July 2023 Cover IllustrationPrinter-friendly PDF file

July 14, 2023

Part 1 of Two-Part Series
Costs to Rescue Laguna Honda Hospital Soars. Again.

LHH's Mismanagement Costs Reaches $64.1 Million

New Contracts Totaling $11.4 Million Raise Questions, Including a
$4.1 Million
Air Traffic Control Contract Amendment to Triage
Incoming Requests for Information From Mayor Breed

by Patrick Monette-Shaw

Various costs related to Laguna Honda Hospital’s mismanagement over the years and LHH’s efforts to obtain Federal recertification continue to climb.  Having now reached $64.9 million in costs, expenses are expected to climb significantly higher.  LHH’s multiple problems can only be described as being a hot mess.

Costs associated with LHH’s mismanagement involve at least four major “buckets” of spending:  Consultant contracts trying to assist LHH obtain recertification; lost Medi-Cal revenue that had been budgeted to cover LHH’s operations; State and Federal fines, penalties, and lawsuit expenses involving substandard care of LHH’s patients; and miscellaneous expenses, including neglected repairs to LHH’s physical buildings, hiring of crucial additional staff, and professional association fees.

By the time LHH gains its recertification, costs will likely escalate to between $80 million and $100 million.

Pull Quote 1Table1

Pull Quote 2Each of the four main buckets of associated expenses are addressed in this two-part series.  Part 1 of this article explores the $52.7 million between the consulting contracts and lost Medi-Cal revenue.  Part 2 addresses the additional $11.4 million in expenses, which will probably rise before Part 2 is published.

Consulting Contracts

Within a month of being decertified in April 2022, LHH and the San Francisco Department of Public Health (SFDPH) set out on a spending binge of hiring consulting firms to come in and help LHH straighten out the mismanagement of the hospital and assist with efforts to get LHH recertified by the U.S. Centers for Medicare and Medicaid Services (CMS).

SFDPH initially awarded a combined $9 million in May 2022 for three consulting firms to help rescue LHH and prevent its closure following its April decertification, as shown in Table 2.  The initial $9 million rapidly ballooned to $16.3 million.

Two contracts totaling $11.4 million — the $7.3 million contract awarded to Health Services Advisory Group (HSAG) in January 2023 and the $4.1 million contract awarded to Moss Adams approved in 2023 — are problematic, raising questions.


Pull Quote 3SFDPH had sought to create the first three contracts — with Health Management Associates (HMA), Health Services Advisory Group (HSAG), and Tryfacta, Inc. — as somewhat open ended, proposing that each of the three contracts could be extended to $10 million each, with each having flexible terms of up to ten years.  But San Francisco’s Board of Supervisors balked.  They weren’t willing to allow SFDPH to increase the contracts without additional Board of Supervisors oversight and pre-approval, especially not for ten-year contract terms.

That hasn’t stopped SFDPH.  Within a little over a year the contracts have been in effect, they’ve increased to $30.5 million anyway.  It’s thought SFDPH may ask for additional contract amendments in short order, or seek additional new contracts.

Concerns about oddities in the contracts include:

Additional Moss Adams Contract Oddities

The rapid growth during the 14 months between December 2021 and January 2023 in the Moss Adams contract merits a closer examination.

Table 3 raises disturbing questions:


Obviously scheduling a briefing on the Moss Adams contract during a Health Commission LHH-JCC meeting might better educate both the Health Commissioners and members of the public by providing answers to questions raised in this article.

And other pertinent question to ask is:  Does Mayor London Breed really need an “air traffic controlHoshin Kanri contract to field her incoming information inquiries to LHH’s “Incident Command” structure and new “Executive Sponsor” (Roland Pickens’ new job title now that LHH has a new CEO, Sandra Simon)?

Lost Medi-Cal Revenue

As Table 1 above reports, SFDPH acknowledged in its May 12 Third Quarter Revenue and Expenditures report for Fiscal Year 2022–2023 (through March 31, 2023) that LHH has a $22.3 million loss in Medi-Cal revenue, given the halt on new admissions starting in April 2022.

That lost revenue is somewhat strange, since SFDPH has assured San Francisco’s Board of Supervisors repeatedly that Medi-Cal revenue to LHH typically involves approximately $200 million annually.

Pull Quote 17Therefore, why SFDPH is only reporting a shortfall of $22.3 million in lost Medi-Cal revenue seems to be ridiculously under reported.  The Fourth Quarter report through June 30, 2023 will become available in August or September to learn whether the total amount of lost Medi-Cal revenue has gone up.

Part 2 of this article will explore the State and Federal fines, penalties, and lawsuit expenses, plus the additional miscellaneous expenses, that total approximately $11.4 million — which will likely increase during the next few weeks.

Monette-Shaw is a columnist for San Francisco’s Westside Observer newspaper, and a retired City employee.  He received a James Madison Freedom of Information Award in the “Advocacy” category from the Society of Professional Journalists–Northern California Chapter in 2012.  He’s a member of the California First Amendment Coalition (FAC) and the ACLU.  Contact him at monette-shaw@westsideobserver.com.