San Francisco officials mobilize to win recertification as Laguna Honda faces CMS closure timeline

Laguna Honda Hospital — the city‑owned skilled nursing facility that provides long‑term medical care to hundreds of San Franciscans — is under an urgent federal recertification process after the Centers for Medicare & Medicaid Services (CMS) found compliance problems this spring. City and hospital leaders told the Board of Supervisors on June 14 that CMS has decertified the hospital and has required a closure, patient transfer and relocation plan tied to federal payments.

Department of Public Health (DPH) leadership, Laguna Honda executives and SEIU Local 1021 representatives described a two‑track effort: implement immediate corrective actions and prepare for a CMS resurvey while carrying out a mandatory transfer plan for patients. Roland Pickens, interim executive officer of Laguna Honda and chief executive officer of the San Francisco Health Network, said the hospital and DPH have retained two consulting firms to prepare the hospital for a re‑survey and to produce a sustainability and operations plan.

"We took the decertification of Laguna Honda as a very serious matter and thus established the incident command system to make sure that we were harnessing all of the resources available," Pickens said during the committee‑of‑the‑whole hearing. He outlined a timeline in which consultants will perform two “mock” surveys in July and August, the hospital will submit an application for resurvey to CMS in September, and CMS would likely complete its second, final inspection later in the year.

But CMS also has required a closure and transfer plan that directs Laguna Honda to refer and relocate its patients to other certified facilities by Sept. 15 under the timeline it approved. Pickens and other DPH officials described a dramatic mismatch between the transfer mandate and the availability of nursing‑home beds, especially for Medi‑Cal patients. "When we look at the contracts services delivered against paid and their trial balance, we have not seen a deficit at that level for the 2021 cycle," DPH deputy finance officer Drew Morell said about how the department learned the full extent of the financial and operational problems. Pickens said DPH and Laguna had been in ongoing communications with state and federal agencies as staff worked to implement interim fixes.

Union leaders and staff urged urgency and full support for keeping Laguna Honda open. SEIU Local 1021 representative Teresa Rutherford said Laguna Honda is ‘‘a vital part of our healthcare system’’ and warned that forced transfers could endanger residents. "Laguna Honda is not a building. It's part of our health care process," Rutherford said. Registered nurse and clinical specialist Kathleen Mackeral added that many residents have complex medical and behavioral health needs; she described weeks of emotionally fraught discharge planning with residents and families.

Hospital officials provided a metric snapshot of the early transfer effort: roughly 300 of about 670 patient assessments had been completed, and six residents had been discharged to date during the multi‑week effort. Pickens said Laguna Honda staff and consultants were making thousands of calls per week to identify open beds across California, but that the majority of available beds are not cleared for Medi‑Cal or Medicare patients. He also cautioned that many residents are conserved or have complex needs that limit relocation options.

Supervisor roles and next steps: the board unanimously approved Supervisor Melgar’s motion to continue the committee of the whole to Sept. 13 for an update on recertification progress and the transfer plan. In the interim DPH agreed to provide weekly public updates on assessments, referrals and the bed search process, and to coordinate with state agencies on any available capacity. The hospital and DPH have also contracted HSAG and HMA to complete in‑depth assessments and to certify that Laguna Honda is prepared for CMS re‑survey before the city requests a formal resurvey.

Why it matters: Laguna Honda is one of the largest publicly owned skilled nursing facilities in the country and serves a disproportionate share of San Francisco residents with complex medical and behavioral health needs. Closing or losing federal reimbursement for Laguna Honda would require the city to find alternative placements for hundreds of residents — many with limited family supports and restrained by Medi‑Cal coverage — or to fund the hospital entirely from local dollars at an estimated half‑million dollars per day without federal payments, DPH officials said.

What’s next: DPH and Laguna Honda will report weekly to the board, and the board will revisit the issue at a special hearing on Sept. 13. The hospital’s consultants will run two mock surveys before a September resurvey application is submitted to CMS; the timeline for formal federal inspection is then controlled by CMS.

Editors’ note: During the hearing several supervisors and DPH officials pressed for transparency and raised concerns about how the situation unfolded over prior years. DPH officials said some warning signs were visible in fiscal monitoring going back to 2014–2015, but that the full scale of the problem became clear after a controller’s office review completed in 2021 that documented staffing and finance shortfalls.