FALLBROOK – The Board of Directors of the Fallbrook Healthcare District (District) is actively seeking a way to provide temporary financial assistance to Fallbrook Hospital Corporation (FHC). In late September of 2013, FHC reported that they had sustained substantial losses, nearly $2 million, in the first six months of 2013 in specific service areas referred to as “Core Services” and requested financial assistance from the District.
Since receiving the FHC request, the District has actively communicated with the hospital CEO and has engaged a financial consultant to analyze and review data made available by FHC to verify the extent of the financial difficulties related to Core Services. The District, in November 2013, presented a proposal to FHC that would provide significant short-term financial assistance to the hospital operators in return for financial considerations related to the end of the Lease term in 2028; and a commitment by FHC to implement measures designed to improve the hospital’s financial performance.
Fallbrook Hospital Corporation is a for-profit entity that has operated the hospital for fifteen years under a voter approved thirty year lease from the District. The District is a local government agency fully accountable to the community and operating under the laws of the State of California.
Terms of the District’s proposal are consistent with the California State Constitution and laws governing Healthcare Districts. These laws do not permit giving public funds to a for-profit corporation. The District proposal presents a means by which the District can provide funds to alleviate the current financial circumstance of FHC while ensuring a fair market value return of funds as a credit to the District at lease end. It would allow the District to appropriately manage assets apportioned from property tax revenues of this community while providing financial support to FHC to address operational issues. A win-win outcome – beneficial and of value to both FHC and the District.
FHC asserts that the District, under language of the lease, is allowed to reimburse FHC for losses in Core Services. The lease required FHC to provide Core Services for the first ten years of the lease; it has done so. The lease also provides FHC with the right to discontinue one or more Core Services after November 2008 under certain circumstances. As an alternative to FHC closing an unprofitable Core Service, the lease provides an option for the District to reimburse FHC for financial losses upon written request from FHC with reasonable backup to support the claimed losses.
“As a public entity, the District is charged with prudently managing its’ revenue for healthcare service and programs for the people of this community now and in the future,” said Board President Steve Abbott. “We are aware of and committed to acting within governing laws of the State Constitution and those governing Healthcare Districts. We are seeking to provide temporary support to Fallbrook Hospital Corporation while ensuring that the District receives tangible value in return for up-front financial commitment. We will continue our efforts to determine a workable solution. To that end, we will work to develop and implement a collaborative strategy that supports Fallbrook Hospital and its valuable service to this community.”