May 20, 2011

SF Mayor To CPMC: $108 Million To Approve Cathedral Hill Hospital

CPMC Cathedral Hill Rendering

From the San Francisco Business Times:

San Francisco Mayor Ed Lee is asking California Pacific Medical Center to pay to play on its proposed $1.7 billion Cathedral Hill hospital project, and $800 million in other major construction projects in the city that require San Francisco permits and approvals.
The mayor wants California Pacific, the city's largest private hospital, to fund $108 million in affordable housing, transit and other community projects in return for the city's OK on the controversial 555-bed hospital.
"We welcome the mayor's statement and thank him for his leadership on this issue," hospital spokesman Kevin McCormack told the San Francisco Business Times early Friday. That said, "We think this is a rather ambitious request of a non-profit hospital trying to meet its legally required seismic obligations."

No word on whether or not Mayor Lee has recently started frequenting the Buck Tavern.

Hospital approval? That will be $108M, S.F. tells California Pacific [Business Times]
CPMC’s Long Range Development Plan Renderings And Draft EIR [SocketSite]
CPMC: Latest Designs, Renderings, And Architecture Review [SocketSite]

First Published: May 20, 2011 4:00 PM

Comments from "Plugged In" Readers

Love the cool response from CPMC.

"Pay up, so we can squander those funds" says the City.

What a joke...the City should count itself lucky to have CPMC.

Posted by: gh at May 20, 2011 4:09 PM

I guess private property rights are nearly dead.

Posted by: Mark at May 20, 2011 4:15 PM

But extortion is alive and well.

Posted by: gh at May 20, 2011 4:32 PM

This is nothing but blackmail. I hope they fight this and win.

More intelligent news from our city leadership.

Posted by: noearch at May 20, 2011 4:33 PM

It sure did not take very long for Mayor Ed to go insane with his perceived power. We need up to date hospitals. Please do not hold the permit process hostage.

Posted by: Marten at May 20, 2011 5:43 PM

And I would like a receipt of every nickel this money supposedly for "transportation" and "affordable housing" goes.

Posted by: sf at May 20, 2011 6:13 PM

why does a hospital have to provide affordable housing? Don't they provide enough social benefit already?

Posted by: James at May 20, 2011 6:13 PM

^It's because they're tearing down a bunch of SRO and rent-controlled units and removing those from the housing stock.

Not saying that I agree with the reasoning, but that's it.

Posted by: anon at May 20, 2011 7:48 PM

It is beyond me why the idiots who run San Francisco don't understand that San Francisco needs hospitals as well as "affordable housing" or whatever and the existing California Pacific campus is seismically unsafe. It could collapse in a major earthquake injuring hundreds of sick people inside it--or the state could just shut it down leaving much of the northwest part of the city without a hospital.

These stupid games may well result in one of those situations for a large swath of the city--an unsafe hospital or none at all. How is that good governance? Leadership? I am becoming glad Ed Lee isn't running for a full term and that is a change for me.

Posted by: BT at May 20, 2011 7:50 PM

@ James: Speaking only of the proposed Van Ness hospital, where are those SRO and rent-controlled units exactly? They are not on the block where the Cathedral Hill Hotel sits and the hospital will go and they are not on the block across the street where the medical office structure will go which is pretty much entirely commercial (and now largely vacant).

Posted by: BT at May 20, 2011 7:54 PM

Don't be fooled by the clever PR: CPMC is a money-making machine and is far and away the most profitable hospital in the city. Although technically designated as a "non-profit," the reality is that CPMC's priority is its bottom line, not its social mission. Patients may not realize it (because they are in effect shielded by their health insurance plans), but CPMC is the most expensive hospital in the city. They can afford to give a little of that money back to SF citizens.

Posted by: SF doc at May 20, 2011 10:08 PM

^ can you please substantiate your claims?

Posted by: anon at May 20, 2011 10:27 PM

Posted by: anon at May 20, 2011 11:41 PM

@anon: My partner is employed by a major health care insurer and works with data concerning patient revenue for hospitals in SF. CPMC consistently comes out on top for amount billed per procedure, amount it receives per procedure from the insurer (which is not the same as the amount billed), and amount billed per hospital stay. This is in comparison to equivalent procedures and patient diagnoses at other San Francisco hospitals. I have personally worked at CPMC as well as at other hospitals in the Bay Area. The emphasis placed on (and training received in) physician billing and revenue generation was exceptional at CPMC. Not to say that the doctors themselves are the culprits--more that the philosophy of the hospital is not as altruistic and socially conscious as the word "non-profit" would imply. For a true non-profit SF hospital, SFGH and UCSF are much better examples.

Posted by: SF doc at May 21, 2011 12:22 AM

Good lord, tear down every SRO and Section 8 HUD housing, SF will only be the better for it.

I love the Buck Tavern comment. Did the carpetbagger install those wood windows yet? If not, shut him down until he brings the place into compliance. Then turn the place into a homeless shelter.

Posted by: Reboot SF at May 21, 2011 2:31 AM

@ SF doc

Your original post says CPMC is a money-making machine, with a priority on the bottom-line. When I asked you to provide more information, you then changed your argument to focus on CPMC's efforts to generate revenue (revenue is top-line, not bottom-line, but I digress).

Are they actually a money-making machine, as you originally posted?

It would be helpful for us all to know. (and I'm not saying you're necessarily wrong...for example physician groups subcontracting with CPMC might be making bank...who knows). You seem to know something about the topic, and you're making strongly worded claims -- you would bolster you case if you could back it up with data.

Posted by: anon at May 21, 2011 7:15 AM

Regardless if they are a "money-making machine" or not, isn't the debate about having some level of proper care available for San Franciscans? If the city arm twists CPMC and they say forget it, I would think access to that care is gone, or at least threatened?

Posted by: Can't think of cool name at May 21, 2011 8:02 AM

http://www.consumerwatchdog.org/story/state-accuses-sutter-health-fraud

Typical CPMC.
Treat this corporation just like you treat the local developers.

Posted by: that.guy at May 21, 2011 9:13 AM

Here are two stories I looked up:

http://www.npr.org/2010/11/18/131410569/big-hospital-chains-use-clout-to-dictate-premiums

http://www.npr.org/2010/11/18/131413075/as-hospital-system-expands-patient-advocates-worry

Of course, this is a larger problem than San Francisco. But I'd rather see General Hospital expanded than these would-be monopolists.

On the other hand, it's not directly bad for the city, and I'm not too impressed by the results of all the "affordable housing" spending. Better have the millions spent on transit.

Posted by: Alai at May 21, 2011 9:37 AM

Forget affordable housing, forget transit.
Quality public schools and hospitals are what this city needs.

Posted by: kathleen at May 21, 2011 11:34 AM

Roger on investing in better schools. Plus better schools help to make living in San Francisco more affordable -- two problems solved at the same time.

Posted by: Joshua at May 21, 2011 11:42 AM

I'm sure I'm going to catch hell about this, but I fail to see the benefit to building more cheap housing. Every year we get further away from our supposedly free market system. I'm not an Ayn Rand disciple or hardcore republican - we need more regulation, particularly in finance, banking, real estate transactions, etc. - but this problem is easily solved by the market. Will some people be forced to move? Yes. There is always short term pain to achieve long term gain. But what is the value of trying to maintain projects in the midst of otherwise middle class neighborhoods? And now we are threatening a hospital (for profit or not, I really don't care) so we can add more future blight to the city?

I am actually asking for opinions on this, not trying to inflame. I truly don't understand this point of view, although I am completely willing to try. I admit, I have no background in or high level understanding of city planning.

So, why the emphasis on BMR housing in San Francisco?

Posted by: Not Bashing at May 22, 2011 9:47 AM

It is widely held that Sutter Health hospitals are more profitable when compared to their competitors.

Besides Kaiser, Sutter Health is the largest hospital network in the state.

Medicare payments to hospitals are public record:

https://www.cms.gov/CostReports/02_HospitalCostReport.asp#TopOfPage

In 2010, CPMC alone collected a total of $661,713,627.00 in payments from medicare inpatient, outpatient, and ancillary services. (not including Davies or St. Lukes).

I would estimate that medicare makes up no more than half its payor mix. Just an empirical hunch.

It's also widely understood that a large hospital network can negotiate much higher contract reimbursement from private payors.

So if all the other payors add up to medicare figure yearly revenues of $1.25B (again, only from CPMC, excluding Davies, or St. Lukes).

Realistically, those private contracts are multiples of medicare (1.5 times, if not more) so $1.5B is a more conservative estimate.

In that context, $108M, or 7-10% of one year's revenue, isn't that much given the scope of the project.

Yes it's a "tax". But lets not be naive, shall we? We may be living in San Francisco in 2011, but Rome is still alive and well.

CPMC's response was measured. California's seismic retrofit requirements aren't cheap, but they are necessary for the public good.

Yes it's an "unfunded mandate" but you're a hospital, not a private equity fund. Comes with the territory.

Posted by: BillyBalls at May 22, 2011 12:22 PM

Incidentally, my previous comment is aimed squarely at anon's reply to SF Doc.

I'd appreciate the benefit of his/her consideration of my comments.

Posted by: BillyBalls at May 22, 2011 12:45 PM

So here are some facts provided by Sutter Health's audited 2010 financial statements:

http://www.sutterhealth.org/about/financials/pdf/SutterHealth2009AuditedFinacials.pdf

A quick scan indicates that Sutter:

* Generated Income of $697MM in 2010
* Invested $830MM in PP&E (property, plant and equipment)

So it doesn't seem like Sutter is hurting, but a question for SF doc and BB: if Sutter is making a big profit, who is benefiting and how is that reflected on the financials?

p.s. the financials indicate that Medi-Cal and Medicare represented 45% of gross patient charges in 2009.

p.p.s. What about the above comments that any "tax" should be paid to K-12 education?

Posted by: anon at May 22, 2011 4:25 PM

I'm certainly not big on handing over more money to the SFUSD. Schools are a problem in SF, but more money isn't the fix, drastic restructuring and changing of policies are the big things needed.

Shoveling more money to the current system is just throwing money down a rathole.

Posted by: anon2 at May 22, 2011 6:28 PM

I met a guy who moved here from out of town -- he's a smart 26 year old guy, but sort of lazy and a stoner. He doesn't like to work. So instead he went and got himself some care not cash and now is living in a nice little SRO room on our dime. What about food? I asked. There's so much free food around that's not a problem, he says. He even gets free "compassionate medication" presumable also on our dime.

Posted by: marco at May 22, 2011 7:14 PM

CPMC should pay into the transportation and housing funds to mitigate their adverse impact on housing and transportation. I don't see how you can claim that they should pay into a school fund. I have kids in the public schools too and would love to see funding of them a priority, but getting from this source is a stretch.

Posted by: NoeValleyJim at May 22, 2011 8:02 PM

Though looking carefully at the impacts, it seems to me that they should be paying much more into the transportation fund and much less into the housing fund. Not sure why The City has the numbers inverted like that, probably politics.

Posted by: NoeValleyJim at May 22, 2011 8:31 PM

Not Bashing wrote:

> I'm sure I'm going to catch hell about
> this, but I fail to see the benefit to
> building more cheap housing.

Any time you mention that giving away money to "the poor and needy" may not be a good idea in this town you run the risk of "catching hell" and unless you are at the PU Club or the SFGC you probably will also "catch hell" for "not caring" or "sounding like Republican"...

> I am actually asking for opinions on
> this, not trying to inflame. I truly don't
> understand this point of view, although I am
> completely willing to try. I admit, I have no
> background in or high level understanding of
> city planning. So, why the emphasis on BMR
> housing in San Francisco?

It is funny you mention this since I just had a long conversation about affordable/BMR housing in CA with a friend from business school in Mammoth Lakes yesterday. A friend that grew up in Los Angeles has a family cabin in Mammoth Lakes and has been trying to get me to come and go skiing with him at Mammoth for years so this past week we drove down for a week of skiing, smowbooarding, golf and tennis (and we drove home today via Hwy. 50 that re-opened early). While playing tennis at the Snowcreek Athletic Club my friend pointed out the BMR/Affordable housing next door and asked me why I was not doing any tax credit driven deals like that in Northern California.
http://www.mammothlakeshousing.com/faq.php
He said that the people that put the deal together not only got a bunch of tax credits but they got low rent housing for their employees so they could pay them less. I told my friend that there are plenty of Affordable/BMR deals in San Francisco that claim to be open to all but end up getting filled with the nannies and cleaning ladies of the rich (and politically connected) but I want nothing to do with them (I plan to stick to regualr apartment investing outside SF). When I was a kid (not that long ago) almost every rich family had some type of cook, cleaning lady or nanny living with them (my family never did but as a caddy at the Burlingame CC just about all the guys I carried clubs for did). In the present time most families on the Peninsula and in the nice parts of SF no longer want servants living with them so they work behind the scenes to put together tax credit deals with government and developer funding where they can get a nice place for their nanny from Mexico or Sweden to live for far less than a typical studio or 1br in the area would rent for and they can get away with paying them less.

Posted by: FormerAptBroker at May 22, 2011 10:11 PM

anon,

Thanks for the link, I should've started with the financials. Glad my projections weren't too far off.

Let me be clear: I'm not saying that the mayor is justified in dipping into someone else's pocket.

Ideally, that wouldn't be the case.

Pragmatically, I think he picked just the right number.

If it were me, sitting in that office, knowing that there would be NO property tax income from those shiny new buildings, I would've channeled a bit more Tony Soprano.

I think Sutter may actually make a publicity run at fighting this, using the "access to care" argument.

Whining. Nothing More. In my opinion, they have no intention of reducing their San Francisco presence.

...Sutter's income from operations is 453M (page 3) and and additional 244M in investment or trading income.

Stark contrast to (285M) in 2008, incidentally.

tangent: Isn't it a departure for a non-for profit hospital network to have $500M plus in "trading" activity over 2 years?

In response to your question, obviously, Sutter Health as a parent is benefiting, but there is no shareholder body to which profit is flowing.

It's not direct profit per se, but indirectly, it allows capital improvements that would otherwise be impossible (at least in this area code) in a for profit model.

Sutter's 501(c)(3) status allows, or perhaps forces, larger relative amounts of PPE investment. Same deal with Kaiser.

Compare them to Tenet or HCA, (who have pay a 43.84% premium to play in the same market) and it's clear that the non-for profit model actually make the most "for profit" sense...

... however, you can only fly under the radar for so long.

Regarding the PPS - I'd rather see money go to education over transportation and housing.

Posted by: BillyBalls at May 23, 2011 1:17 AM

Sutter should pay, no wrongdoing there. Sad part is, the money won't go to pay for city services, it will pay for (a drop in the bucket of) entitlements like outrageous pension benefits, city employees' health care, etc.

Posted by: once_said at May 23, 2011 8:58 AM

@formeraptbroker - thanks for the point of view, I appreciate it. I was clear that this was a political issue, so I'm not really surprised to hear that the housing is oftentimes handled in this manner.

Posted by: Not Bashing at May 23, 2011 9:54 AM

Design wise -- bulky, ugly, already dated 70s, heavy, Huge unique full-block lost opportunity -- Patients and community deserve far better experience. IMO.

Posted by: Invented at May 23, 2011 10:07 AM

I have ZERO sympathy for CPMC. Under already existing law, as a project located within the Van Ness Special Use District, CPMC has an already existing affordable housing obligation of $200 million. In a bald-faced attempt to get around their existing obligations, CPMC has been working to get their project sites re-zoned and negotiate their housing oligations on a building by building basis.

Add to this they have been on a building spree lately in other cities, constructing new facilities catering to wealthier patients in order to cream away from other community hospitals, force those hospitals to then close and thus be able to monopolize local medical markets (with poorer patients getting the shaft). Add that to the evidence already provided elsewhere in this comment thread about CPMC's profit making machine, and I'm left with little reason to buy their corporate flack's PR.

Posted by: GoBlueInSF at May 23, 2011 10:42 AM

I'm with kathleen, Reboot SF, and some of the others on this one. The affordable housing projects just go towards making housing here unaffordable, and these guys are doing the city a favor if they're tearing down SROs.

FAB gave a good description about what goes unspoken about affordable housing. These types of projects are hardly cost-effective, and I doubt every penny that CPMC pays will actually go to what the city says it will, even if it made sense.

Posted by: sfrenegade at May 23, 2011 12:41 PM

Just an FYI for anyone reading through the comments. The Financials posted are not for CPMC they are for all of the Sutter Health system. Thats about 34 facilities all aroung Northern and Central CA. So even if CPMC is 10% of the total that is only 63 Million in revenue not 637 Million. So what the mayor is asking for is about 2 years of CPMCs profits.

Posted by: HB at June 9, 2011 11:15 AM

Post a comment


(required - will be published)


(required - will not be published, sold, or shared)


(optional - your "Posted by" name will link to this URL)

Remember Me?

(you may use HTML tags for style)


Continue Perusing SocketSite:

« More Than Meets The Eye Permits At 674 15th Avenue | HOME | Polk Street Parking Lot Shuttered, Apartments Ready To Rise »