warning signs, or some balloons floated, to hopefully avert that closure, or if it had to close, why it was such a shock. so that that closure would not seem so over the night but would at least be well prepared for. >> i think i can answer the question. we can also talk about healthy san francisco. patients would be tiered in terms of most in need. looking at each of the patients. one of the concerns is if they closed at the end of the month, .-- end of the month, there is a concern of chaos. i am not sure i am answering the

question. sorry. supervisor mirkarimi: "chaos," that is how we saw it several weeks ago, which is what motivated the community. i think that was one of the ingredients that brought people together, but we want to know now what is the mechanism that is put in place to avoid a repeat scenario. >> i am not sure, a supervisor. that is what we are trying to work out. supervisor mirkarimi: would there be a routine, where if they got to a place of closure, there would be some warning sign to determine where the placement of patients who could be displaced in a way that would seem somewhat seamless? >> the clinic consortium is

introducing new protocols in the clinics that we fund for increased monitoring. there is a federal protocol that we are adopting that is really intense. some clinics already have that oversight. we are hoping for the ones that do not. supervisor mirkarimi: what about the operation -- operating budget for the clinic itself? >> i believe about $2 million. supervisor mirkarimi: and the deficit that we became aware of a few weeks ago? >> december 14. i had come back from boston for a meeting. i understand now it was over $1 million. a national bank has agreed to restructure the long term loan.

supervisor mirkarimi: the threat of closure, that is not going to happen in march? correct? >> the community has responded such, and other groups are responding. there are some foundations that have expressed interest, but they are looking for a budget and cash flow projections. supervisor mirkarimi: but the amounts raised so far by the community and others, does that then provide for -- what period of time? >> i believe, supervisor, i would have to defer that to someone from the sl --lyo -- lyon-martin staff. we are in constant contact with washington about this.

we do have federal funds at risk, so we have a potential congressional investigation at lyon-martin also. lyon-martin has hired a financial consulting firm to do their finances, and i believe they start tomorrow. .-- the new ceo, to work together as a collaboration. there is going to be increased oversight and scrutiny, including the restructuring of the board. supervisor mirkarimi: i think that is part of it, was a part of the government's korea -- was it part of the government's -- was a part of the government --

was it part of the governance? >> we had some folks who for a variety of reasons -- i am not sure. we have not done a full diagnosis of where the communication breakdown was between the past administration and the current administration. what we do know is that i think it was a well intended board that did not understand the finances, and this is something we are seeing over and over again, unfortunately, at nonprofits around the country. this does not excuse it. there are 1400 health centers across the country, and this is an area of the weakness. the board members are well intended. they are mission driven. they are passionate. but unless you really understand finance, balance sheets, this really gets a little bit -- many times, they

rely on one or two people to do it, so i think that is one of the problems that existed here. supervisor mirkarimi: note do you think the report addresses this or is in the process of doing so? >> i think so. what type of infrastructure development needs to be built into the receivables system? we have a good financial reports for the first time. -- we have a good -- havwe good financial reports for the first time. supervisor mirkarimi: does any of the existing deficit become such a problem that it threatens the future stability?

potential action? >> there is one thing being addressed currently. that is certainly a potential. they do have a debt to the state of california for taxes. they have a debt to the irs for taxes. i believe the board is working on having a plan. it would be a plan to approach irs and the state of california. we understand that it is a long- term plan, but we also know that there is a health center in philadelphia that experienced a similar kinds of problems, and they went to the irs and negotiated with them and have a long-term plan, so the irs is familiar with this type of situation. supervisor mirkarimi: sometimes

the irs negotiates. could they be in that frame of mind? >> with our informal conversations, they said we have to get our money and get it paid. iand not have to pursue a bunch of folks to get it back. their greater interest is that somehow the irs has indicated they will have to pay interest, and they waved all penalties. supervisor mirkarimi: overall, the prospects of the income that could be harnessed looks strong. i read through the report, i really tried to understand the the report. there is a series of information coming out. it is not like the potential is there. this clinic has really carved a particular niche for itself, and

because of its specialty and how it is utilized, it has all the reason not just to survive this crisis but to sustain, does it not? >> exactly, today in the san francisco health plan board meeting and also in discussions with the financial consultants, lyon-martin has a significant number of medicare, medical patience. it is congressional approved. it is why it was approved in 1990. the high reimbursement rate in with the state moving, the disabled population into metical, lyon-martin is well- positioned because of their population to increase their numbers, yes.

supervisor mirkarimi: and this is why i want us to be optimistic, the forecast for lyon-martin. understand how we got here, but look for all the indicators that i think really suggest that it could have a bright future. >> i think to the board's credit, they're really started moving on this quickly. they were provided a pro bono attorney, excellent in providing guidance. in my conversations with the board, they have been absolutely wonderful. she is a physician. that is not her area of expertise, i think should be the first to say, they put the budget together. they have done two turnarounds in two health centers in california.

from what i am hearing, when i did reference checking, his last assignment at the coastal alliance was very happy with his work. he really made a difference up there. i think they're taking the right steps. the other thing, as you can imagine, the board was scared, not sure where to turn, and the attorneys helped with that. supervisor mirkarimi: very good. are there any other members of the consortium that would like to present? supervisor kim: just to get some clarification and the restructuring, it seems fairly clear that you will still continue to serve your very low- income clients, and middle- income clients. what does this mean for your

patience that our sliding scale? >> i will ask one of the representatives from lyon- martin. supervisor kim: specifically, will this change who can get services from lyon-martin in the future? >> they must retain a sliding fee scale. their target must be to to% -- must be 200%. >> the patient mixture will not change. they will still be able to use the clinic, they will not be turned away. it becomes my responsibility, the leadership's responsibility, and the board's responsibility to find a way to balance those needs with our financial resources. but no one will be turned away. supervisor kim: so there are not

concerns or challenges with certain income populations? >> no, the other thing we will supplement, citywide, we close clinics to new patients. every single clinic in san francisco, they may be down a provider, so i am assuming that is the strategy we will implement. it is closed to all new patients. supervisor kim: did you say that you had to discharge some of our san francisco healthy patients? >> ok, just -- can we defer the question? supervisor kim: sure. thank you. i believe there was another individual? supervisor mirkarimi: anybody from the consortium? or is that it? if you would like to come back. >> thank you, supervisors.

i wanted to give a sense of the city's investment and lyon- martin, which they provide that high-quality, but also behavioral services, mental health, and substance abuse. the value of that investment this year is a little over $300,000. the department actually does not have a contract with lyon- martin. lyon-martin is a subcontractor for the range of services both on the health the san francisco side and on the behavioral health services side. when the department became aware of the cash flow issues, which are not uncommon for a nonprofit, we advanced funding to the organization to allow them to meet payroll, to address operating expenses, and the like. we certainly have the ability to

help with cash flow issues. but cash flow is very different from reducing long-term debt. the department does not have in its budget additional new dollars to allocate to lyon- martin at this time. in fact, i am sure that eric in his new role is probably aware that any organization, either philanthropy, local government, community-based organization, and individuals interested in providing funding to lyon- martin is going to want to see a business plan, where the business plan is solid and shows not only how lyon-martin will be able to fulfil its ongoing operating expenses, but how it will spend down the debt that it has. we certainly believe that any

additional new dollars from the city and county are put in, that they have to come with strict provisions in terms of business planning, changes and governance, changes in operations, and the like. the department will be with lyon-martin tomorrow, with the cfo of the consortium clinic, to review the financial statements, not to do an audit, just make sure that the department of public health has the same understanding in terms of this fiscal condition of the organization when they go forward basis. the department has a result instituted a number of things. you have before you the department has instituted a corrective action plan. that corrective action plan covers four areas in terms of operations and oversight,

governance, fiscal management, fiscal recovery, and certainly program operations. when we became aware that in the latter part of january that a closure was potentially a minute, -- potentially a minute, the first thing the department of health did as a responsible action is we closed lyon-martin to new individuals, so new individuals are not able to enroll in the clinic. certainly we have had healthy san francisco participants who have called us asking us the status of the clinic and whether or not they could perhaps change clinics and select another clinic, and we have allowed individuals to do that because we think it is prudent to do and it provides peace of mind for those remaining healthy san francisco participants. there are currently just under

1000 of these participants who have selected lyon-martin out of their current client base of about 2500. we have started the process, the issue that supervisor mirkarimi raised, in terms of transfer. we recognize and the clinic recognizes that it needs to search for people who are financially viable. so with the help of the board, we have identified the clam population -- the client population through special provisions, either those who have hiv and/or aids status, those who are transgendered, and we have reached out within the department of public health at asked each of our clinics, all 60 primary care clinics, how many individuals you could take with the special conditions and

when could you take that population. we have also gotten similar information from our consortium clinics. quite frankly, this is new territory for the help the san francisco program in terms of potential downsizing or close your of a clinic, but we're taking it as a learning opportunity and we're putting in place a system that would allow us to repeat the exercise we have gone through to date for any other future clinics if a clinic should get to this point. certainly at this point we don't know of another clinic, but we think putting together a template for us is prudent to do, in part because it allows the city to have a game plan if in fact we approach this again. i think in the case of the department with lyon-martin, i think we were all a little surprised by the fiscal condition, and certainly because

the department was not the contractor with the consortium -- not the consortium, but with lyon-martin, the level of information the department received was not the level of information a contractor would receive. we have taken a tactic to essentially treat lyon-martin as if it were a contractor, even though it is a subcontractor, so now we will get and be able to monitor their progress in terms of operations, fiscal structure, governance, and we see that as an appropriate mechanism to do. and certainly as mentioned, if in fact the financial analysis that john church will be doing, the work that eric will be doing suggests that closure is perhaps an unfortunate decision that the board would have to make, we are cooperating and have collaborated on what that closure plan would look like and

what the department's activities would be in terms of that. and the closure of an organization, there is cost involved. things don't close without cost. we would certainly look at how the organization and others could help facilitate the covering of those costs if we were to face that. so with that, i think i want to say that you can see from the presentations today that not only is lyon-martin and their board engaged, i think all of us are quite frankly working from the same perspective in terms of trying to ensure as much as possible that if this organization continues, that it continues in a viable manner. that it really addresses their ability to serve their existing population in inappropriate and fruitful manner.

with that, i am happy to take any other questions that the supervisors may have, either of myself or my other presentation partners. >> thank you. just a quick question. at first, i want to say the work that has been done by the clinic consortium, the lyon-martin board and staff, and community and the ph, i think the information that is before us is a testament to how hard everybody is working to figure out what a solution could be. i just want to say that has been impressive. just a quick question about the time line. i know they had talked a little bit about the level of public support, the level of foundation funding that would be necessary, and it sounded like that was necessary by the end of march, and it was about

$250,000, another 150,000 from the foundation side. i guess i am wondering, if the organization is able to be successful with the support of all these entities to bring that together by the end of march, what would we be seeing? is that enough cash flow to allow the organization to take these corrective actions? >> a qualified yes. the $500,000 it is the number that was presented to us by hfs, and that was based on an analysis of the operating budget compared with revenue, which includes the existing debt. the numbers that i shared with you our projections. that is how we see them possibly happening. as indicated earlier, we would have to continue our analysis to figure out where that comes from. the threat at this point is if

we cannot raise or least have some assurance is there is half million dollars in the bank or available to us by the end of the month, then we would have to be looking at the exit strategy, at the closure strategy. at that point, that would give us enough financial resources to finance a closure of that has to happen. supervisor kim: the related time frame is to see at the end of the month where we stand with the foundation possibility or the organization's ability to receive the money that has been talked about? >> yes, as well as looking internally at the revenue projections and also a restructuring the budget so it is responsive to the need as of well. supervisor kim: the other thing, as i read the corrective action agreement, some of the issues, the governments, financial management, all of the components make sense. on the financial recovery side, it looks at analyzing and taking

a look more deeply into the mixture of clients or patients. i would imagine even if we take corrective action on financial recovery, being able to diversify the client base is something that would have to happen over a long time? >> yes, that is correct. supervisor kim: i guess i am wondering if the recovery plan allows the time to do that? >> given that we have a march 31 deadline and given that it could involve moving people into those programs, i would have to say at this point i don't have enough information to share with you. the example i will share, if we're looking at an uninsured person whom we wish was eligible for an existing program, that enrollment process may take 30 days to do. but if we know that we have the resources available to us by march 31, then that enrollment

process really -- i do want to say it becomes a moot point, but we look at the revenue generated. >> i don't want to put eric on- the-spot, but we have been looking -- >> please come closer to the microphone? >> the $500,000 gives us the cash flow in the short term to continue operations. we have some immediate debt that we need to pay down, probably at least $100,000. we recognize and we took into consideration in our projections changing the patient mix. that will probably take a closer to a year to see the complete results of that. we factored in also working more diligently to collect a sliding fee scale payment at the time of visit, and number of things that require not only training of staff but trading of patients as

well. -- but training of patients. we looked at what it would take also in terms of having a cash reserve to get us through the month where we have a larger expenses that we have revenue coming in. that happened several times during the year. although i will saber the budget that was -- although i will say the budget presented to the board should a revenue expense at the end of the year, but that necessitated having this influx of cash in order to do that. i think we need to wait until iraq has the opportunity to work with the financial people -- until eric has the opportunity to work with the financial people to come up with a plan. but we have to have $500,000 to get us over this horrendous mountain. supervisor kim: thank you, and i

want to recognize another supervisor who has joined us. >> i wanted to add another thing. we have already taken some action to try to shift the mixture. part of that is downsizing the healthy san francisco, and the other part is working closely with the health plan to become part of the automatic and roll process for the seniors with disabilities who will need to enter into the program, which is not a process we have been involved with before, and they're committed to helping us take on more of those patients. >> ok, thank you. supervisor mirkarimi? supervisor kim: -- supervisor mirkarimi: very quickly, what is the remainder of the subcontractor amount that the city is dispersing to lyon- martin. >> of the $322,000 over the

contract, a total of $160,000 was advanced on both sides. so you have the remainder of about $170,000 remaining on the contract. the department would certainly look to end work with eric and his physical team to determine what would be inappropriate advance amount. -- what would be an appropriate advance amount. we would certainly be able to do that for lyon-martin. supervisor mirkarimi: and with the clinic -- and with the clinic then be renewed as a candidate in the fiscal year in july? should all the corrective actions that have been mentioned here take place,