Much of the recent public scrutiny on Salinas Valley Memorial Hospital has focused on retired CEO Sam Downing’s $4 million retirement payout. But Assemblyman Luis Alejo (D-Watsonville) says the SVMH audit, which the state Joint Legislative Audit Committee approved at his request May 11, is about more than exorbitant executive pay.
“[Downing’s pay] raises a lot of questions, especially with layoffs and less services at the hospital,” Alejo says. “But what made the audit rise to the top of my priorities was the numerous complaints and inquiries by community members about the hospital’s finances and their relationship to the charitable organizations they’re contributing to.”
The committee, which includes Assemblyman Bill Monning (D-Carmel), estimates the audit will cost $244,000 and 2,400 hours of work over the next six months. But Alejo notes that the money is part of the auditor’s budget, and contends that it’s a reasonable price to pay for the full disclosure and transparency SVMH hasn’t provided voluntarily.
“We needed definite answers about where the hospital’s money was going,” Alejo says. He expects the audit to answer a wide range of questions about SVMH operations, including revenue, expenditures and staff compensation practices.
The hospital’s board president, Jim Gattis, has publicly stated that SVMH welcomes the audit. But if that’s the case, Alejo asks, then why did SVMH hire a lobbyist at an expense of $25,000 to try and quash the audit in the days before the committee’s vote?
“I talked to [the lobbyist] the day before the hearing,” Alejo says. “The goal was to oppose the audit or narrow its scope.”
Not so, according to SVMH financial analyst Mike Profumo. “[The lobbyist’s] marching orders were not to help us get out of this audit,” he says.
Adds hospital spokesperson Adrienne Laurent: “We’d never been to Sacramento before. We had three days from the time we were notified and the time we had to be there, and needed someone who could tell our story.”
One of Alejo’s desired outcomes is legislation that would rein in pensions for executives of public entities like hospitals.
“Public pensions have come under scrutiny from voters and constituents, who say, ‘How can you justify multi-million-dollar pensions to CEOs resulting in less services at hospitals?’” Alejo says. He points to Downing’s receipt of a $900,000 supplemental pension upon retirement earlier this month, in addition to his $150,000 regular pension and his $668,000 annual salary.
A Los Angeles Times review of California hospital districts showed that Downing’s pay was higher than that of his colleagues at similar-sized hospitals.
But hospital officials say Downing’s compensation package is in line with national practice, and has nothing to do with SVMH’s current goal to reduce its staff by 150 full-time employees.
“[The hospital] has been paying into Downing’s retirement account for years,” Laurent says.
“Our commercial business is down 26 percent; that’s what’s driving our decisions,” Profumo adds.
Alejo, however, is convinced that there’s more to the story.
“Is there more money that is owed to outgoing executives?” he asks. “That’s one of many things I’m looking forward to finding out.”