they had transferred as much as $180 million, which they claim was transferred illegally, and this was recently an arbitration award that was given for the marine general hospital. they would pay $21 million. are you familiar with that arbitration award. >> on the surface -- the allegations are serious but they say money was transferred out of that hospital and this is a significant allegation. if we will go into business with this agency, this goes to the past practices.

by fay, i mean the north-based business journal, -- by a day, -- by they, i'm in the north based business journal. according to this report, and this was dated -- it is alleged that sutter moves $106 million and in that same article, according to their investigations, this was transferred out of california pacific medical. are you familiar with that? >> i am not familiar with those numbers.

the question on if they continue to operate this rests on as they are meeting financial performances. would it be relevant to know if the money was being transferred out of cbmc into sutter? >> our job is to make an ironclad agreement that lets the hospital do what we wanted to do. i am not qualified to talk. the sutter representative is here. >> i want to know what you know. the focus is making sure we have an ironclad agreement. they say money was transferred

out of one hospital into the sutter system. are you confident the agreement right now is iron-clad to prevent money transferred into sutter? >> we have a provision in the agreement, item seven. they are not prohibited to move funds around. they count any funds to the sutter parent. let me try -- greg can help. we did not address the ability to move funds around.

but they can take the funds and move them up. this is not permitted in the development. >> cna thcan the attorney point to that? >> it will take a moment to find the paragraph. yes. you want me to read parts of it? exhibit f, page 14. the operating expesne inse is te definition for the calculation. means, total expenses of operation and all afiliates, operating with the city to find the generally accepted principles -- so this includes reasonable payments to the system, i.e. sutter health,

applied through the system for overhead and services required. this would not include equity or cash transfers. we cannot use is to cut against the operating margin. >> let me ask you a question. what kind of transfers would be allowed under this language? >> i will let gret answeg answe. >> supervisor, the purpose here, i don't know if this will clarify, but teh purpose -- the purpose is it transfers money to

that system. you have to calculate the operating margin. any money trasnferred, that cannot come out of the bottom line. you can calculate this -- with the books and records. after calculating the margin, they can make transfers as they do with normal operations. they would not serve -- >> what if the money. in a prior life. we sued pg and e corporation. the parent company -- the utility filed for bankruptcy,

even though 10s of millions were funneled to the parent corporation. one entity claims financial problems, using different mechanisms. what if we don't call it a transfer, per se, but we charge them for certain services from the entire system. >> i will refer back up to the same paragrah. applied to the system -- my

understanding, help me if i'm not right, but for them to get away with the charge -- every branche was charging this. it couldn't be something cpmc was doing. >> that doesn't solve the problem. if they short-change san francisco, it is okay if they short-change everyone else? we want to make sure there is no ability for the moenney from cpmc to be funneled. >> this language is protective. >> i want to talk to the city attorney.

why not have clear language outlining the things the money cannot transfer or direct? why not provide greater clarity? >> the language as drafted was for the concern you raised. as you know -- you had the discussion about audits. we have the rights for the records. with regard to charges, they have to be applied. and we can charge this -- as a means to get out of the failure.

we cannot make capital contributions upstream. i think we covered both sides of the issue we are addressing. the standard rates and costs for services and upstream transfers being used to cause an operating margin failure. >> are you familiar with the proceedings? >> i saw the newspaper article when it came out. >> we talked about that with the negotiations before then. >> were you aware -- sutter was reporting -- they reported in the june 12 article that sutter,

according to the article, says these transfers were legal because they were excess capital, but this is something they have done through the hospital system. >> they play with specific costs, and it has to be applied through the system. and if it is a capital call, they say you can't do it. i am not clear on the agreements -- >> in light of that, can you guarantee what happened in marin won't happen with this agreement? >> i haven't seen the finding but i will be prepared. >> we were concerned with the issues you raised now, and included this language, to make

sure cpmc wouldn't fudge the numbers for the operating margin failure. >> it is important we make ourselves familiar with what happened. if they defend this use, this is happening throughout the system. notwithstanding that argument, $21 million were awarded. i know one of find ourselves in a position where, notwithstanding, we have the money being transferred. we should not have to go through that process. i would say that more time is needed to make sure that the goal that he pointed to, with

the ironclad agreement, that this is achieved. we cannot say we have that if we have not dotted all of the eyes -- i's with what they did in the county. i have other questions but will refer to my colleagues. >> a couple of comments. as i read the section that they pointed to, that such expenses can include, without limitation, reasonable payments to the system, for the overhead and services provided. this is in the plain language of the contract. i just wanted to say this. it is troubling that this could be done, and we don't know what the corporation is going to be

charging, but this feels problematic. let me mention one other thing. when i first heard what you said about the implications of the revenue, with regard to the commitment -- this was very surprising. the revenue projections also impact the baseline charity if i am not mistaken. let me see if i can understand this. i wonder if we could get that back up on the slide. on page 21, you talk about the baseline commitment, which is the level of charity that you have committed to provide to the city. it says that you are required to spend more than 40% of the --

this is an accounting term the most do not focus on. if you are telling me that net income has gone down, if you would not mind going to slide no. 24 on the presentation -- his strikes me that the black line, that caps with the charitable numbers are, we could start to see that come into effect earlier. >> supervisor, this is a good question and we did look closely at this also. the slide that you are referencing on no. 24, with a black line, this, for all intents and purposes is going down, because this is going down relative to inflation in the health-care industry.

that flat line, where it meets underneath, this would be fairly pessimistic as a scenario, because it would mean that during a time when the cost of health care is growing, the earnings are staying flat, and they're not keeping up with inflation. this scenario, we chose the pessimistic scenario and the purpose there is to show that under the pessimistic scenario, we think that we have sufficient room, and this applies given even the revised financial projections we have looked at. >> you see that this black line reflects the projections -- >> this line does not reflect the projections, this assumes that it stays at the same nominal dollar value for the

next 10 years, and does not go up or down. i am trying to indicate that the new numbers we have seen have raised some significant concerns. on the st. luke's issue. if they had raised the same concerns we would have liked that. >> from my perspective it is hard to a body weight the fact basis of that statement without knowing more about what these numbers look like. you're asking for us to trust you, that these numbers will be capped without knowing what the facts or numbers are under that. >> thank you. >> supervisor, did you have any comments? supervisor campos? supervisor campos: i was simply recommend -- there'll be other questions and this position can

move forward, but maybe we can hear from the public. >> we still have a number of presentations and i think that we should move forward. there is a need to get as much financial information as we can but until the negotiation moves forward, we feel it would be premature to act on these 12 items we have. that is what i am hearing. let me say -- supervisor? >> i will not repeat that but i think we should take a step back, and we have several more hearings and a week more to go. because there is a lot of information is hard to evaluate. we may finish up in the next few days with a perfect solution, but we just don't know this.

i do not want to rush to conclusions until we know what the conclusion is. we do not see the information but presumably we will know that very soon. >> we have every intention of getting the solution to you before the current schedule has you taking any action. as of today, you are not ready to do that and we will go as quickly as we can. >> i respect what he is saying, but i would take this -- i would have a different take on this. what is presently before this commission, the schedule of this committee, and the schedule that was drafted on the assumption that the negotiations were completed, and we have the development agreement that should be fouled for us to consider, this is no longer the case. i do not know if this as simple as saying that we proceed and

see what happens. this may change the time line before us. >> i am not expecting an opinion one way or the other. all that i am is saying is, i am looking for to see what the proposed solution is to this problem. and at that time, making the evaluation. >> thank you. >> wrapping up the presentation -- we will proceed with a number of community representatives. thank you for being here, again. >> i have a presentation i will try to load. >> it is good to be back in

front of you to bring the health care aspects of this project. this is what the project is really about. we have taken care of the patients in san francisco many years and like to do this another 150 years. i recognize the importance of the discussion that we have had with the operating margin and i will discuss them in my closing remarks. what you see before you is the model for the delivery system, at a new campus on cathedral hill, supported by additional community hospitals and outpatient facilities, distributed to up the city. those paying close attention will rapidly realize that this is not geographically accurate,

as this is not to the west of the pacific campus. it shows what we are trying to accomplish. why have we chosen this model for health care? it is because this is the way health care will be delivered in the future in this country. they will serve as full-serve as hospitals -- and they will have similar programs -- and st. luke's will continue their award-winning programs, with double the emergency capacity of the current hospital. we will continue our signs of rehabilitation and the care of patients with hiv and aids. >> i know that some of these slides are from the last hearing from june 15. but do we have copies of the current presentation?

>> i did not know the answer to that question. we can certainly make them available. >> do you have additional questions? >> did pacific campus -- is supported by the psychiatrist residency, and does not need to be in a hospital setting. this will transform into an off payson -- off patient medical center. premies will be transferred to the hospital and this is the consensus of the hospital planners the route the world. it is not feasible to demonstrate these services at every community hospital. centralizing care for the sickest patients is known to produce a better outcome.

we will provide all of the patients with the single payer which is greatly preferred. these recommendations were supported by two different reports -- one of them at the request of the health commission. the other as part of the blue- ribbon panel, which recommended the course of action we propose to. importantly, the decision was made that we absolutely needed to rebuild at st. luke's, which is why we chose this site where it will be relocated. and the size of the hospitals -- you can hear that we have 1200 licensed beds, but many of them come from many years ago. the more accurate presentation -- this has 900 licensed beds,

approximately 720 which we believe will provide adequate care for us going forward in the future. including a relatively modest rate of growth -- in response largely to the aging of the population. in specifics -- we have growth where we anticipate to have a substantial increase in capacity for labor and deliveries, and an increase in the ability to provide outpatient surgery. with the urgent care in all of the rooms and the services recommended by the blue-ribbon panel. in summary, the rebuild plan will help hospitals that meet the high standards, and will be able to remain operational after a major earthquake. we will not interrupt the

services during construction. we will maintain the excellent programs for the region and help to control the rising health- care costs, and building to hospitals at the same time to protect and expand health services for the poor and the underserved in our community. what is this all about? this is about building rooms like this and you can see the single-patient rooms, this is a major improvement for the care that we can provide. i would now like to address one of the more controversial issues that came up today. the news of the updated tenure plan is correct, but it is important to realize that these are projections and nothing more. we make financial projections on a regular basis.

we have the utilization and to a lesser extent, escalating costs. since we began this process, this has a less robust look into the future. we have the obligation to be fiscally responsible so that we can rebuild a hospital to meet the demand and continue to deliver the highest quality care. i want to make clear these do not alter our commitment to invest for the new hospital. our new 10 year projections, while less optimistic, do not show us in reaching region -- do

not show us breaching. this will be critical to our ability to provide comprehensive health care throughout san francisco. and we do recognize that our new projected operating margin and provides more than the current plan. is operating test is a belgian and suspenders approach. -- a belt and suspenders approach. the suspenders provides a processing and financial benchmark to work with the city to monitor our financial situation and make adjustments if needed. this kind of notice and participation is unprecedented. the city gets it from no other

private hospital and is provided nowhere else in the country. it is important to keep our eyes on the point. all we want to make sure it is rebuilt in a robust and effective manner. the city wants to make sure it is operating as part of cpmc. we must make sure we can make the best health care decisions to serve all of our patients. in the tough negotiations on the development agreement did this. san francisco will have a new hospital with a firm obligation, and we will have the ability if necessary to respond to catastrophic situations in a responsible manner if we