To: Board of Supervisors
From: Anna Roth, Health Services Director
Report Title: Contract #23-861 with Alvarez & Marsal Healthcare Industry Group, LLC
☒Recommendation of the County Administrator ☐ Recommendation of Board Committee
RECOMMENDATIONS:
APPROVE and AUTHORIZE the Health Services Director, or designee, to execute a contract with Alvarez & Marsal Healthcare Industry Group, LLC, a limited liability company, in an amount not to exceed $6,139,200 to provide interim Chief Financial Officer services, including management of all day-to-day financial operations of the Health Services department, subject to County Counsel and County Administrator approval, for the period October 1, 2024 through September 30, 2025.
FISCAL IMPACT:
Approval of this Contract will result in an amount not to exceed $6,139,200 and will be funded as budgeted by the department (20% Enterprise Fund I, 80% Enterprise Fund II).
BACKGROUND:
Engagement History
On January 16, 2024, the Board of Supervisors approved Contract #23-837 with Alvarez & Marsal Healthcare Industry Group, LLC (A&M), for the period January 1, 2024 through December 31, 2026, in an amount not to exceed $400,000 to provide consultation and technical assistance to Contra Costa Health Services (CCHS) regarding health system transformation including, but not limited to, strategy development, payment reform, selected leader compensation review, and an assessment of human resources processes. To date, CCHS has expended $399,894 and the following work has been completed related to this initial scope of service:
• Strategy development that included briefings on health industry trends, an assessment of their impacts on CCHS and its partners, and actionable recommendations on sustainability, growth, and payment reform.
• CCHS leader compensation review for the Contra Costa Health Plan Chief Executive Officer (CEO) and Chief Operating Officer (COO) positions, as well as the Contra Costa Regional Medical Center CEO.
• An assessment of County Human Resources and CCHS Personnel to support specific workforce management needs of the health department.
On June 25, 2024, the Board of Supervisors approved the contract amendment with A&M, for an additional $1,800,000 with no change to the original contract period January 1, 2024 through December 31, 2026, in a total amount not to exceed $2,200,000, for additional consultation and technical assistance, specifically related to support for organizational structure planning, an assessment of Contra Costa Health Plan (CCHP) and review of the CCHP contracted Enhanced Care Management program, and an assessment of CCHS finance operations. To date, CCHS has expended $977,657 and the following work has been completed related to this amended scope of service:
• An assessment of current administrative structures and organizational transformation activities that has examined areas of Finance, Information Technology, Compliance, Capital Planning, and Quality.
• A review CCHP’s contracted Enhanced Care Management program.
• An assessment of CCHS Finance operations and recommendations to improve effectiveness and transparency.
Initial Findings of Financial Assessment
Current work related to the assessment of CCHS financial operations is ongoing; however, A&M has provided initial findings revealing an urgent need for CCHS to:
• Undertake an effort to transform its finance function as a service organization and collaborative partner to executive and operational leadership, including the Board of Supervisors.
• Empower its operational leaders by developing their financial acumen and positioning them to be accountable for performance.
• Promote collaboration among departmental finance functions and take a “best practice” approach to standardize common processes.
• Ensure leaders within the Finance and IT functions collaborate to modernize manual financial processes.
Scheduled Retirement of Current CFO/COO
These opportunities to enhance transparency, streamline financial operations, and modernize systems require an immediate need for executive financial leadership to steer the organization through a critical transition period with the scheduled retirement of the current CFO/COO occurring at the end of the calendar year.
Despite a national executive search conducted by a leading healthcare executive recruiting firm, CCHS efforts to hire a new CFO have been unsuccessful over the past year. This challenge may stem from two primary factors, 1) the compensation package may be insufficient to attract an experienced executive capable of managing a complex health system that includes both a hospital and a health plan; 2) the current structure of responsibilities under the CFO does not align with industry norms, making it difficult to find a successor with credentials to meet the needs of the County.
Specifically, the current structure includes a single CFO with oversight over traditional County functions such as behavioral health, environmental health, public health, hazardous materials etc. as well as additional enterprise functions such as the Contra Costa Regional Medical Center and the Contra Costa Health Plan, a Health Maintenance Organization (HMO) operated by the County. It is important to note that the current position also operates as the Chief Operating Officer (COO) for certain Health Services department functions.
As such, the interim findings from A&M recommend uncoupling the CFO/COO roles and to bring in an interim CFO along with a team of executive finance personnel resources to manage daily financial operations and drive the organizational transformation efforts required of CCHS. This includes CFO oversight and management of the Contra Costa Regional Medical Center (CCRMC) and Contra Costa Health Plan (CCHP).
Interim CFO Solicitation
Following receipt of the initial findings and recommendations from A&M, CCHS solicited a proposal from A&M to provide the required interim CFO duties for the period of one year. A&M provided a scope of service to provide interim CFO services, including:
• Providing leadership to finance and accounting staff employed by the CCHS and manage all aspects of the day-to-day operations and support activities of the CCHS finance function as well as help identify issues and opportunities within the departments reporting directly to the CFO.
• Assisting in developing appropriate financial reporting packages for County and CCHS leadership.
• Assisting CCHS in assessing the current skills, staffing and organization of the finance function and make recommendations to leadership to enhance support of the department’s objectives.
• Assessing the financial operations of various CCHS function areas and implement process improvements to enhance reporting and decision support functions as appropriate.
• Assessing current reporting tools and methodologies and assist with enhancements to improve timeliness and efficiency of reporting.
The estimated cost of this engagement is $6,139,200 based on the following breakdown:
In addition, A&M has provided detailed hourly rates for personnel that may be assigned to the positions above or additional A&M personnel that may be needed for supplemental tasks requested by the department. A summary of the hourly rate schedule is below:
Today’s action requests that the Board of Supervisors authorize CCHS to enter a new contract for interim CFO services for the period October 1, 2024, through September 30, 2025. CCHS will continue to provide updates to the Board of Supervisors as process improvements are made to the CCHS finance function as well as updates to the organizational structure and search for a permanent CFO.
CONSEQUENCE OF NEGATIVE ACTION:
If this contract is not approved, Contra Costa Health may not be able to provide strategic leadership to support existing finance operations as the current CFO/COO has announced his retirement.
Additionally, CCH cannot strengthen and enhance its finance functions to more efficiently support its operations, meet its future challenges and advance the organization’s mission to deliver high- quality healthcare services.