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Henry A. Barrios / The Californian

Paul Hensler was fired from his position as Kern Medical Center CEO Monday evening. This photo was taken earlier in the day at the meeting of the Kern County Board of Supervisors.

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Henry A. Barrios / The Californian

Paul Hensler, who was KMC's CEO, right, and KMC CFO Sandra Martin answer questions by the Kern County Board of Supervisors concerning KMC's budget during a meeting at KMC Monday. Later Monday evening the Kern County Board of Supervisors fired Hensler.

The day after supervisors fired the leader of Kern Medical Center, a group of current county staff were in charge but a long-term management plan remained unclear.

Supervisors voted unanimously Monday to terminate the county's contract with hospital CEO Paul Hensler following a meeting in which KMC's chief financial officer and a consultant revealed several large fiscal problems.

The county has not decided on a process to replace Hensler, Supervisor Mike Maggard said Tuesday.

Asked if the Board of Supervisors bore some responsibility for the financial problems laid out Monday, Maggard squarely blamed Hensler.

"I believe we have now held accountable the person responsible," Maggard said, pointing out KMC's finance staff reported to Hensler and Hensler took responsibility at Monday's meeting.

He said reports Hensler and his management team had made to the Board of Supervisors were deeply flawed.

"It's not very often in private practice that you get reports that are simply not true," Maggard said.


On Monday, Kern Medical Center CFO Sandra Martin and Nancy Kaatz of consulting firm Toyon Associates Inc. told supervisors that hospital staff had over-budgeted for the current fiscal year and made inaccurate projections of how much KMC would be reimbursed by the state for various programs dating back to fiscal year 2006.

Martin and Kaatz did not return a reporter's phone calls and emails Tuesday seeking more information about their findings.

County Administrative Officer John Nilon said Tuesday the problems were brought to light after the county discovered that there were issues with "accounts receivable not being collectable" and Toyon was tasked with investigating.

"As information arose and as we got a new (CFO), it became apparent that we needed even deeper analysis," Nilon said. "And that's when (Toyon) was engaged to do even deeper work for us."

At Monday's meeting, Martin told supervisors that the hospital potentially owes the state "about $28 million (from various programs) that has not been accounted for on the books."

The review also found that KMC had been expecting $36 million from the state but, Martin said, staff could "not find any substantiation" that that money was owed.

Additionally, about $9.6 million in state indigent program funding had been over-budgeted from July to December of this year alone, the CFO explained.

Martin said hospitals usually have reserves to cover such oversights, and that the findings explain why KMC kept needing the Board of Supervisors to increase the county general fund loan to the hospital.

Though Hensler told the board he was ultimately responsible for things going off-track, questions remained Tuesday about where the problems started and how they went unnoticed for so long.

Supervisor Mick Gleason asked Monday why audits hadn't turned up the problems sooner.

Martin said auditors may not have had the expertise in California public hospital financing to ask harder questions about the information they received from KMC.

Hensler blamed "poor oversight" and "laziness" by the hospital finance department for why accounts were not reconciled to updated finance models.

Maggard asked Kaatz if she could identify which hospital staff lack public hospital finance knowledge. Kaatz replied that hospital staff need training.

"I'm going to look to your company and you, Ms. Kaatz, and Sandra Martin to provide for us a plan as to how we develop or hire or go outside so that as soon as possible we have adequate expertise to be able to do this properly from this point forward," Maggard said.

Maggard said he also wanted to understand exactly what the county's responsibility is to provide medical care to the indigent.

"Are we doing anything at the hospital that is beyond our core responsibility?" Maggard said.

The county has contracted with Toyon Associates since 2008. Martin has been working at KMC for less than two months. The board approved a three-year contract with Martin effective Aug. 1.

The hospital's previous CFO, Houshang Abd, was also hired for a three-year term starting Jan. 7, but earlier this summer Hensler said Abd left the hospital because his family did not want to relocate and his former boss made him a great job offer.


To cope with KMC's financial woes, the county will first look to reduce costs inside the hospital budget, Maggard said, but supervisors must cut carefully. Some KMC services are tied to sources of revenue and cutting them would risk that money.

But Maggard said that eventually, supervisors will "have to look beyond the hospital. There is going to be shared pain."

Maggard said it would be tragic if the county had to roll back plans to increase the number of days libraries are open and to spend more money on aggressive spay-neuter efforts because of Kern Medical Center's financial turmoil.

The vacancy at KMC also leaves questions about what will happen to a proposed collaboration with local health care nonprofit Clinica Sierra Vista to revamp the hospital's family medicine residency program.

"I am wondering today if the county of Kern and Kern Medical Center is still willing and interested in going forward with us," Clinica CEO Steve Schilling said Tuesday. " Paul (Hensler) was clearly one of the key players in that decision."

Last year, hospital administrators suggested that KMC pass on bringing in a new class of residents to the hospital's family medicine residency program, but supervisors overruled the idea after an outpouring of public support for the program. Hensler and a consultant brought up the prospect of partnering with Clinica at a supervisors meeting last December and supervisors vote to pursue further talks with Clinica.

Schilling said his organization and the county will have a small window of time in the next four to six weeks to decide if they want to apply for teaching health center money allotted by the Affordable Care Act. Clinica has already launched a similar program in Fresno, Schilling said.

Schilling fears the proposal, which he said could save the county money, will be lost in the shuffle.

"In this moment of upheaval (at KMC), my question is, 'Who the heck do I talk to?'" Schilling said.

Maggard said Tuesday night that he had asked Nilon to call Schilling on Wednesday to reassure him the partnership is "still full-speed ahead."

Supervisor Mick Gleason said that despite the pain of this experience, he wants to uncover all of KMC's problems immediately.

"We want to have all the bad news now," he said.

Dr. Ramon Neufeld, a retired family practice physician, said leading KMC is a tough job that requires skill balancing medical care and physician education with being under the gun financially.

"It's gonna be a challenge for whoever comes in, but I think we need to find the right person to lead this hospital into the next level," said Neufeld, chief medical officer for GEMCare Health Plan.