Desert Medical Group in Lancaster. The board oversees not only the hospital but the entire Antelope Valley Healthcare District, the geographic area the hospital serves. Unlike a corporate board that looks after the interests of the company and its shareholders, a district board is public, similar to a school board, and serves the interests of the community. Members are elected by the public instead of appointed, meetings are open to the community and decisions are subject to public scrutiny. Ann Ehringer, a business consultant who has sat on boards including the one for television station KCET, said boards are responsible for overseeing the entire situation of an organization. She added this is best accomplished when a board is made up of a diverse group of people with varying backgrounds. “If everyone has the same point of view and same experience, they are going to come up with the same answers,” she said. “Sometimes what you need is a broader perspective and broader experience.” Antelope Valley Hospital’s board is comprised of three doctors and two nurses with the majority currently employed at the hospital. In contrast, the New York Stock Exchange requires a majority of independent directors, with the rule stating: “A majority of independent directors will increase the quality of board oversight and lessen the possibility of damaging conflicts of interest.” Each member of the hospital’s board campaigns and goes through the election process. Parazo added that the board has consultants on specific issues as well. “The hospital structure has an advisory board, which includes community members and a finance committee,” he said. “But it is the community that elects the board members, and that depends on who wants to run.” Robert Myrtle, professor of health services administration at USC, also pointed out that experience is crucial to successful administration. “From what I gather, none of the members from the governing board have management experience,” he said. “Elected officials often don’t have the knowledge or experience to run a third-of-a-billion-dollar operation.” He also cited the potential for conflicts of interest. “If you have a nurse working for a hospital also serving on the governing board, whose interest is she serving?” he asked. New direction In 2015, Antelope Valley Hospital had an operating margin of 4.6 percent on operating revenue of nearly $402 million. It was ranked the fourth largest hospital in the Valley region by number of beds, according to the Business Journal. The hospital is the only Level II trauma facility within a 50-mile radius and serves 5 percent of L.A. County’s population. Under the new bond financing, the hospital district pays about $8.2 million on its debt, down from $12.1 million under the previous arrangement. Currently, the hospital is suing L.A. County for allegedly misallocating public funds, resulting in its trauma services being grossly underfinanced. It was also just hit with reduced Medicare payments for having higher instances of potentially avoidable patient infections and complications. Other Valley hospitals that incurred the same penalty include Northridge Hospital and Sun Valley-based Pacifica Hospital of the Valley. Furthermore, the nurses’ strike resulted in lost senior staff and a decline in recruitment. To solve these issues, the board hired Wall. “When the board election occurred, you had two nurses with no campaign war chest and a grassroots effort, and they won,” Wall explained. “That said the community wanted change.” The Antelope Valley Press reported that some community and advisory committee members wanted to rehire former chief executive Dennis Knox but that the nurses preferred Wall, who was popular among the nursing staff at Northridge Hospital, according to the newspaper. Wall has over 30 years of experience in health care and plans on managing with transparency and a flat organizational structure. He said he might not even bring in a chief operating officer as he rarely has had one in the past. “My biggest concern at the moment is to really reinvest in nursing,” he said. “We lost almost 30 critical care nurses and senior nurses. I want to understand what drove that and fix those issues.” He also wants to continue the hospital’s partnerships with other providers such as Kaiser Permanente Inc. and give special attention to in-hospital surgeries. He said he knows he is tasked with earning the trust of his staff, who have been subjected to years of instability, but he hopes to empower them to make positive decisions for the hospital and patients. “If we miss our mark, the community will hold the organization accountable,” he said. “It may take a while, but they will hold it accountable.”