Minutes. Melanie Talbot, MIHS, Executive Director of Board Operations

Transcription

1 Minutes Maricopa County Special Health Care District Board of Directors Special Meeting Maricopa Medical Center Auditorium 1 and 2 August 28, :00 p.m. Present: Mary A. Harden, Chairman, District 1 Mark Dewane, Vice Chairman, District 2 Terrence McMahon, Director, District 5 Susan Gerard, Director, District 3 Elbert Bicknell, Director, District 4 Others Present: Betsey Bayless, MIHS, President & Chief Executive Officer Bill Vanaskie, MIHS, Chief Operating Officer Michael Ayres, MIHS, Chief Financial Officer Robert E. Fromm, Jr., M.D., M.P.H., MIHS, Chief Medical Officer Warren Whitney, MIHS, Chief External Affairs Officer arrived at 1:41 p.m. Susan Doria, MIHS, Vice President of Strategic Planning arrived at 1:46 p.m. Louis B. Gorman, MIHS, District Counsel Sherry Stotler, MIHS, Chief Nursing Officer David Wisinger, M.D., MIHS, Chief of Staff arrived at 1:56 p.m. Michael Eaton, Navvis & Healthways Grant Hamill, Stifel Nicolaus & Company Mica Goldfeder, MIHS, Director, Human Resources Paul Dereadt, MIHS, Director, Purchasing and Supply Chain Management Brian Maness, MIHS, Director of Contracts and Procurement John Middleton, MIHS, Chief Compliance Officer Patricia Schultheis, MIHS, Assistant Clerk of the Board Recorded by: Melanie Talbot, MIHS, Executive Director of Board Operations Call to Order Chairman Harden called the meeting to order at 1:00 p.m. Roll Call Ms. Talbot called roll. Following roll call, it was noted that all five voting members of the Maricopa County Special Health Care District Board of Directors were present, which represents a quorum. Pledge of Allegiance The Pledge of Allegiance was led by staff from the Facilities Department. Call to the Public Chairman Harden called for public comment. There were no comments from the public.

2 Call to the Public Chairman Harden read an that was received from a patient s family regarding the excellent care that was given at Maricopa Medical Center, specifically in the Pediatric Intensive Care Unit and in the Pediatric Emergency Department. General Session, Presentation, Discussion and Action: 1. Department Spotlight Chairman Harden explained that the Department Spotlight was a new item that will be recurring at the monthly Board meetings. The idea to add this to the agendas came while she was reviewing cost centers budgets and realized there were many departments within Maricopa Integrated Health System (MIHS). The employees are the greatest assets and spotlighting them is a way to convey how much they are valued. Each month, three-to-five employees from the spotlight department will introduce themselves, describe their position responsibilities and indicate how long they have been with MIHS. The first department to be spotlighted will be the Facilities Department. Mr. Larry Buchmelter began employment with MIHS in 1972 as an entry-level employee working. He later became Manager of Central Transport and after ten years, became an Administrative Coordinator overseeing three departments. After that, he became a Facilities Administrative Coordinator. He is currently in his forty-second year of employment with MIHS. Mr. Frank Wagoner has been with MIHS for 10 years and is an Electrician. He enjoys his position with MIHS. Mr. Ralph Jones is a Locksmith at MIHS and just celebrated his eighth year. He handles emergency calls on a daily basis and on any given day, he may re-key ten or more locks. He enjoys his job immensely. Mr. Scott Long, Senior Facilities Project Manager stated he is responsible for planning, coordinating, meeting with vendors, building what is new and fixing what is old. He has been with MIHS for five and a half years and is looking forward to his sixth year. Mr. Pete Fulling has been with MIHS for nine years. He began his career with MIHS as an Electrician and worked his way up to a supervisory position. He is a Manger for Maintenance and the Power Plant. He is responsible to ensure the facility keeps running on a daily basis. His experience has been great at MIHS. 2. iprotean Online Course Ms. Talbot stated she believed it was good to view a course on quality since some of the agenda items related to quality, such as the annual performance improvement plan and indicators on which to measure quality. The course was then viewed by the members of the Board and those present. 3. Discussion, Consideration, and Possible Action on Employment Agreement with Stephen Purves, President & Chief Executive Officer of Maricopa Integrated Health System Director Bicknell moved to approve the employment agreement between the Maricopa County Special Health Care District and Stephen Purves, President & Chief Executive Officer of Maricopa Integrated Health System. Vice Chairman Dewane seconded. Motion passed by voice vote. 4. THIS ITEM WAS INTENTIONALLY LEFT BLANK 2

3 6. Presentation on Performance Improvement and Quality Management; Approval of Maricopa Integrated Health System s Annual Performance Improvement Plan for Fiscal Year 2014 and Approve Indicators on which to Measure Quality for Fiscal Year 2014 Dr. Fromm stated that included in the quality plan are discussions about quality and the mission, vision and values of the organization. They change a little over time and the vision probably needs to be recreated based on the decisions that the Board has made regarding the mission statement for the future. It lays out the organizational authority, responsibilities, and what the relationship of the Board, medical staff and administrative leadership is to one another. It also covers priorities for the coming year and details as to why the priorities are included. Some items are important because of MIHS s mission; some are things that MIHS reports to other entities, or there are things that MIHS staff feels there is a specific concern about and that it should be an indicator of overall quality and performance within the organization. Many other things are considered and included in the reports to the Board. Some of these items appear in the monthly dashboard and all of them appear in the quarterly quality report. The report also includes how indicators are measured, where the benchmark comes from; and why the benchmark was chosen. MIHS also participates in a number of registries across the country and those databases are included in the report. MIHS is required to participate in some State programs like the Arizona Perinatal Trust. MIHS chooses to participate in some State programs since they provide additional benchmarks or guidelines that help MIHS to reach its targets, like the No Place Like Home process. The remainder of the report covers the process by which quality is examined; how to plan a quality project, implement it and check it to see if MIHS is improving or not. MIHS continues to make changes and the quality cycle repeats with the hope of decreasing error rates and improving overall performance. This is described in a standard Plan Do Check Act (PDCA) model. The quality plan also provides a listing of the Service Line Committees, the chairs and support staff of those committees, and how each relates to the quality process. A graphic shows each of the committees, how they are structured, and the sub-areas they are responsible for in the quality structure within the organization. Chairman Harden asked for numbers to back up the information, such as how many colorectal cases were performed. Dr. Fromm indicated he asked Jean Morris, Manager of Quality Management, to pull the raw numbers for the SCIP (Surgical Care Improvement Program) criteria and those will be included on future reports, unless there are issues retrieving the data. Director Bicknell moved to approve the Maricopa Integrated Health System Annual Performance Improvement Plan for FY Vice Chairman Dewane seconded. Motion passed by voice vote. Director Bicknell moved to approve the Indicators on which to Measure Quality for FY Director McMahon seconded. Motion passed by voice vote. 5. Discuss, Review and Approve Maricopa Integrated Health System Strategic Plan Ms. Bayless explained that the strategic planning process has been in the works for some time and the Board has had an opportunity to review it and discuss it for a number of months. She asked Ms. Doria and Mr. Eaton to report on the current state of the Strategic Plan. 3

4 5. Discuss, Review and Approve Maricopa Integrated Health System Strategic Plan (cont.): Ms. Doria commented she and Mr. Eaton were pleased to present a synopsis of the Strategic Plan and key strategies. She stated Mr. Eaton would review them with the Board. Ms. Talbot pointed out that Ms. Doria & Mr. Eaton revised the Strategic Plan coversheet to reflect all the points that the Board asked for. Ms. Schultheis distributed this to the members before the meeting. Mr. Eaton reported that staff took the Board s feedback and incorporated it into the document. The remaining pieces of the Strategic Plan are essentially as they were presented previously to the Board. Director Gerard stated that Ms. Bayless, Chairman Harden and she received an from Gary Tenney, who is the Chairman of the Maricopa Health Centers Governing Council (MHCGC). He expressed his disappointment that there is no specific language about how management, the Board and the Strategic Plan were going to be working with the MHCGC. Mr. Tenney asked her if the Board would add a statement about partnership with the MHCGC in the Strategic Plan, specifically, language should be in either Item 2 or Item 5. Director Gerard suggested adding language to Item 2 which currently reads Build and upgrade a network of ambulatory care facilities in key markets outside the Maricopa Medical Center primary service areas. Director Gerard stated Mr. Tenney suggested adding a comma after facilities in this section and after that, in partnership with the MHCGC,. The wording could also be added along with Item 6, Advance community initiatives to improve the health of Maricopa County. Director Bicknell had no problems with the request from Mr. Tenney. His concern was that the Council should be completely separate from the Board and wondered whether adding this language would create any legal problems in terms of the separation factor. Mr. Gorman stated that there is a current contractual relationship between the Board and the Council, both in a cooperating agreement and in a series of bylaws which sets forth both the Board s and the Council s duties and responsibilities. The Health Resources and Service Administration (HRSA) has reviewed and approved these documents. Director McMahon thought the situation was similar to the limited liability corporation issue it would be more of a tactic as to how to accomplish the goals rather than a goal in and of itself. He did not see the need for additional language in the Strategic Plan regarding the Council. Vice Chairman Dewane believed Mr. Tenney and Director Gerard had a point that absent the language, it appears they are not involved. Considering this and the fact the Council is sensitive to the issue he sees no harm in including language that states, working with, working in conjunction with or something to that effect. This would let the Council know they are part of the process. Mr. Gorman suggested the wording in consultation with. Vice Chairman Dewane asked Director Gerard if she thought the language they were discussing would address the Council s concerns. Director Gerard believed it would address the Council s concerns. The main thing is that the Council is referenced in the document. She believed it would be appropriate to place it in either Item 2 or Item 5. Director McMahon believed an equally important collaborative effort is with District Medical Group (DMG), which is not mentioned in the document either. He still believed it was inappropriate to add language regarding the Council. Vice Chairman Dewane stated that under HRSA, the Council has to stand as a separate body to oversee the Federally Qualified Health Centers (FQHCs) and DMG is different in that it receives compensation. 4

5 5. Discuss, Review and Approve Maricopa Integrated Health System Strategic Plan (cont.): Director Gerard stated DMG is a contract, whereas the Council is a part of MIHS. When HRSA audits MIHS they want to see that the Board or management is not making the decisions without the Council being part of it. Director McMahon stated he understood both Director Gerard s and Vice Chairman Dewane s points but HRSA would not know that the Council is participating based on a Strategic Plan and the Council will know that it would be participating based on looking at decisions that are made. Director Gerard stated the Council look at documents too. Director McMahon stated a document, absent action, is nothing. Vice Chairman Dewane believed Director Gerard s point was that she was concerned the Board did not make the Council feel included in the process. Chairman Harden believed Vice Chairman Dewane s thoughts were especially true in light of the Board s expectation that the Council is a vital part of the process. Chairman Harden stated she was hearing that the language should be added under Item 2 of the Recommended Strategies, Build and upgrade a network of ambulatory care facilities, in consultation with the Governing Council, in key markets outside the Maricopa Medical Center primary service area. Director McMahon moved to accept the Maricopa Integrated Health System Strategic Plan as presented. Vice Chairman Dewane seconded. Director Gerard moved the following amendment under Strategy number 2, in the first sentence, after facilities insert in consultation with the Maricopa Health Centers Governing Council, and then the rest of the sentence. Director Bicknell seconded. Motion passed by voice vote. Mr. Gorman stated the original motion needed to be approved, with the amendment. Vice Chairman Dewane moved to approve the Maricopa Integrated Healthcare System 2013 to year Strategic Plan, as amended. Director Bicknell seconded. Motion passed by voice vote. Chairman Harden thanked the Board, the management team and Ms. Talbot for their hard work on the Strategic Plan. Vice Chairman Dewane thanked Ms. Doria and Mr. Eaton for their efforts and Chairman Harden agreed with his sentiments. 5

6 7. Discuss, Review and Approve Documents related to Transfer of Maricopa County Property to the Maricopa County Special Health Care District, and Approval of Delegation of Signatory Authority related to such Transfer Documents from the Board to the Board Chair Mr. Gorman stated senior administration is requesting the Board approve the list of documents that relate to the transfer of property and all the appended documents, UCC statements, which would permit title of the property to move from Maricopa County to the District, with one exception of a listed intergovernmental agreement (IGA) between the District and the County for the lease of some small space at Desert Vista. The Board is also being asked to delegate to the Chairman the authority to sign many documents. Director Bicknell moved to approve all of the documents related to the transfer of Maricopa County Property to the Maricopa County Special Health Care District, with the exception of the Intergovernmental Agreement (C ) for use of real property, G-30159, at Desert Vista, spaces 1 and 2 and approval of delegation of signatory authority related to such transfer of documents from the Board to the Board Chair. Director McMahon seconded. Motion passed by voice vote. 8. Chief Financial Officer s Report, including but not limited to: Medicaid Expansion s Financial Impact on Maricopa Integrated Health System, Fiscal Year 2014 Budget Reconciliation, and Review Plan for Fiscal Year 2013 Mr. Ayres stated during the budget approval process senior administration was having discussions with the State and other parties regarding Medicaid Expansion (Expansion) and the implications it would have on MIHS. As the District s budget was being approved, senior administration informed the Board that the rules appeared to be changing in an unfavorable way toward MIHS. Over the last several months there have been a number of discussions, meetings, conferences and data reviews to try to determine the status of the Expansion and its effects on MIHS. Mr. Ayres spoke regarding implications for the health care exchanges that are being presented through the federal exchange programs of the states. He explained the Affordable Care (ACA) was approved with a start date of January 1, The program requires enrollment and is designed with ramp-up periods. The State s data is limited but they did go back to 2010 and 2011 to create some actuarial documentation to demonstrate where the State thinks things are headed. A great concern is that the Safety Net Care Pool (SNCP) Program will discontinue December 31, 2013 and MIHS will lose approximately $50 million per year in reimbursement for the care of the uninsured. The State predicts the Expansion and Exchanges will remedy this and return MIHS to where it was in There are challenges to this argument. For a little bit of background, Arizona shares the expense with the federal government of providing Medicaid coverage. The ACA will allow states to pay the federal government a rate in exchange for a match in enhanced federal funding (approximately a 10-to-1 match). The state of Arizona has elected to allow providers to pay for the state s portion of the payments (match) for the enhanced federal dollars. Under the current programs, states are obligated to pay what is called FMAP (Federal Medical Assistance Percentage). This is a calculation that is made every year by the federal government. The mechanics are that the state sends 34 cents to the federal government; the federal government sends back the full dollar and then that dollar is distributed by the State to the Medicaid patient. MIHS currently does this with the Safety Net Care Pool (SNCP) so for every dollar of allowable cost, it sends 34 cents to the state; the state sends that to the federal government. The federal government sends back a full dollar and MIHS nets 66 cents or 66 percent of the dollar s claim. Under AHCCCS for the current year s Medicaid program the State makes the match and MIHS does not. However, on the Expansion cost the providers will make the match. 6

7 8. Chief Financial Officer s Report, including but not limited to: Medicaid Expansion s Financial Impact on Maricopa Integrated Health System, Fiscal Year 2014 Budget Reconciliation, and Review Plan for Fiscal Year 2013 (cont.): The State has produced a formula that requires all of the hospitals must be involved in the program with the exception of Mayo and Phoenix Children s Hospital. The participating hospitals will pay 20 cents or 20 percent on a calculation based on the number of beds, multiplied by the rate. The rate varies for acute and psychiatric services, with a lower rate being paid for psychiatric services. In effect, the actuarial calculated amount that MIHS will receive for the remainder of 2014 when this new formula begins in is $12 million, of which MIHS must pay slightly over $2 million to match. The current rate formula for Medicaid pays MIHS only 60 percent of its costs. In essence, MIHS takes it costs, bills Medicaid and receives 60 percent of the cost back. Considering this 60 percent along with the 40 percent that MIHS will have to pay for the Expansion, MIHS will only get 40 cents on the dollar of costs applied, versus 66 percent. In the second year, the rates changes slightly, going down to 18 percent, which slightly increases MIHS s yield. A historical look at the MIHS percentage of total patient revenue by payer for fiscal year 2011 was 15 percent Medicare; 39 percent Medicaid (AHCCCS); 25 percent self-pay and 20 percent as all other sources. In fiscal year 2012, after changes to the Medicaid (AHCCCS) program, the percent of Medicaid revenue was less due to enrollments, with these numbers shifting to the self-pay category. This change is not big from 2011 to On June 30, 2013 the percentages for Medicaid was 29 percent versus 32 percent in 2012 and 39 percent in The self-pay category remained at about 28 percent and all other categories shifted a bit. Looking at the percentage of self-pay versus Medicaid, Medicaid revenue was 60 percent in fiscal year 2011, 53 percent in 2012 and 51 percent in SNCP made up the difference. A chart produced by the Arizona Hospital and Healthcare Association (AzHHA) shows the percentage of uncompensated care averages for the state. It shows, on average, that MIHS provides substantially more uncompensated care than any other organization in the state. Applying these numbers to the Expansion, beginning January 2014, along with actuarially based calculations from the state, reveals an increase in the number of Medicaid patients enrolled. For those Medicaid patients who are not enrolled they will qualify for the Exchange. Based on this information, senior administration has made an assumption that 50 percent of the population is going to enroll in the Exchange. There is much debate whether or not this figure makes sense. The number of enrollments grows until March 2014 when the open enrollment period for the Exchange stops and then it stays flat until the next open enrollment period. The potential loss to MIHS from the discontinuation of SNCP and the implementation of ACA is an accumulative total of $12 million. The $12 million loss figure is uncertain and considering a slight change in the calculation, for instance, if MIHS only receives 33 percent of its employees covered under the Exchange it would be looking at an $18 million gap. The difference cannot be made up in additional volume. Add to this a consideration that Medicaid does not ramp-up as fast as predicted and considering compensation based on current inpatient volumes, MIHS could end up with a gap as high as $25 million over the next year. Mr. Ayres stated the exact numbers are uncertain, however, it is somewhere within the range that he spoke about. He does not believe MIHS will be able to return to its revenues by the end of the year and MIHS will end up with a deficit during the first couple of months of the fiscal year. Senior administration is working to address this issue. One of the plans is that they will be sharing this same information with the AHCCCS Director, Mr. Betlach, asking them to reconsider the exclusion of MIHS to the SNCP. It makes sense to the extent MIHS has the largest percentage of uncompensated care of all the providers in the State and does not have the reserves that other hospitals have to make it work. 7

8 8. Chief Financial Officer s Report, including but not limited to: Medicaid Expansion s Financial Impact on Maricopa Integrated Health System, Fiscal Year 2014 Budget Reconciliation, and Review Plan for Fiscal Year 2013 (cont.): Plan B is that senior administration will address the shortfall and decide what to do next to address any potential shortfall, both from a cash conservation perspective, as well as recognition of costs. It is going to be a difficult set of issues for both senior administration and the Board to address. There will be plenty of opportunities to discuss this. Ms. Bayless stated there was a legislative bill that MIHS was optimistic about which would have changed the termination date of the SNCP and for a variety of reasons, it did not go forward. It was not supported by Mr. Betlach so it is important that MIHS meet with him again to impress upon him the position it is in and seek support from AHCCCS and the Governor. Chairman Harden believed the uncompensated care graph along with the fact that MIHS is the only public hospital for the entire State were compelling arguments that should be made to AHCCCS and the Governor. Chairman Harden asked Mr. Ayres to address the Fiscal Year 2014 Budget Reconciliation and Review Plan for Fiscal Year 2013 Annual Audit. Mr. Ayres stated there was nothing to present to the Board currently. Chairman Harden asked if the report would be forthcoming. Mr. Ayres stated he was not aware this item was on the agenda and if it was, it was a mistake. 9. Discuss, Review and Approve the District s Short-Term Strategic Capital Finance-Borrowing Plan and Approve Delegation of Authority to the District s Chief Financial Officer to Operationalize; Approve Board Resolution Authorizing Lease-Purchase In January, senior administration brought forward a number of short-term strategic capital projects of an urgent nature that they thought they had resources to implement. Over the last several months, senior administration has been working with a number of parties with respect to financing the projects. The total amount of the short-term strategic capital projects is $35.4 million. A number of different financing options have been considered and the decision was to go with a lease-purchase arrangement. The advantages are that it can be accomplished under MIHS s current statutes; no voter approval is necessary; and it is a well-accepted form of financing for organizations such as MIHS. The disadvantages are it does not create a new source of revenue; it will involve some lease and leaseback arrangements and it is a higher interest rate than a general obligation bond, which is not available under this option. MIHS would lease property to a trustee bank for 18 years and then enter a leaseback arrangement for 12 years. Certificates would be sold to an investor who provides the funds up front and MIHS pays the investor bank through annual payments. MIHS has to have collateral and will be using the Comprehensive Health Center (CHC), which has an estimated value virtually equal to that of the loan. Since MIHS will be spending money in a number of different locations it had to produce a piece of collateral that was essential to the operation of the organization in order for the lender to feel like there was some exposure for not making the annual payments. The Board will appropriate dollars yearly during the budget process to pay back the loan. If MIHS defaults on the lease purchase it is locked out of the CHC. The essentiality provision states that MIHS cannot afford to default as a business, therefore it will make the annual payment and then at the end of the lease term, MIHS owns the property free and clear. 8

9 9. Discuss, Review and Approve the District s Short-Term Strategic Capital Finance-Borrowing Plan and Approve Delegation of Authority to the District s Chief Financial Officer to Operationalize; Approve Board Resolution Authorizing Lease-Purchase (cont.): The funds flow arrangement is: the bank or the lender provides funds to the trustee; the trustee pays the contractor and equipment vendors or whatever else needs to be spent for the capital projects; MIHS then has the capital projects to make the lease payments back to the trustee and to the bank. Contracts are drawn up between each of the entities to make it all work. If the Board approves the financing-borrowing plan, senior administration can probably close the deal by the end of September. Certificates of Participation (COPs) will be issued. The principal amount of the COPs will not exceed the principal amount necessary to provide financing for the projects. MIHS will only borrow money that is needed to fund the projects and cannot borrow any more than what is needed. The COPs will be sold directly to a commercial bank, although there is a public offering available which will require more time, money and a higher cost. The belief at this point is, given the negotiations with the banks, that a public offering will not be necessary. The loans are amortized using District tax levy money and it runs through The average life of the loan is about 7.7 years. The source of funds is a principal certificate in the amount of $36, The use of funds will be $35 million to fund projects, with about $1.1 million to pre-fund interest through July 1, 2014, and $215,000 worth of issuance cost, rounded up to a total of $36,740 million that is being borrowed. The reason for the pre-funding is that the payments have to be accrued at the beginning of the budget cycle. The next budget cycle is not until next year, therefore, if the Board approves the prefunding it will be set for the first year. A rough amortization schedule is included which makes some interest rate assumptions. It includes a four percent rate assumption, although the market is looking closer to three and a half percent. Director Bicknell asked if the interest was based on the entire $35 million being funded, up front. Mr. Ayres stated it was. Director Bicknell asked if the borrowing could be incrementally phased in. Mr. Hamill stated typically for projects of this sort, the entire amount is borrowed up front at the start of the construction or acquisition of the projects. The reason this particular financing was chosen is that the security that MIHS has chosen is a single asset that it currently owns and operates. As that facility gets leased out to the trustee bank for consideration of the ground lease they re going to execute the issuance of all of the COPs that will be needed to fund the projects. Director Bicknell asked if instead of paying the $1.1 million every year in interest, that the District instead borrows only what is needed for current phases of the project to save on interest charges. Mr. Hamill explained usually in public finance projects, which is the domain he works, projects are typically funded up front, depending on the timing of the acquisition of the projects. Projects that are built within an 18 month to two-year period of time are typically more cost effective to fund up front versus taking successive draws from the trustee bank that could entail some additional legal and financial work. That being said, if this transaction goes in the way they anticipate as a single source provider, i.e., a commercial bank, arrangements might be made so that the monies could be drawn down over the period of construction. The process is not at a stage to determine this yet, but it could be investigated. Director Bicknell questioned if the $35 million is funded up front, whether the amount not used for immediate projects could be placed in an interest bearing account. Mr. Hamill stated it would be the intention to reinvest the money until it is needed in order to generate some interest earnings, however, reinvestment rates are very low. 9

10 9. Discuss, Review and Approve the District s Short-Term Strategic Capital Finance-Borrowing Plan and Approve Delegation of Authority to the District s Chief Financial Officer to Operationalize; Approve Board Resolution Authorizing Lease-Purchase (cont.): Mr. Ayres reviewed the planned timetable if the Board approves the borrowing plan. Staff has done its due diligence to ensure that several things are in place for the funding of the projects. They have worked to ensure it supports the Board approved strategic direction for the organization. A major portion of the Board s Strategic Plan involved ambulatory services and this is what the project funding is focusing on, with the exception of the 4 East and & 5 West Remodel and Conversion, which will re-condition and reuse the acute settings to bring about more efficiencies to Maricopa Medical Center. Senior administration has presented the financing plan to the Bond Advisory Committee and it endorsed it and believed it make sense. Senior administration has also discussed the plan with MIHS s strategic planning firm, Navvis, who has no opposition to the implementation of the financing plan. It is important for MIHS to do these things in order to position for next year and the following year when the organization will be going into a more focused ambulatory setting. There is about $10 million of undesignated funds for other short-term strategic capital investments in the financing plan and all of those projects will come back to the Board for approval. Those funds will be used in ways to advance MIHS s strategic purpose and the schedule will be worked through rapidly to ensure that they are identified appropriately. No funds will be spent without the Board s review. Should the Board end up offering bonds for a larger project, this financing plan includes a provision to roll it into a larger long-term strategy. The financing is tied to the District taxing authority so by the time the taxing authority expires this would be paid off and MIHS would own the property free and clear. Vice Chairman Dewane asked if the potential extra cost of issuing the funds in phases, along with the possibility of interest rates rising as they have for the past six months, might outweigh securing the funding in phases. He thought it would be better to lock in the interest rate for the entire $40 million. Mr. Hamill agreed with Vice Chairman Dewane and stated when the financing is concluded, a rate of four percent will be locked in for the entire term and will not change. As Mr. Ayres pointed out, the rate has a pre-payment provision beginning in 2017, so at the Board s discretion and ability to access other funds, the lease can be paid off. If the funds are phased in by the lender over time, the anticipation is that there would be a new interest rate established at the time of each draw. This provides some exposure to interest rate risk. It is also possible that interest rates will go down. The anticipation currently is that interest rates are trending up. The ten year Treasury Note Yield has gone up about 100 basis points in the last 12 months, or one percent, so the direction with the economic recovery is that rates are increasing from where they are today. As to another point, the amount of legal or financial work involved in a loan with draws depends on how they are organized. It could simply be more of a bookkeeping function on behalf of the bank to provide the draws or it might entail some additional legal and financial expenses. Vice Chairman Dewane asked if the financial institutions had been identified. Mr. Hamill replied they have issued a term sheet to local commercial banks that includes JP Morgan, Chase, Wells Fargo, Bank of America, etc and since then, a couple of additional banks have expressed interest in accessing the term sheet. As Mr. Ayres explained, MIHS is still providing some updated information to the banks before the banks submit their responses. Vice Chairman Dewane asked if Mr. Hamill felt confident there is an appetite from the lenders for this project. 10

11 9. Discuss, Review and Approve the District s Short-Term Strategic Capital Finance-Borrowing Plan and Approve Delegation of Authority to the District s Chief Financial Officer to Operationalize; Approve Board Resolution Authorizing Lease-Purchase (cont.): Mr. Hamill stated thus far, it has been encouraging. Banks are able to borrow at roughly a zero percent interest rate from the government so they are looking for good opportunities to lend money and earn that spread. The industry is seeing banks shift from private to public sector lending. Banks are looking to lend money to school districts, cities, counties, hospitals, and universities, since they can earn a good spread with a high degree of confidence that they will be repaid. Vice Chairman Dewane asked what the shadow rating was for the project. Mr. Hamill stated the private indicator rating that the District applied for was an investment grade rating from Moody s. He was reluctant, in a public forum, to specifically disclose it since one of Moody s conditions is that the rating not be publicly disclosed. Since the rating is private and non-disclosed the general fear is if the public hears what that rating is for this particular investment they could potentially base an investment decision of theirs on that rating, without having the benefit of a full ratings report that would accompany a formal application for that. The benefit to MIHS in seeking the private rating is that it can utilize it to evaluate whether the private placement route is more advantageous than going through a public sale. The resolution before the Board allows for the public option however they do not believe it will be necessary and the anticipation is the current process will generate a good response and good interest rate for the term. Director Bicknell moved to approve the District s Short-term Strategic Capital Financing- Borrowing Plan and approve Board Resolution Authorizing the Lease- Purchase. Director McMahon seconded. Motion passed by voice vote. Director Bicknell moved to delegate authority to the District s Chief Financial Officer to Operationalize the Plan. Vice Chairman Dewane seconded. Motion passed by voice vote. 10. INTENTIONALLY LEFT BLANK 11. Review of Maricopa Integrated Health System Employee Satisfaction Survey Results for Calendar Year 2012 Ms. Goldfeder shared that the Employee Engagement Survey was conducted in February of 2013 and was successful. The survey has been conducted for four years with a group called Morehead. The participation rate in 2009 was 61 percent and this year it was 89 percent. This is an extremely good participation rate, is much higher than the average rate, and a rate that Morehead has rarely seen. This shows that employees care enough to share information with the organization and management is proud of this. Morehead has a database that includes over 600 health care facilities. MIHS s national ranking for 2013 was in the eighty-third percentile and again, is compared to 600 other health care facilities in the database. Last year MIHS was in the sixty-ninth percentile so the current ranking is quite an improvement. The Morehead Survey listed areas that were most improved, strengths to maintain, and opportunities. Some of the areas that are most improved are that employees feel comfortable raising concerns about patient safety; that they feel there is a climate of trust and employee safety. 11

12 11. Review of Maricopa Integrated Health System Employee Satisfaction Survey Results for Calendar Year 2012 (cont.): The strengths show that employees like the work they do and the co-workers they work with; they believe patient safety is a priority and there is a culture of customer care. MIHS will continue to maintain these strengths moving forward. The opportunities are the perception of work unit staffing; work-life/personal-life balance; communication; involvement in decisions that affect work; and in demonstrating that information will be used to make improvements. Managers are working with their staff to put together action plans for these items and they will be worked on in this year. Ms. Goldfeder finished by stating the hope is that the positive trend in the engagement will continue to improve in the future. Chairman Harden asked if the survey is an online survey and if it is voluntary. Ms. Goldfeder replied that the survey is conducted online and the participation is voluntary. Ms. Bayless stated the results presented by Ms. Goldfeder truly reflect the change in culture at MIHS. 12. Update on Return on Investment Performance for Strategic Investments and Capital Improvements Mr. Ayres stated he did not have anything to present for this item. Chairman Harden asked if Mr. Ayres would have a return on investment report by October for the dollars being spent for improvements including the Pediatrics expansion and the Adult Emergency Department renovation. Mr. Ayres agreed that they had committed to report to the Board, however, none of the projects has reached the point of creating any return. The projects are still in the implementation or construction phases. 13. Discuss, Review and Approve the Maricopa Integrated Health System District Treasurer Investment Policy Mr. Ayres explained on July 1, 2013, all of the District s funds kept with the Maricopa County Treasurer were moved into District controlled accounts. This entailed changing the owner of the account from Maricopa County to MIHS. All of the money has been invested very. Mr. Ayres believes it is best to adopt a policy that governs investments prior to going any further. The proposed policy provides for oversight and safety in the investment decisions that MIHS makes. One of the key components of the policy is that a Treasurer s Advisory Board would be appointed. It would be comprised of four individuals working with Mr. Ayres on a periodic basis to review MIHS s investment profile, to understand what is happening in the market and to make any necessary changes or recommendations that need to be made to the Board. Director Bicknell asked if the Board would be told who the members of the Treasurer s Advisory Board are. Mr. Ayres stated he would structure it to be comprised of one Board member, the Chief Operating Officer, the Chief Accountant and the outside financial advisor from MIHS s bank. 12

13 13. Discuss, Review and Approve the Maricopa Integrated Health System District Treasurer Investment Policy (cont.): Another part of the policy restricts the amount of investment that can be made in any one form of investment. The policy requires quarterly and as needed reports to the Board, with financial statements each month detailing the investment amounts. The Board s current policy is much broader than the proposed policy. The current policy allows for the investment of funds, as identified in the statute, which does not place any types of controls over how it is dealt with. The proposed policy provides a much more conservative structure; gives full disclosure and should provide satisfaction that the funds are being invested appropriately, based on what is happening in the market. The only way the policy could be changed is if management came to the Board requesting a change or if the Board decides on its own, to change the policy. Vice Chairman Dewane stated he spent about an hour and a half reviewing this topic and the document with Mr. Ayres. The document is consistent with that of the County s and is tight as far as what can be done with funds. Additionally, the individuals that are overseeing the execution of the policy are also under heavy scrutiny since they are acting as fiduciaries. Director Gerard asked Mr. Ayres to reiterate who will sit on the Treasurer s Advisory Committee. Mr. Ayres stated it is a Committee that would advise him as the CFO, and would comprised of a Board member, the COO, MIHS s Chief Account, and a principal from MIHS s investment advisory firm. Director Bicknell moved to approve the Maricopa Integrated Health System District Treasurer Investment Policy. Director McMahon seconded. Motion passed by voice vote. 14. Update on Savings Achieved from OMSolutions (O&M) Supply Chain Consulting Services Mr. Maness stated in February, 2013 the Board to approve an agreement with a consulting firm to help review supply chain expenditures. In February, 2013 when this matter was first brought to the Board, the total annual spending of the supply chain was approximately $110 million. This included medical/surgical supplies, pharmaceuticals and any purchased services. The major supply chain system that involved these particular expenditures included materials management, contracts management, finance, pharmacy and various other departments throughout the organization. When the agreement with OMSolutions (O&M) was approve in February, the agreement was to help MIHS establish a program to allow MIHS to reduce expenses in the supply chain. The program was designed to create an effective structure to define the roles, standardize procedures, establish protocols and acquisition costs, and enhance product selection throughout the supply chain. One of the benchmarks established was to save $8 million in the first year with $4 million of that directly impacting fiscal year The first step was to follow a multi-step process established by O&M to set up core teams, referred to as Value Analysis Team (VATs). Seven VATs were established that include personnel from the laboratory, cardio imaging, support services and other areas. The VATs meet monthly to discuss and identify savings opportunities through research and analysis and to eventually achieve savings throughout the organization. Some of the steps in the process are to standardize the data collection in order to review the opportunities; ensure there is appropriate reporting and communication between the VATs and that there is peer support throughout the organization for the savings opportunities that are identified. 13

14 14. Update on Savings Achieved from OMSolutions (O&M) Supply Chain Consulting Services (cont.): A Value Analysis Steering Committee was also established. This Committee meets on a monthly basis to consider the various reports from the VATs. Mr. Dereadt stated a second goal was to identify and preclude savings through comprehensive review of the supply chain materials as well as purchased services. There have been 249 opportunities identified so far for just under $7 million worth of potential savings. Of the 33 opportunities implemented, $1.3 million has been saved. Once an opportunity is identified, the accounts payable files are reviewed to see where the money is being spent. Products and purchased services are reviewed to see what is on or off contract. Contracts are reviewed to see which are going to expire within 6 months, and then staff starts building a strategy on how to tackle the expenditures to drive more savings. If staff is unhappy with the GPO (group purchasing organization) pricing and benefits, staff will issue a request for proposal (RFP). So far MIHS has realized $1.3 million in savings and is looking see an additional $6 million in savings by October, The current schedule is on track to realize $970,000 thousand in fiscal year 2013, with the goal being to realize $4 million in fiscal year Vice Chairman Dewane asked if he was referring to savings. Mr. Dereadt clarified that he was referring to actual savings that can be planned for in budgets. When he spoke about implemented savings, he meant contracts are being signed in order to save money. Vice Chairman Dewane questioned if they were calculable outcomes and Mr. Dereadt affirmed they were. Mr. Dereadt mentioned there was exceptional cooperation and participation by the medical staffing in all of the VATs. The goal is to realize $12 million of savings over 36 months. Nothing other than travel expenses have been paid to the consultants thus far. The contract is constructed so O&M must implement $6 million worth of savings before they are paid gain sharing payment. The cost savings stands at $2.78 million currently and the expectation is high that the $6 million goal will be reached. Chairman Harden asked that another report be brought back to the Board in February. Vice Chairman Dewane asked if the firm that was hired (O&M) is tied to the outcomes. Mr. Dereadt stated this was correct and that MIHS needs to realize $6 million in savings before O&M is paid. MIHS has paid $105,000 in travel and hotel expenses and has realized $1.3 million in savings. O&M is sharing in the risk and expending time and effort in order to implement $6 million in savings before they get paid. Director McMahon asked if this program would continue throughout the years. Mr. Dereadt stated O&M was primarily chosen due to their training component. Staff members and VAT chair members are being trained to continue the program once O&M is scheduled to leave at the end of January, This was part of the design. This is also why it took a few months to implement the savings, since the training is extensive and time consuming. When Mr. Dereadt spoke to the Board previously, he had a goal of implementing the initial contract in the first four months and this was accomplished in the third month. Director McMahon asked how the program was received by the staff. Mr. Dereadt stated there is some resistance to change with any change. He is not telling people what they should be doing as a Director of Supply Chain - they are actually telling him. 14

15 14. Update on Savings Achieved from OMSolutions (O&M) Supply Chain Consulting Services (cont.): He is functioning more as a support role with controlling the processes. Individuals who are responsible for spending money know how to save money. Many times savings are not achieved since there is no good avenue to make it happen. The VATs, with the support of the Steering Committee, are enabling staff to achieve the goals. After the initial resistance to change the program has been fairly well received. Mr. Ayres noted that the supply chain program is being accomplished along with Mr. Maness task of implementing a new computer system, to be up and running by the end of September, 2013 or the first of October, 2013 along with working under a significant handicap due to some staffing issues. Break: 3:08 p.m. - 3:18 p.m. 15. Discuss and Review Financial Performance for Fiscal Year Ending June 30, 2013; Discuss, Review and Possible Action on the July 2013 MIHS Key Indicator Dashboards and Financials Report Dr. Fromm presented the June 2013 Quality Dashboard. The dashboard includes a medication error with an adverse event and is an opportunity to review some of the processes and make some changes to prevent it from ever happening again. The Process of Care Measure for pneumonia continues to be addressed. Some additional best practice alerts have been implemented within the EPIC system however there are still issues. Hopefully by next month these will be resolved, given the mechanisms that are in place to remind staff to administer immunizations before patients leave. Director Bicknell asked for more details on what the issues were with the pneumonia shot process. Dr. Fromm explained that the pneumonia indicator has a number of elements attached to it. One is to ensure people who need proper immunizations receive them before they leave the hospital. This is not something that directly impacts a patient s care in the hospital but impacts them back out in the community, after they leave the hospital. This item tends to gets pushed down on the list of orders as something that needs to be done before the patient leaves and it does not always happen. When the documentation was being done on paper, staff was doing a better job with this. The current struggle is with the computerized EPIC system and trying to establish a way for it to remind caregivers when items still need to be completed. Dr. Fromm stated the July Quality Dashboards looked good, except for the pneumonia piece, which was one percent better. Hopefully next month this will be even better and above the threshold. Mr. Vanaskie reported on the June 2013 Operational Dashboards. Acute admissions were up compared to the prior year. Behavioral Health admissions were slightly less than last year and the length of stay was higher. Work is continuing with the Regional Behavioral Health Authority (RBHA) to place patients. This has delayed some of the admissions, however, by and large, the average daily census is quite full. The Seventh Avenue Walk-In Clinic (SAWIC) had almost 26,000 visits in fiscal year Surgical minutes for the month were off but on a year-to-date basis are better than they were the prior year. The Emergency Departments are busy, as seen in both the Adult Emergency Department (AED) and Pediatric Emergency Department (PED). PED was up substantially, about 20 percent over what it was the prior year. ED visits resulting in admissions held steady in June, on a monthly basis. This was not the case in July. The average time to treatment in the AED is approaching 30 minutes and in the PED it is down to 16 minutes. Mr. Vanaskie reported on the July Operational Dashboards. Acute admissions were better than budget. The length of stay was less than was anticipated at 4.54 days, which is why the actual patient days were worse than budget for the month. Behavioral health admissions were still strong at 331 and length of stay was back to a more reasonable amount, 15.6 days. 15