LAFCO designates special study area for Fallbrook Healthcare District 

On May 4, San Diego County's Local Agency Formation Commission approved municipal service review updates and sphere of influence updates for the county's four healthcare districts, although the districts were designated as special study areas for possible future action. Although Fallbrook Healthcare District hospital operational issues which led to the December 2014 closure of Fallbrook Hospital may become jurisdictional issues of LAFCO in the future, the 2015 update concluded that all four districts have demonstrated accountability for community service needs and have adequate capacity for provision and support of healthcare services within their respective service areas and current spheres of influence. The county's other three healthcare districts are the Grossmont, Palomar, and Tri-City districts. LAFCO's board voted 7-0, with no City of San Diego representative present, to approve the updates and designate the special study areas.

"This is part of our five-year review where we conduct an examination of services," said LAFCO executive officer Mike Ott. A municipal service review evaluates a jurisdiction's services and anticipated needs. A sphere of influence study determines boundaries best served by a particular agency. A municipal service review update and a sphere of influence are prerequisites to any jurisdictional change including annexations, detachments, consolidations, dissolutions, and city incorporations. LAFCO, which is responsible for jurisdictional boundary changes, also periodically conducts municipal service review and sphere of influence updates for all cities and special districts.

LAFCO initially established a sphere of influence for the Fallbrook Healthcare District in June 1986; the 110 square mile sphere of influence matches the district boundaries and has remained unchanged. The four hospital districts were included when LAFCO conducted a municipal service review and sphere of influence study for all special districts in San Diego County in 2007. The 2007 conclusion was that no anticipated changes would be necessary for the Fallbrook, Grossmont, or Palomar districts but that a sphere expansion for the Tri-City Healthcare District was possible. Because no annexation proposal had been planned, no territory was added to the Tri-City sphere of influence. The 2007 study concluded that all four districts were adequately coordinating facility upgrade programs to comply with Federal and state seismic safety standards mandated by 2012.

The Fallbrook special study area includes Camp Pendleton and DeLuz. Both the Fallbrook district and the Tri-City district serve portions of Camp Pendleton, and the Fallbrook district includes a portion of DeLuz. The study of the Fallbrook area will determine whether Camp Pendleton should be in a single district and whether the remainder of DeLuz should be added to a hospital district. The study will also determine whether the Palomar or Tri-City district would better serve residents within the Fallbrook territory. The review will also determine whether a small portion of the City of Oceanside within the Fallbrook Healthcare District should be detached from the Fallbrook district and annexed to the Tri-City district. The Fallbrook and Palomar districts have already adopted a joint powers agreement to identify potential health care service providers for the Fallbrook service area.

"We, too, welcome the process moving forward," said Fallbrook Healthcare District board president Stephen Abbott. "We are very mindful of the concerns that exist."

Special study areas for the other three districts will investigate possible annexation of the Shadowridge area in Vista which is between the Tri-City and Palomar districts, the coastal incorporated cities, and East County communities not in the Grossmont district.

"All of these areas demonstrate medical need," said LAFCO local governmental analyst Robert Barry. "We feel that there is a critical need for their services."

The expansion of California's population after World War II, as well as the need for many of the war's veterans to receive ongoing medical care, led to state passage of 1945 legislation authorizing local hospital districts. Subsequent state amendments allowed hospital districts to be renamed as healthcare districts without the requirement for a public vote. Healthcare districts currently have the authority to operate healthcare facilities such as hospitals, clinics, skilled nursing facilities, adult day health centers, nurses' training schools, and child care facilities, to operate ambulance services within and outside of the district, to operate programs which provide chemical dependency services, health education, wellness and prevention, rehabilitation, and aftercare, to carry out activities through corporations, joint ventures, or partnerships, to establish or participate in managed care, to contract with and make grants to community provider groups and clinics, and to conduct other activities necessary to maintain the good physical and mental health in the district's communities.

The Fallbrook Healthcare District was originally the Fallbrook Hospital District when it was formed in 1948. Fallbrook Hospital opened in 1950. An 18-bed hospital facility on the present East Elder Street location was constructed in 1959. A 1960 expansion provided surgery facilities, a delivery room, and emergency services. An enlargement to the 47-bed capacity occurred in 1971. In 1998 the district's voters approved a 30-year operational agreement with Community Health Systems, Inc., and that year the district's name was changed to the Fallbrook Healthcare District to reflect the district's services in addition to the hospital. CHS terminated the agreement in 2014 due to financial losses, and Fallbrook Hospital closed in December 2014.

"It creates a different role for the district in the community," Barry said. "The closure of the hospital has changed the role of that district."

The Fallbrook Healthcare District also leases the 93-bed Fallbrook Skilled Nursing Facility on Potter Street, which has been licensed since 1963.

The Palomar Healthcare District was formed as the Northern San Diego County Hospital District in 1948, the Grossmont Hospital District was created in 1952, and the Tri-City Healthcare District dates to 1957. Grossmont Hospital has been leased to the non-profit Sharp system since 1988, Tri-City Medical Center is owned and operated by the Tri-City district, and the Palomar district operates Palomar Medical Center and Palomar Health Downtown Campus in Escondido and Pomerado Hospital in Poway.

Statewide 73 healthcare districts exist in 40 different counties (California has a total of 58 counties). Only 43 of those districts still own or operate acute care hospitals.

"The independent hospital model is probably going away across the country," said LAFCO legal counsel Michael Colantuono.

"I don't think Grossmont could survive without the relationship with Sharp," said Dianne Jacob, who is one of two county supervisors on the LAFCO board.

Fallbrook Hospital's Fiscal Year 2012-13 net operating revenues were $38,306,345 including $37,814,952 of net inpatient and outpatient revenue, but operating expenses of $45,960,998 created a net from operations loss of $7,654,653 and a total annual loss of $8,072,323. Fallbrook had net operating incomes in 2007-08 and 2010-11 but net losses in 2009-09, 2009-10, and 2011-12 as well as in 2012-13.

During those six years Tri-City Medical Center had three net income years and three net loss years, Pomerado Hospital and Palomar Health Downtown Campus had one loss year apiece, and in Grossmont Hospital's worst fiscal year the hospital had a net income of $4,936,702.

"It's a service, but it's also a business and they have to make money on the service," Jacob said.

During the six fiscal years from 2009-08 to 2013-14 the Fallbrook Healthcare District itself had average allocated property tax revenue of $1,480,332; the 2013-14 amount of $1,488,294 constituted 2.5 percent of the district's net operating revenues. Although property tax revenue provides some funding for healthcare district hospitals, services are not restricted to residents.

"It doesn't have to serve you and it can serve people outside its boundaries," Colantuono said.

The Fallbrook Healthcare District served an estimated population of 57,515 in 2014 and is expected to have service populations of 61,001 in 2030, 68,461 in 2040, and 72,681 in 2050. Currently between 10 and 12 percent of the population is over 65; that is expected to increase to 20 percent by 2030. The number of county residents who are 75 or older is expected to double in the next 15 years.

"This is going to create a very strong need for specialized programs and services," Barry said.

"Our needs are growing," Jacob said.

San Diego County has a total of 34 licensed hospitals, including 28 acute care hospitals. Only 17 of those hospitals have emergency departments and only six are designated as regional trauma centers to treat traumatic injuries which require immediate medical attention. Five of the other hospitals are acute care psychiatric hospitals and the other is a chemical dependence recovery hospital. The six trauma centers include Rady Children's Hospital, which is a pediatric trauma center; Palomar Health Downtown Campus is the only trauma center which is part of a hospital district and the only one outside the City of San Diego.

As of December 2014 the county's 90 licensed long-term care facilities had a total of 5,475 licensed beds and consisted of 82 skilled nursing facilities, seven congregated living health facilities, and one intermediate care facility for the developmentally disabled.

The county's 108 licensed primary care clinics include 104 community clinics; the other four are free clinics.

The 101 licensed home health and hospice facilities consist of 78 home health facilities and 23 hospices.

The county's 36 licensed specialty care clinics consist of 30 chronic dialysis clinics, three surgical clinics, one alternative birthing center, one rehabilitation clinic, and one psychology clinic.

"We do have private hospitals in this region," Jacob said. "I would hope that the private hospitals in our region would be looked at. We need to look at this as a regional issue in terms of service."

Under state law any licensed acute care hospital facilities not in compliance with seismic safety standards - which include the ability to remain operational as well as the ability to avoid collapse - by 2030 must be replaced or cease acute care operations. The structural performance category rating which indicates a building's compliance with seismic safety standards utilizes a scale of 1 to 5 with five being the highest. Fallbrook Hospital's main hospital, medical/surgical addition, and intensive/cardiac care units have ratings of 2 (will not significantly jeopardize life but may not be repairable or functional after strong ground motion) while the emergency room and perinatal additions have ratings of 4 (in compliance but may experience structural damage which could inhibit the building's availability). The non-structural performance category rating indicates conformance of hospital equipment and systems for adequate anchorage and bracing of non-structural features such as electrical, mechanical, plumbing, and fire safety systems for continued use after a disaster; Fallbrook's non-structural performance category rating is 1. Designations of 1, 2, and 3 have specific required deadlines to achieve conformance.

The 1998 agreement allowed CHS to discontinue one or more services after November 2008 under certain circumstances. In May 2014 CHS notified the district of its intent to terminate the agreement. In June 2014 the Fallbrook Healthcare District sent 12 hospital management organizations a request for proposals to assume operational responsibility for Fallbrook Hospital. Three proposals were received. "None of that really penciled out in terms of being viable," Barry said.

Only two of the proposals were considered viable when the healthcare district reviewed them. The proposal from Strategic Global Management, a for-profit operator based in Riverside County, was rejected as not financially feasible for the district which would have had all liability for continuing acute care operations and would also have provided substantial up-front funding.

A joint proposal submitted by the Palomar and Tri-City districts would have converted the emergency center into a 24-hour urgent care center for six months but would not have kept open inpatient services such as emergency, obstetrics, or intensive care. A joint powers agreement between the three hospital districts would have provided those inpatient services. The proposal for a joint powers authority required approval from all three boards, and the Tri-City district withdrew from the proposal.

The Palomar district then applied for a license to operate the Fallbrook Skilled Nursing Facility, but Federal regulations require that an acute care hospital be located within 250 yards of a skilled nursing facility operated by a healthcare district (that proximity is not required for a privately-operated skilled nursing facility) and the Federal Centers for Medicare and Medicaid Services denied the license application. CHS is continuing to operate the Fallbrook Skilled Nursing Facility until the facility can be licensed as a stand-alone facility.

"We're acutely aware that the future is going to be public-private partnerships," Abbott said.

Palomar Health Medical Center is 24.5 miles from Fallbrook by road, the Palomar Health Downtown Campus is 26.1 miles away, and Pomerado Hospital is a 35-mile drive. Tri-City Medical Center is 17.5 miles from Fallbrook, Loma Linda University Medical Center in Murrieta is a 23.0-mile trip, Southwest Health Care System in Murrieta requires 23.2 miles of travel each way, and Menifee Valley Medical Center in Sun City is a 30.6-mile distance from Fallbrook.

LAFCO alternate member Ed Sprague is on the board of the Olivenhain Municipal Water District, but professionally he is the deputy fire chief for the North County Fire Protection District. Sprague noted that the closure of Fallbrook Hospital has increased ambulance transport time.

"We're going for a long ride," Sprague said. "It is certainly an area right now that we're struggling with. We have these extended transport times and our ambulance resources are stretched."

Current regulations require ambulance transport to an acute care facility. The North County Fire Protection District has six stations, including one staffed by the Rainbow Volunteer Fire Department. Sprague noted that if three ambulances are already unavailable due to transport mutual aid is needed by the fourth call for service. Since Fallbrook Hospital closed, NCFPD has experienced a 12 percent increase in calls for service from other departments.

"For us it's a little more acute because it's happening today," he said.

Although a proposed jurisdictional change for one or more healthcare districts may be initiated by sufficient local voter or landowner petition, affected agency resolutions, or LAFCO action, under state healthcare district law any jurisdictional change involving dissolution of one or more healthcare districts or transfer of more than 50 percent of a healthcare district's assets must be approved by local voters.

Should the Fallbrook district be targeted for dissolution, including possible consolidation with another district, a transitional zero sphere of influence would be assigned.

"We don't think it would be appropriate at this time to go down that path," Ott said.

The special study area designation allows for discussions among other healthcare districts regarding a potential reorganization involving the Fallbrook district.

"It will come back," Ott said. "Fallbrook may need to re-engineer themselves."

Although the Fallbrook Healthcare District no longer operates a hospital, the district is still involved in preventative care activities within the community.

"Not all medical care is in a hospital," said Fallbrook Healthcare District administrator Vi Dupre. "A hospital is for sick people. We want to keep them well."

During Fiscal Year 2013-14 the Fallbrook Healthcare District received grant requests totaling $634,227 and awarded 21 grants totaling $556,159. Since the grant program was established in 2000 the district has awarded more than $6 million in grants to non-profit organizations which provide health education, health promotion such as prevention and disease or injury control, health maintenance, health treatment, and programmatic efforts to develop and test new healthcare approaches.

"This is public funds well spent," Abbott said. "That's where the focus is. That's where healthcare needs to be."

Fallbrook Healthcare District also has communications efforts to encourage immunization, nutrition, exercise, healthy behavior, and other preventative activities.

"I think they're looking to see what is being done to meet the needs of the community," Dupre said. "It's a place of education. There's an investment in teaching young children."