>> supervisor wiener: thank you. thank you for the presentation. just two questions. first of all, in terms of the -- what you call the good news, if we potentially get the say 10 million in medi-cal reimbursement that we hadn't necessarily anticipated, what would be the mechanism by which that would be returned to the general fund? >> so basically, if it we have any revenue beyond what's required to get us through year end, at the year end, in the year-end close process, the controller will adjust downward the transfer from the general fund into the hospitals. so each year, the general fund is kind of on the margin that comes in and fills the gap. if we can make that gap smaller, they'll just give us less general fund at the end of the year. and that will fall back into the pot of general fund that's available for appropriation through the budget process.

>> supervisor wiener: for any use. >> exactly. >> supervisor wiener: presumably had this 10 million let's say come in last week your supplemental, you would be reduced that you're requesting would have been reduced by 10 million. >> that's correct. >> supervisor wiener: and then in terms of the sources for the supplemental, just to be clear -- a bunch of this money is really internal dph money that we're allocating, right? >> that's correct. so of the $38.7 million of total revenue, all except about $13 million of that is internal dph revenue in excess of budget. >> supervisor wiener: right. so the true give to the department is really from the two reserve funds. that money could have been used for a number of different things. and -- but we're being asked to use leverage for dph. >> that's correct.

had that money not -- if that money is not used from the reserves, it would fall to the city -- out of balance anticipated oat theend of the y. >> supervisor wiener: that's about 12.7 million and change. >> i want to make it clear to the committee that we take it seriously, the fact that we're asking for this money. we don't take it lightly at all and we understand the preciousness of those dollars. >> supervisor wiener: i just want to say that this is sometimes -- and this happened last week. we have a supplemental where the department comes in and they've spent money that they weren't supposed to spend and then we're asked to make up the the difference. this is a very different situation. the department, in addition to being by far the largest department, and one where you can't always predict what the the financial -- you don't have complete control over your budget for a variety of reasons,

relating to the way healthcare is delivered. this is a structural problem that we've known about for a long time. it came up in last year's budget process. so this is not in any way a surprise. and -- what was i going to say? and it's something where we really i think kicked the can down the road. so i think it's appropriate to resolve the issue now. i guess the question i have, in terms of at the beginning you broke down what the causes were, of the need for the supplemental, and in terms of the actual recurring structural imbalance, within the department, do you have -- can you let us know how that's projected to play out in coming years? and i'm hoping that we can deal with that in the two year budget that we're about to adopt.

>> yeah, absolutely. the total value of the structural problem at this point is probably right in the neighborhood, if you look at next year, compared to the current year, and evaluate the projected change in cost, it's about $45 million, is the size of the total problem based on the size of our current operations. so as you point out, we're looking very hard at how we can address this problem over time, including in the budget that you'll be seeing before you in the next couple of months. and the health commission, as part of its budget-planning process, has identified this as one of our largest priorities. so we've got the instruction from them to work on the

solutions. part of the challenge in the past, of course, has been that in order to solve this in the budget, it requires either appropriation of revenue, or shifting expenditures from other places within the budget. so we've been working closely with the mayor's office and the controller's office to discuss this issue. we'll be focusing on it in the budget hearings for our department on our two year budget. but it is our intent to develop a multi-year plan, to bring this structural deficit down so that we don't have to keep coming back before this committee, year after year, asking for a supplemental appropriation of this size. >> supervisor wiener: in terms of the numbers, you indicated about -- i think you said 45 or 46 million. on page -- early in the report, i guess page 4 of the presentation, it states that the current deficit of 341.2 -- 31.2

million is comprised of 16.2 million of delayed approval of reimbursement program. is that a recurring issue, or is that one time? >> that's a one-time revenue. and so there's a portion of it that's ongoing that we do expect to receive. this is retroactive payment for -- that we anticipated for prior years as a catch-up. so that the bulk of that would be a one-time solution. >> supervisor wiener: and then the second bullet, revenue weakness relating to the transition of seniors and persons with disabilities to manage care reimbursement, 19 million, is that recurring? >> that's a recurring revenue. >> supervisor wiener: so that 19 million is part of the ongoing structural deficit? >> yeah. that is part of the deficit. and i think there are a couple of things -- the way i think about our structural deficit is there are two issues. there's the amount that we're

spending overbudget, and that's about $45 million per year, that we're spending over our budget. and then there's how much of that $45 million can we cover r revenues in excess of budget. so the 19 million that we are not receiving as we transition to managed care means that instead of us being able to cover additional portion of that revenue and perhaps use that revenue to fix it in the budget, we're here asking you for general fund. >> supervisor wiener: of that 45 -- i'm talking after this fiscal year, the ongoing structural defers, 45 million -- deficit, 45 million, how much do you anticipate needing all of that to be filled from the general fund? or are there -- i assume there are other revenues that are going to cover a portion of that. so my fundamental question is the structural deficit, where the general fund may need to step in, year after year after year, what do you anticipate that number to be? >> so a couple of answers to

that question. in the five year financial plan for the city, there's a projection that about $38 million of that structural problem is an ongoing issue for the general fund. however, as you suggest, the amount of that, that is required from the general fund, depends on how well we can do in our revenues. so for example, if we are able to get state and federal approval for enhanced payments for our managed care program, we can offset that amount. if we're able to be successful under the transition to healthcare reform in retaining medi-cal and formerly uninsured individuals, who will now have a -- source with them we can bring that money down. so part of our financial strategy for the coming years is going to be to try to make the

investments that we need to ensure that we can get there, and also to have a strategy for making sure that we're successful in the formulas for things like our reimbursements under medi-cal and under healthcare reform. so i think the answer is we're not sure exactly how much of that we will be able to eat into but the solution will likely require a combination of general fund and revenue that we can appropriate through the -- >> supervisor wiener: do you have a sense if terms of timetable when we'll know how successful we are in accessing those other sources of support that would reduce our general fund? is that need to the general fund to fill in the gap? >> some will be short-term. for example, we could look, depending on what comes in through this $19 million igt source and when it comes in, that could be something that helps offset our problem next

fiscal year. so that soon. some of the larger questions are going to be unanswered in terms of the actual impact, until probably fiscal year 1516, which is the first full year that federal healthcare reform will be in place, and will start to be able to see some of our performance. but what we will have is in the budget that comes before you for the next two fiscal years, we'll have our revenue projections in place, and a proposal for how much of this we wish to fund in each of the two years. >> supervisor wiener: as we budget fiscal year by fiscal year, as we end up overappropriating because some time in that fiscal year you end up getting some of those additional revenues, things go maybe better than we anticipate at the end of the fiscal year that money -- we would get money back into the general fund? >> absolutely. >> supervisor wiener: thank you. >> chair farrell: supervisor mar. >> supervisor mar: thank you,

mr. wagner, for the great presentation. i wanted to ask you about the good news in the last slide. could you explain a little more the 19 million that may come into our general fund through the igt program for seniors and people with disabilities transitioning. >> sure. so under the medi-cal waiver, the state's medicaid waiver, there was a provision to transfer seniors and persons with disabilities from fee-for-service into managed care. so basically instead of getting paid a certain amount when somebody comes into our hospital for a day, we get paid a flat month -- flat amount per person per month. so we -- the reimbursement structure has changed. as we've implemented that change, and as we've done analysis, and this is for san francisco, but also statewide, of the impacts of that change, it turns out that

the reimbursement under the new managed care model is less than counties had been receiving for the -- under the fee for service payment model. so the counties and the public hospitals have collectively been working with the state and federal government to see if there's a way that we could draw enhanced federal revenue to partially make up that gap. and so that program needs to be negotiated through both the state and federal government, and the process of those approvals are underway. if it's approved, basically the federal government will authorize us to make a payment, and then we'll get federal matching dollars on that payment for a portion of the amount that we've lost under the transition. so it will be effectively going back and trying to retroactively make up some of that lost

revenue to the safety net providers due to that transition. >> supervisor mar: in the slide it says timing is uncertain. is there any estimate of when that would happen? >> the negotiations are in progress, and so our expectation is that we're hopeful it can happen within the next six months to a year. it's possible that it could happen by the end of this fiscal year, which is why we wanted to note it here, so that you understand what the scope of possibilities is for our year-end. but we really don't know because there's no analytical way to project it. it's really just a matter of when the federal administration signs off on the approvals and gets the notifications out to the counties to pay. >> supervisor mar: from the slide it looks about 29 million plus any updated revenue from the nine month report would be returned to the general fund so it's in some ways possibly going

to cover the potential deficit of the general fund that we're dealing with today? >> yeah. if these payments were to come in, it would reduce the amount of general fund needed for the department. and i don't want to -- i want to be careful not to overset expectations because these are dollars that we don't have in our hands, and we've only really got three months left of the fiscal year. but, absolutely, if they do come in that would reduce our general fund draw, and we would be very happy if that was the case. >> supervisor mar: and i'm appreciative of supervisor wiener's questions about the structural problem since 2009. in the budget and legislative analyst report on page 8, mr. rose and his staff make reference to the process that the health commission is going to go through within the next two months to have public hearings on suggestions and policy directions for the the department so that we can correct the structural deficit

for the future. in those two months, it looks like it's the health commission but also these hearings that input's going to come from the public. could you elaborate about that process. >> sure. absolutely. we have multiple processes that we do every year. we try to make as much of an effort as possible to bring people into the deliberative process about our budget. so a couple of things that we'll be doing is we of course will be having continued hearings at our health commission, later this month, we will be having a budget hearing at the health commission, following hearings in ma may as well to discuss particular budget proposals, that we have a group of service providers, cbos and organizations that we meet with periodically, to get their input and thoughts on what we're doing. we will be holding meeting of

that group. we have additional processes for outreach and public input through the mayor's office, cbo-stakeholder meetings, hearings out in the community. and then we've also got a public hearing that's focused on budget and financial planning at the commission. so those are all open to the public, and opportunities for discussion. >> supervisor mar: thank you. >> thank you. >> chair farrell: is there anything more to the presentation you want to cover? >> just the only item is that the board of supervisors budget and legislative analyst worked with us closely on the legislation. they made some recommendations, which we're in agreement with. we thank them for their work and for helping identify some places where we could trim this down a little bit further. >> chair farrell: supervisor breed. >> supervisor breed: thank

you. i know this is not great news, but it's better than what we had anticipated news. and i'm really happy that there are creative ways to try and figure out a way to deal with this huge deficit. i did have a more specific question. i noticed that some of the concerns, specifically with laguna honda hospital, were cost of materials, supplies, especially pharmaceuticals and food to meet patient care. and i know that the number of patients from the old laguna honda decreased in the new laguna honda. and so i guess part of what i'm trying to do is understand why was there an increase in something like food, or even pharmaceuticals, when the number of patients have been reduced. >> yeah. that's a good question. and in fact, what happened is during the transition from the old building to the new

building, the budget was adjusted. and actually what happened is that the budget was adjusted during that transition too far downward, based on the reduced number of materials and supplies consumed at the new hospital. so it was reduced downward to reflect the reduced number of patients, but it was a little bit too far down, and there's a gap. and then that gap, as we see every year, we have a rate of growth in our costs, particularly for pharmaceuticals, but also for medical supplies. this is much faster than the rate of inflation. and so we've tried to kind of make little adjustments to try to catch up to what our actual expenditures are. but you can see that we haven't caught up, and there remains a gap, where our expenditures are slowly creeping upward and our budget is not matching it. so that's a good question. >> supervisor breed: i wanted to also mention, and this is for

something to potentially look into in the future, one of the things that i think -- i don't know if i've mentioned it publicly or not, but my grandmother's been in laguna honda for maybe nine years or so. she gets three meals a day and with each meal she gets coffee and she doesn't drink coffee. so i see that as wasteful. and i'm hoping that we look at ways in which we can reduce that kind of waste. and, also, one of the other things i want to mention is the fact that i know since the new hospital is open, yes, there are less patients, but dinner has been delayed, and some meals have been delayed by over an hour, which means that there's been a challenge in adjusting to the new larger, i guess, size of the hospital. i don't know what the details

are around there. but i do know that there have been some challenges. and i know that we're dealing with this deficit, and we're looking at cost savings, and we're looking at what we need to do as a city to improve on services. and so i would just ask that some of those things be taken into account with that hospital in particular. i'm not sure what the other issues are at some of the -- our other facilities, or where we can save costs. but clearly there might be an issue around a need for additional staff support at this particular hospital, to meet the need. and again, i don't know how that plays itself out, but saving money for years of waste with coffee may not equate to a significant impact in the budget. but things like that could help us readjust our priorities so that we are serving the population appropriately. >> and we're looking for every penny. so i'll bring those issues back

and raise them with operations team at laguna and we'll see what we can find out for you. >> supervisor breed: thank you. >> thank you mr. wagner for your report. i think just from my perspective, i want to thank you for coming before us today. it is obviously disappointing i think to everyone that we're here, and voting on what we're voting on. and i think the message from my perspective at least, and i think from this committee, i think we're all focused on what we're going to be doing next year structurally. i think the time is now for no more band-aids and figuring this out for the long haul. i look forward to that dialogue. i know it will be intense and i look forward to working on that. thank you. >> chair farrell: if there are to further questions for mr. wagner we'll go to our budget report. mr. rose. >> harvey rose: the bottom line of this request is $46.1

million. and this request, if you look at page 6 of our report, in table 3, it's paying for miscellaneous salaries, permanent salaries, temporary salaries, premium pay, holiday pay, and -- so it's a 46 million request while it is true that the bulk of the revenues are not coming from the general fund, they're coming from within the department, supervisors, if those funds did not -- were not needed, if there was not this deficit in salaries and overtime, then those revenues would cause the general fund to have -- to need less general fund in next year's budget. so it's -- the bottom line is this is a deficit. and fortunately, there are revenues that can help pay for this. but if they didn't have the deficit, those revenues would fund next year's budget. on page 4 of our report we pointed out the proposed

supplemental would appropriate, as has been pointed out, $12.7 million from the state revenue loss in general fund reserves and that's shown in table 1, page 3 of our report. i know the supervisors know this but there are two additional sup premental appropriations pending before the board of supervisors, the public defender's office, 751312 and the sheriff's department 3,458.970. if the board approves it the state revenue loss reserve lch no balance and the general fund reserve will have a remaining balance of 21.3 million. on page 7 of our report, as has been discussed by the committee, fiscal year 09-10 through 12-13 the department of public health's budget for both hospitals, san francisco general and laguna honda, regarding salaries and -- and for laguna honda materials and supplies has

resulted in shortfalls and the department has needed supplementals during that timeframe. the serious thing about this supplemental is that there is a very significant amount of general fund moneys going towards the supplemental namely the 12 million combined with the state revenue loss reserve fund as well as the general fund reserve. our recommendations are on page 8 of our report. we recommend that you reduce -- and this is based on a detailed review of the actual expenditures to date, as well as the projected expenditures through june 30, we recommend that you amend a proposed supplemental to reduce by 1,1222, which would reduce the general fund reserve appropriation which would be a direct general fund savings from 4.3 million to 3.92849 secondhansimilarlyto 44.857.

that's the revenue side. on the expenditure side we recommend that you reduce the proposed ordinance to reduce the expenditure appropriations by 1.222, which include san francisco general hospital fringe benefits reduce that by 550,000, reduce the laguna honda salaries by 5 22,000 and reduce materials and supplies to laguna honda by 150,000 and that totals up to the 1,222,000. we recommend that you approve this ordinance and i would be happy to respond to any questions. >> chair farrell: thank you. do we have questions for the budget analyst in seeing none, thank you ver mr. rose, mr. wagr and to ms. garcía, department of public health. i've spoken with her on a number of occasions and appreciate their intent to take care of

this long-term. any members of the public that wish to comment on item 2, please step forward. >> hello. good afternoon, supervisors. is this working? my name is gus feldman with 2021, i am field representative for 1600 workers at san francisco general hospital. right now, the report's certainly feeling the crunch of the budget deficit that was discussed today. and i think it's most -- i think feeling this most vierly, in the fact that many department directors, or division directors i should say have been directed to put a halt to all future hiring, our current hiring, and that has created a situation in which workloads have become unmanageable. it's created a situation in

which patient care is being jeopardized, and which both patient and staff safety is being jeopardized. in the psychiatric unit it has been reduced to 12, the graveyard is staffed by two people, one rn and one psychiatric technician. we're concerned about this. as mr. wagner pointed out really well in his presentation, the full implementation of the affordable care act presents great opportunities for dph to bring in much-needed revenue. i think the approval of the supplemental at this time is critical. we can't allow the department to enter into 2016 without full staffing, without the tools that it needs to really present itself to the public as a viable healthcare option, and hopefully get that and take advantage of those opportunities for revenue. thank you very much. and i hope that we have the full support of the committee for the supplemental.

>> chair farrell: thank you very much. next speaker please. >> i'm brenda, i work in the medical clinic out at san francisco general. we're in the process of implementing the affordable care act right now. so i will tell you that part of it is they have these excellent standards that are going to be attached to the amount of revenue that we get. so if we don't meet these standards, and a lot of it is related to satisfactions of the patient, that means no long lines for wait, no waiting to get your phone call picked up, all these things are going to be judged. and the amount of revenue that we receive from the federal government is going to be based upon whether we meet all seven of these standards. so when i hear them talking about cutting people's salaries at a time like this, when one of the things that you're going to need, you're going to need high performing, high productive employees, who are not miserable because, if they're miserable, because their salaries have been cut, guess what, the budget is

going to be cut anyway because we're not going to meet the standards. and so all of us are trying to do that. i'm on the service excellence, where we're trying to change the tone at san francisco general, to change the way things are done at san francisco general, to make sure we do meet those standards. so if you cut people right now, that's just going to -- it's going to blow it all up. and we may not meet those standards because there's no way that two people, working on the nursing unit taking care of 10 patients is going to meet that standards. it's just not going to happen. it's humanly impossible to meet the standards that are going to be placed upon us, once this gets implemented and full -- so i give credit to the head of the hospital. she's been working really hard, sue, barbara garcía, even people like me, everybody, we're all in this to make sure that this works. because we want public health to remain strong like it is. we want to still provide the t