Every time I drive by the behemoth new Palomar Hospital, I shake my head in wonder.
Palomar Hospital is a public hospital, owned by the citizens who reside in the huge Palomar Pomerado Health District (PPHD). The District’s governing body is supposed to be the Palomar Health Board of Directors, an elected body. The old Palomar Hospital did need a retrofit to meet state earthquake standards. Somehow, in 2001, the Board of Directors were convinced by “outside experts” that it would be more prudent to build a brand new hospital than to beef up the old one. Now the VA Hospital in La Jolla, was retrofitted to the new standards for $55 million. http://www.bdcnetwork.com/va-san-diego-healthcare-system-building-1-seismic-correction-san-diego-calif.
The new Palomar Hospital cost $956 million. http://www.utsandiego.com/news/2014/jun/05/michael-covert-palomar-debt-cash-problems/
But, I must confess, I was one the almost 70% of voters who approved Proposition BB in November, 2004. Prop. BB authorized the PPHD to issue $496 million in general obligation bonds and $210 million in revenue bonds for a total of $706 million. This would be to build the new Palomar West Medical Center ($531 million), renovate the old Palomar Medical Center ($73 million), expand Pomerado Hospital ($139 million) for a total cost of $753 million—the $47 million shortfall to be made up with cash reserves and philanthropy. http://www.smartvoter.org/2004/11/02/ca/sd/prop/BB/ General Obligation Bonds are backed by property taxes. Revenue bonds are backed by the revenue of the issuing body.
So how were the majority of voters within the PPHD convinced? Largely, it was due to the actions of the then fairly new CEO of PPHD, Michael Covert. Covert gave very good presentations to community groups and organizations. His arguments for the building of the new hospital were very convincing. He convinced me. He convinced a friend, a very intelligent and knowledgeable certified financial planner, who met with him personally. Lyle Davis, editor of The Paper, described Covert as a “…Master of the Legerdemain, Silver Tonged Orator, Master Showman, Brilliant Executive…” in his excellent review of Covert’s sales job, “Mr. Mike’s Traveling Miracle Medicine Show.” http://www.thecommunitypaper.com/archive/2007/12_20/index.php Davis examined Covert’s entire career more closely in his “A Covert Operation.” http://www.thecommunitypaper.com/archive/2008/03_20/index.php. On October 18, 2004, the PPHD Board voted to build the new hospital in Escondido if Prop. BB passed. A vote that, as many critics at the time pointed out, could be easily changed by another vote. http://www.utsandiego.com/uniontrib/20041020/news_1mi20ehosp.html
And so the behemoth project moved forward. An Ad Hoc Committee of City Council Members Ed Gallo and Marie Waldron was formed to negotiate with PPHD’s Covert—Tweedledee and Tweedledum against a “master of legerdemain”. I attended many of the Council meetings when the Ad Hoc Committee reported on their progress—a painful thing to watch. It soon became apparent that the only place Covert would consider in Escondido for the new hospital would be the Escondido Research and Technology Center (ERTC). The City Council balked. Covert threatened to build in San Marcos, near the University. In 2006 the City Council Caved. I have always found it interesting that the new hospital, as described in Prop. BB was to be named Palomar Medical Center West. Is it possible that somehow Covert got together with James R. McCann long before negotiations with the City began? The City’s agreement with the PPHD included a one-time payment of $13 million to make the improvements needed to Citracado Pkwy, and the City agreed to complete the improvements needed to improve the Nordahl Road/Highway 78 interchange. I’m sure McCann felt it better for the taxpayers in the City and the PPHD to pay for these improvements than for a developer to do so.
And so the building of the behemoth began. And there were problems. Costs soared, as they tend to do in any project, The PPHD officials blamed increasing construction costs. One major cost increase was the removal of rocks from the construction site. This was not foreseen? Remember the granite in them there Quail hills? But Michael Covert’s monument to himself had to continue regardless of other considerations. The $73 million to renovate the old Palomar Medical Center—reduced to $3 million. If any renovation has occurred, it is not visible from the street. The new Palomar West Medical Center opened in August of 2012.
The final cost to taxpayers? In June of 2014, Covert resigned, moving on to a position with Catholic Health Initiatives. The proposed $531 million, 453 bed hospital in actuality became an almost $1 billion project with only 288 beds. http://www.utsandiego.com/news/2014/jun/03/michael-covert-palomar-health-catholic-initiatives/
Post Mortem: In June of 2013, Palomar Health failed to live up to the Prop. BB bond agreement. http://www.utsandiego.com/news/2013/jun/22/palomar-bond-covenant-violated/ In March of 2014, Moody’s downgraded the PPHD General Obligation Bonds from A1 to A2. https://www.moodys.com/research/Moodys-downgrades-Palomar-Pomerado-Health-Care-Districts-CA-GO-bonds–PR_294638. These are the bonds guaranteed by my property taxes and yours too I suspect. Dan McSwain summarized Covert’s crimes very well in his “Outgoing CEO leaves debt, little cash to health district. http://www.utsandiego.com/news/2014/jun/05/michael-covert-palomar-debt-cash-problems/ Good luck to the Catholic Health Initiatives. They’ll need it.