Roland Pickens
Laguna Honda Hospital Interim CEO Roland Pickens

DPH's "Flow Project" Comes Home to Roost

Laguna Honda Agonistes

Laguna Honda Hospital’s (LHH) struggle for recertification intensified with the departure of CEO Michael Phillips around June 2nd, 2022. The Westside Observer requested a copy of his resignation letter from the Department of Public Health (DPH). There were “no responsive records.”That suggests that Phillips did not leave voluntarily.

CEO Michael Phillips
FormerCEO Michael Phillips

We obtained the 6/2/22 letter from Roland Pickens to LHH staff, announcing that he was now the Interim CEO. Pickens oversees LHH as Director of DPH’s San Francisco Health Network. All he said about Phillip’s role and departure was; “I would like to thank Michael Phillips, who has served as Laguna Honda’s CEO for the past two years. During Michael’s tenure, Laguna Honda became a model for COVID response when the hospital experienced one of the lowest death rates and highest vaccinations rates anywhere in the country for a skilled nursing facility of its size. His work saved lives.”

No mention of Phillips’ efforts to uphold the DPH Flow Project that pressures LHH to admit non-paying, often disorderly patients from SFGH. Nothing about his attempts to manage unruly patients whose behaviors violate safety mandates. Caught between the conflicting demands of DPH executives and hospital regulators, it was a set-up for a fall-guy.

It probably didn’t help that in October 2021 Phillips told a State inspector that; “the facility’s goal is to reduce harm from illicit drug use and be selective in admitting residents that may play a role in contraband drug use and distribution.” After 2 near-fatal drug overdoses, the laissez-fare tone of that statement likely struck the inspectors as laxity. But for Flow Project proponents, it signaled heresy because selective admissions impede patient flow. Now that Roland Pickens and his DPH team are taking over LHH, how will they address the damage caused by the Flow Project - that they promoted?

Dr. Grant Colfax
Dr. Grant Colfax, DPH Director

Costly Emergency

Perhaps Phillips lacked the wherewithal to guide the hospital through the regulatory crack-down and recertification process imposed by the Centers for Medicare and Medicaid Services (CMS). But, nobody within the huge Health Department had that capability. That’s why the DPH awarded “Emergency Contracts” to two consulting firms to do the job. Competitive bidding wasn’t pursued. The City invoked section 21.15(c) of the Administrative Code to rush the contracts. However, these “Emergency Procurement Procedures” apply to; “extraordinary conditions created by war, epidemic, weather, fire, flood, earthquake or other catastrophe, or the breakdown of any plant equipment, structure, street or public work.” Including hospitals that get decertified for flunking inspections is novel.

This new emergency is costing plenty. The contract with Health Management Associates will cost taxpayers $3,782,365 over 14 months. This immense sum will bring a “comprehensive assessment” of LHH’s culture, leadership and governance plus assistance in passing the recertification process. The other contract with Health Services Advisory Group will cost $1,778,247 for 8 months’ work. This group will assess the hospital deficiencies that riled State and Federal surveyors, and recommend fixes. In total, these consultants will collect a cool $5,560,612. Such largesse warrants scrutiny.

Hidden costs abound. For example, LHH cannot admit new patients while decertified by CMS. In FY 2020-21 LHH averaged around 14 admissions per month. Those admissions generated revenue. Because admissions stopped this April, LHH’s census dwindled to 675 as of 6/12/22. Before the crack-down, LHH’s census hovered around 700. The patient count will keep dropping for the next 6 months or so. During this period, LHH will forego roughly 84 admissions. Meanwhile, patients will be discharged, as described below. Fewer patients means losing millions of dollars in potential revenue.

Ironically, the DPH Flow Project itself has been jammed, due to its heavy-handed dispatching of recalcitrant, anti-social patients into LHH. Now, SFGH must hustle to find venues for its discharge-ready patients. Had LHH been allowed to admit patients it could safely handle, rather than disruptive patients that SFGH wanted gone, this pricey mess wouldn’t be happening.

Fortunately, CMS will continue paying for the care of existing patients as long as LHH strives to regain recertification. CMS did approve LHH’s mandatory “Closure and Patient Transfer and Relocation Plan” on May 13, thereby guaranteeing payments for 4 months through September, with a possible 2-month extension.

quote marks

The feds at CMS probably decided that the long-tolerated hazardous behaviors at LHH were actually intolerable. Everybody involved knew that the DPH Flow Project brought disarray and danger to Laguna Honda. Most folks just went along. Now they’re surprised.”

The Closure, Transfer & Relocation Ordeal

In order to receive payments from CMS, LHH must compile and present plans for the transfer and relocation for all its patients. Care Teams must document the clinical needs of every patient - with family input, figure out placement options and the risks of transfer trauma, locate nursing homes that are equipped to meet resident’s needs, and devise relocation plans including transportation out of LHH. This is a grueling, Sisyphean task. And, it consumes a tremendous amount of staff time – another unintended cost, while alarming both patients and families.


As LHH Interim CEO Pickens described at the 6/14/22 Board of Supervisor’s meeting (at 3:23:45), LHH staff have reached out 15 nursing homes in San Francisco County, and hundreds more throughout the Bay Area and California. As of June 12, LHH staff made 4,507 phone calls to these facilities in search of suitable placement for LHH patients. After conducting 338 patient assessments, 178 patient/family meetings and submitting 349 referrals to other facilities, LHH only recorded 10 discharges. The tally is bleak: 4 patients were placed in other facilities, 2 returned to “the community,” 3 died and 1 fled AWOL. So, after one month, just 6 were planned discharges. That leaves 675 to go.

Relocation Plan

Incidentally, Pickens vowed to be “fully transparent.” He then showed the age, race and language distribution among LHH patients. But Pickens slyly omitted sex data: the number of women residing at LHH has dropped to an historical low of 37%. For decades, women comprised over 50% of LHH residents. The displacement of elderly women hasn’t triggered equity concerns.

The prognosis for relocating 675 patients is grim. Very few skilled nursing facilities have openings for Medi-Cal patients. In fact, no Medi-Cal beds were available at the end of May. Yet, last year, 96.5% of LHH patients were covered by Medi-Cal. Most private nursing homes cannot survive by solely serving Medi-Cal recipients due to the low reimbursement rates. Competition for nursing home beds is fierce, and LHH’s medically-complex Medi-Cal patients are among the least desirable both clinically and fiscally. Moreover, LHH patients have the right to appeal their discharges with the State. Therefore, transferring hundreds patients out of LHH is unworkable. But LHH is required to keep trying in order to get funded and recertified by CMS.

The Recertification Game

Alongside this fruitless relocation endeavor, LHH must pass several inspections. The aforementioned consultants will help with this task. They will orchestrate a “Mock Survey” at the end of June, designed to simulate an inspection by regulators. After reviewing and correcting any deficiencies, a second Mock Survey will be conducted in August. By September, LHH should be ready to apply for recertification. Then, CMS inspectors will conduct an initial survey. If LHH passes, CMS will return 90-120 days later for a final survey. This hiatus provides a “reasonable assurance period” to ensure that LHH doesn’t concoct fleeting fixes. If all goes well, LHH should be in the clear by January 2023.

Getting there will be arduous. In their 6/13/22 initial assessment, consultants from Health Management Associates warned; “if…surveyed immediately by CMS, Laguna Honda Hospital would not be found in substantial compliance and granted recertification.” Notably, 56% of LHH’s own Quality Assurance standards were not met: “The areas of greatest concern with demonstrated gaps were Abuse allegations (percent open and unresolved as well as the high total number reported), incomplete…care plans, and the gap in Substance Use Disorder programming engagement.”

Patient Relocation

No Surprise

Ahsha Safai
Supervisor Ahsha Safai

As noted by the SF Examiner, many people have expressed surprise at the ferocity of the federal crackdown at LHH. Our Supervisors were also flabbergasted – except for Supervisor Ahsha Safai who zeroed in on the imprudent mixing of younger volatile drug-users with frail elders. Well, federal agencies sometimes act harshly when local officials fall short or look the other way. Recall how in 2019 the US Attorney for Northern California led an unprecedented crackdown on long-tolerated drug dealers in the Tenderloin. Many were surprised. Similarly, folks were stunned in 2020 when the feds assailed City Hall’s taken-for-granted corruption. The feds at CMS probably decided that the long-tolerated hazardous behaviors at LHH were actually intolerable. Everybody involved knew that the DPH Flow Project brought disarray and danger to Laguna Honda. Most folks just went along. Now they’re surprised. 

Dr. Derek Kerr is a San Francisco investigative reporter for the Westside Observer Contact:

JUNE 22, 2022

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