By Mike Harris Friday, July 12th, 2024

The Ventura County Taxpayers Association is calling on the county Board of Supervisors to address what it says are ongoing cash flow shortages at the county’s medical system.

The non-profit taxpayer advocacy group says the shortfalls have caused the Ventura County Medical System to borrow as much as $200 million from the county’s taxpayer-funded general fund.

“The Ventura County Taxpayers Association calls on our elected leaders to act decisively in addressing the systemic issues within VCMS, ensuring that fiscal responsibilities are met and taxpayer interests are safeguarded,” David Grau, a member of the association’s board, told the Business Times July 11.

In response to the group’s concerns, Dr. Theresa Cho, director of the Ventura County Health Care Agency, said that “despite the cash flow challenges posed by the state’s biennial funding cycle, Ventura County Medical System has reported accrual-based net income above break-even for the last three audited years.”

VCMS net assets increased from $72.6 million as of June 30, 2020, to $124.5 million as of June 30, 2023, the most recently audited period, Cho said.

The medical system consists of Ventura County Medical Center in Ventura, Santa Paula Hospital, and a network of 26 clinics.

County supervisors in June approved the system’s $698.6 million 2024-25 revenue budget, which included plans to shut down Santa Paula Hospital’s birthing center and intensive care unit, Grau said.

But during the budget process, the board failed to address the ongoing cash flow shortages at VCMS, Don Brodt, chair of the association’s board, said in the nonprofit’s latest newsletter.

The shortages have caused VCMS to borrow up to $200 million from the general fund to make annual payments on a decade-old Ventura County Medical Center construction loan, Brodt said.

“This practice, essentially borrowing new debt to pay old debt, is unsustainable,” Brodt said.

Association board members first aired their concerns in late January in a meeting with county CEO Sevet Johnson, then-CFO Kay Mand, and then-health care agency director Barry Zimmerman, Grau said.

They then met with each of the five county supervisors in February, he said.

Cho said that the substantial general fund advance to VCMS is largely attributable to the biennial funding cycle of various statewide quality and supplemental funding programs for California’s Designated Public Hospital Systems, which include Ventura County Medical Center.

She said that as of Dec. 31, 2023, VCMS had not received funds for programs such as the Quality Incentive Pool program, Enhanced Payment Program, and Global Payment Program for 2022 or 2023, with receivables exceeding $290 million and a general fund advance balance of $287 million.

Brodt said that since 2014, VCMS has relied on the general fund loan to manage the debt from the medical center construction project, despite initial promises that VCMS operations would generate sufficient revenue to cover financing costs without additional taxpayer contributions.

“This borrowing, conducted without interest charges or a clear repayment plan, obscures the true financial health of VCMS and misleads taxpayers about the actual costs of supporting the county’s healthcare system,” he said.

Despite the taxpayer association’s concerns, county supervisors have not taken any action to address the fiscal challenges or enhance oversight of VCMS’s financial practices, Brodt said.

“The Board’s failure to demand a FY24-25 budget from VCMS that prioritizes sufficient cash generation to cover operating expenses and debt obligations highlights broader concerns about governance and stewardship of public resources within VCMS,” he said.

Grau added, “Playing a shell game with taxpayer money is not a solution.”

The Board of Supervisors should authorize the write-off of the approximately $200 million loan as bad debt, reflecting those funds borrowed to meet annual debt payments, Brodt said.

Additionally, given VCMS’s ongoing negative net cash from operating activities, the supervisors must explore solutions that don’t involve additional borrowing from the general fund, such as budget adjustments to align costs with revenue or additional annual contributions to support ongoing operations, he said.

Cho put forth her own strategies.

They include the implementation of an updated payment model for hospital services, resetting and increasing of clinic prospective payment system rates, pursuit of additional grant funding for federally qualified health centers, expansion of services such as endoscopy and dental care, and continued high performance with quality-of-care measures. 

Such strategies, she said, “will ensure VCMS’s ongoing fiscal stability for years to come.”