But that mission became an albatross. If an uninsured patient went to the Coastside medical center for a standard checkup, the medical center would be reimbursed about $60 from the federal government — and that meant a net loss of around $100 for the clinic.
However, if that same uninsured patient walked upstairs to the county-operated clinic at Shoreline Station, the federal government would reimburse that medical facility about $400 for the same service.
  
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The difference between the county-run and nonprofit clinics at Shoreline Station is Federally Qualified Health Center status — a designation held by many small regional medical facilities in the state.
Sources involved in the leadership of the medical center are in stark disagreement as to whether the health-care facility could have avoided financial ruin if stronger efforts had been made to revise its fee structure to apply for better government reimbursement.
“(The board of directors) could've saved this clinic,” said Steve Rousso, a principal with HFS Consultants, who has advised Coastside Family Medical Center since it started as a nonprofit. “As it was structured, it was a losing battle.”
For years, medical experts employed by the clinic, including its own chief executive, advised the board to seek federal-qualified status, a government designation that would have guaranteed a much higher reimbursement from the Medicare and Medicaid programs. Medical nonprofits that have FQHC status receive federal malpractice insurance, reduced costs to purchase prescriptions, and access to a number of grant opportunities and government health programs.
Clinic officials say having FQHC status would have saved the Coastside Family Medical Center from bankruptcy. Just this week, U.S. Rep. Anna Eshoo’s office announced $641,116 in extra federal funding for community health centers in San Mateo, Santa Cruz and East Palo Alto. Even if it was open, the Half Moon Bay clinic wouldn’t have qualified for that money because it didn’t have federal status.
Robert Harless, the CEO for the Coastside medical center, says he saw the clinic had an extremely unstable revenue stream as soon as he started in 2006. Harless recommended that the board seek FQHC status right away.
“With FQHC, you have a surefire revenue stream if you have enough underinsured population to be able to qualify for the federal dollars,” Harless said. “The underinsured was our primary problem because we didn’t get adequate reimbursement.”
The U.S. Health Resources and Services Administration normally only allows a clinic to be federally qualified for extra aid if it is in an extremely rural area or serves a needy population, particularly a community with a high percentage of poor and elderly.
The Coastside does not meet either of those criteria, which led board members to decide it would be a waste of time and money to apply for FQHC status when they first began examining it in 2007. The procedure to apply could have taken a year and cost tens of thousands in consulting fees.
However, the federal status can also be given in exceptional circumstances, with the backing of state officials. David Bowman, HRSA spokesman, says that about 20 clinics that don’t meet the standard guidelines are awarded FQHC status each year. The reason, Bowman explained, is that those medical centers are able to demonstrate they serve a community with, for example, rampant unemployment, a large influx of immigrants or a large population without health insurance.
“If that all seems reasonable, most applications we get … end up being granted.” Bowman said. “It does require a lot of effort to put together a good application.”
Working as an FQHC consultant for the board in 2007, Rousso alleges board members didn’t want to seek FQHC status because the federal standards would have changed the makeup of the board, forcing more than half the board to be changed so that it was representative of the patient base.
“They were vehemently against (FQHC status),” Rousso said. “In management, sometime the easiest decisions are to do nothing,”
Mike Laffen, chief financial officer for the board, denies that the board was against seeking FQHC status. Laffen says getting the federal certification wasn’t a top concern for the board in 2007 because it didn’t seem like bankruptcy was on the horizon.
“We heard that we didn’t meet FQHC status. … We probably should have vetted that a little better,” Laffen said. “Knowing now what we do, we would’ve made it a priority to go for FQHC status.”
The majority of board members describe their leadership as an effort to keep the vital medical center afloat despite years of losses. The brutal recession that took full effect last year dwindled donations, grants and government aid — leaving the medical center without the resources it normally used to stay solvent.
As it became apparent that 2008 would show drastically reduced revenues, the board knew that it would face its toughest fiscal year. Ironically, the board canceled its biggest annual fundraiser, the Ritzy Trees holiday auction, due to concerns that dismal donations would cause the clinic to actually lose money.
But the leadership of the medical center believed until the last days that it could weather the financial storm. During its final months, the medical center was actively trying to expand by courting three new doctors to hire, and it was even considering opening a new construction fund to finance a new medical facility.
Harless says that the medical center chose not to publicize its grim financial condition in its final months based on the belief that it could get relief from the county. In its final months, getting FQHC status suddenly became a top priority for the board, even though time was not on its side. The leadership at the Coastside medical center tried to get FQHC status quickly by trying to incorporate either with San Mateo County or a private nonprofit clinic in East Palo Alto. But both ideas faltered.
Harless says it didn’t make sense for the medical center to announce publicly that it needed drastic help.
“You don’t set fundraising by saying you’re in dire straits. That’s an awful PR approach,” he said. “We had hope right until the end. If we got $300,000 from the county, I think we could’ve bridged it.”
Rousso and Harless both say they are surprised the medical center sustained itself for as many years as it did.
A frustrated Harless was asked last week whether anything could have saved the medical center.
“I don’t think so,” he replied curtly. “It was inevitably going to happen.”
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