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County Health Clinic proposal flawed

March 10, 2014

My background is about 25 years in senior level HR including running the company health care plans, was the chairmen of a 10,000 member Taft Hartley Health Care Plan, worked for Kaiser Permanente (worlds largest HMO) in Denver, where we generated about $5 Billion of revenue. While not a health care expert, I know a little about health care.

Of great concern is why any local government would consider competing against excellent, cost effective Waukesha County Health Care providers including Pro Health (which has served Waukesha for 100 years), which has 17 clinics, 3 hospitals and 8 Emergency/urgent care Rooms, and a Fitness center all are located strategically around Waukesha County? It begs the question, “is it now county governments new mission to take revenue from the private sector and health care providers?” Further, taking revenues from the private sector translates into laying off private sector health care employees in favor of new county employees, weather they are ‘county contract employees’ or direct employees, or by some other name – they are paid for and sponsored by county taxpayers.

I have reviewed the May 13, 2013, 115 pages CBIZ Power point feasibility study (CBFS) laying out several pro-forma staffing models that showed the best staffing proposals and the associated costs and savings. Also I studied the County Executive 2014 budget proposal and have had discussions with Norman Cummings, the county CFO to receive explanations of some parts of the study. I have communicated with the Mayor Scrima, the County Chairman Decker and various other elected officials in developing the following analysis and reaching the conclusion that running a clinic would be inappropriate and to show that it would lose money for Waukesha County.

Then last week comes a ‘New’ savings estimate on steroids from Healthstat (HS) that claims to save $7MM in the 5th year alone. With 15000 visits projected if HS performed for free all the projected 15000 visits at the highest priced office visit of $112/ visit X 15000 = $1,680,000. Even without charging a dime of expense – how in the world do they come up with $7,000,000 savings and they show no pro forma? This HS ghost pro forma is not right at all, but more concerning is why the County leadership is not drilling down further and asking these questions.

Other questionable under estimated costs and risks and overstated savings in the CBFS are:

1. If the county has to go alone (city and schools don’t buy in) then they risks in first year is nearly $2 million right off the bat. Approximately a $500K start up costs, $440K annual management fees and approximately $1MM of personnel. So the first year the total cash risk is nearly $2 million and slightly less than $2 million in outlying years. Where is the discussion in the study about the county risk of millions of dollars with minimal reward and the possible losses the county itself would be taking on? See page 51 of CBFS for the supporting numbers or see page 48 if you remove cover pages.

2. Malpractice insurance of $10,000 a year for clinic seems low versus published costs. P.48

3. The pro forma #1 runs 9500 to 13,000 visits without a receptionist, no costs for bookkeeper, Pharmacy tech, no audit costs and no capital expenditures included (like new roof, new A/C, new furnace, parking lot repairs, etc.). Adding the costs of needed positions, auditing, and capital expenditures on an old structure could add nearly $250K/year in costs. Page 48 of CBFS

4. There is a direct pharmacy savings of $3.9MM for 3 entities when clinic won’t have a pharmacy, just a Physicians Assistant dispensing drugs along with her nursing duties. There is no pharmacy tech in Pro forma, no drive through window – who’d go there? Further how can the county expect to compete with Walgreens and other national pharmacies for efficiency and manufacturer’s discounts? Who is coming up with the Formularies? page 48 of CBFS

5. The “County Only” model (3), county visits is up to 75% higher than those in models 1 & 2 - with no explanation.

6. A $366K direct savings over 5 years in ER/urgent room savings for the three entities, this is without an ER room? see page 51 of CBFS report, or page 48 if you remove the cover pages.

7. The entire proposal locks the government in for five-year deal, with $1.8MM of fixed management fees alone so this is very risky and leaves us with no outs for five years.

8. Utilities (heat, light, A/C, water and sewer) for a 14,000 foot facility is budgeted at $450 per month, that’s equivalent to $64/month for a 2,000 home – does anyone think that is realistic? One more example of a huge understatement of reasonable costs that would be incurred.

9. CBIZ has a conflict of interest since they receive $75K in year one and $35K thereafter.

10. If a county clinic adds the equivalent of 11 full time positions to provide health care and pharmacy that will mean that a lay-off of 8 to 11 full time positions at Pro Health and other providers will occur, since this is a zero sum game. In Waukesha County there are only so many clinic visits and if a new provider picks up 15000 visits, they will take them from other clinics.

This proposal is not going to work

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