CFO's quarterly report shows Laguna Honda patient-revenue shortfall; public commenters press for accountability

San Francisco Department of Public Health officials told the Health Commission their second-quarter (fiscal year 2024-25) financial projection shows an expected revenue deficit driven in part by lower-than-expected patient revenue at Laguna Honda Hospital (LHH). Commissioners heard a detailed report from Drew Merrill, the department's chief financial officer, and several public commenters urged audits and accountability related to LHH operations and past decertification costs.

Lede facts and why it matters

DPH's second-quarter projection indicated a material patient-revenue shortfall for Laguna Honda, which the department said stemmed from lower patient census following the facility's earlier decertification and a corresponding lag in revenue recovery even after recertification. The finance report also described offsetting one-time payments and broader system-wide revenue variances: behavioral health services were projecting a sizable surplus tied to payment reform and billing improvements, while Zuckerberg San Francisco General Hospital (ZSFG) expected an on-balance year driven by a mix of revenue and expenditure variances.

Public commenters voiced concern that LHH admissions have increased slowly since admissions resumed in July 2024 and said the slow pace of admissions continues to depress Medi-Cal revenue to the health system. One remote commenter who identified themselves in the record argued the city's prior LHH reform plan and leadership choices contributed to the decertification and that responsible officials should be removed; another public speaker asked the commission to direct an investigation into alleged theft of patient share-of-cost payments at LHH.

Financial details presented to the commission

Drew Merrill summarized the department-wide projection: an expected $59 million revenue surplus overall (driven by improved patient volumes and billing gains across divisions) and a modest $2.6 million expenditure savings; after applying mayoral reserve instructions the net result was roughly balanced on expenditures. Key points Merrill identified about Laguna Honda and system finances included: - Laguna Honda patient-revenue deficit: Merrill identified an approximately $48 million deficit in patient revenue for Laguna Honda that narrowed to a $28.6 million net revenue deficit after a one-time "distinct part nursing facility" (DP NIF) payment was applied. - Behavioral health surplus: Behavioral Health Services (BHS) projected a roughly $45.6 million revenue surplus tied to payment reform (CalAIM) and billing improvements after the EPIC electronic-records go-live; the division also reported substantial vacancy-rate reductions and a clinician fellowship program to help recruitment. - ZSFG position: Zuckerberg San Francisco General Hospital expected to end the year roughly on balance; drivers included higher patient revenue (including 340B pharmacy offsets) and certain expenditure pressures such as registry and pharmaceutical costs. - Management reserve and federal waiver uncertainty: Merrill warned that some revenue sources are contingent on federal/state programs (for example, global payment program funding tied to federal waivers) and the department maintains a management reserve to hedge against shortfalls.

Public comment calls for audits and accountability

During public comment, Jim McAfee and other remote commenters raised concerns that patient share-of-cost for Laguna Honda residents (a component of patient revenue that sometimes derives from residents' Social Security benefits) had not been properly reported or audited and accused some vendors and staff of misconduct. One remote commenter displayed a chart to the commission and argued LHH's ramp-up in admissions since recertification in July 2024 has been too slow, producing continuing revenue losses. The comment record included calls for personnel changes and litigation settlement actions related to the 2019 patient-abuse scandal and the facility's later decertification.

Commissioner questions and next steps

Commissioners asked for additional context on state payment mechanics (including prior-year settlements and AB 85 recoupment referenced in the presentation), contract and labor impacts (COLA-driven holiday and premium-pay increases contributed to near-term expense pressure) and what metrics the department would offer to clarify the path to improved patient census at Laguna Honda. Merrill said some shortfalls are one-time and some reflect timing differences; he also noted the department is monitoring federal and state decisions closely and will present updated details and follow-ups in future financial reports.

Ending

The commission did not take an action beyond receiving the report. Commissioners requested additional contextual briefings on the financing mechanisms cited in the presentation and follow-up information on Laguna Honda admissions, patient-revenue projections and the status of audits or investigations referenced by public commenters.