Through some misguided accounting, a health nonprofit has funneled Santa Clara County taxpayer money to subsidize a clinic in another jurisdiction.
Gardner Family Health Network runs seven Silicon Valley clinics, six of which are located in Santa Clara County. The newest facility—Gardner-Packard Children’s Health Clinic—opened in Atherton, San Mateo County, this past spring and has already gobbled up $804,000 in Measure A sales tax revenue from Santa Clara County.
County Executive Jeff Smith ordered an audit on the organization after it asked for $4.3 million in additional subsidies, advances and a line of credit. Already, the Board of Supervisors awarded the company $550,000 to start up a clinic in downtown San Jose in 2012. The board then followed up with a $220,000 grant to cover operating losses and an ongoing lease rate of $12 a year for the county-owned facility on East Santa Clara Street.
Roger Mialoqc, the lead auditor, said sharing Measure A money with another county appears to violate the purpose of the local tax measure. But he stopped short of calling it illegal.
“While we believe that the general intent of voters who approved the 2012 Measure A sales tax was that those monies be used within the County of Santa Clara, the actual language of the ballot measure was broad and vague,” he wrote. “Determination of the legality of the out-of-county use of those funds is beyond the scope of this audit.”
The San Mateo County clinic will cost the health network, on average, about $97,000 a month to stay in one of the nation’s wealthiest zip codes. Twenty-eight percent of patients served at the site live in Santa Clara County.
The Atherton clinic is the Gardner-Packard Children’s Health Center. GFHN began providing services there in March 2014.
Rent at the Atherton site will be nearly $100,000 a month through 2027. The site was selected because of its proximity to Stanford, though it lies in one of the most expensive zip codes in the nation.
“Atherton is one of the most affluent communities in the country, and Atherton Square is the only office project in the town of Atherton,” the office complex leasing website trumpets, according to the audit. “It truly boasts a 'one of a kind' location!”
The university supplied some of the funding to open the facility. But the recent audit predicts annual operating losses to increase in the near future since the Atherton clinic’s primary funder, Lucile Packard Children’s Hospital, plans to withdraw $1 million in annual funding. That puts more Santa Clara County funds at risk of being siphoned over to stopgap the loss.
The audit also warns that the health network has a long history of financial troubles. Its board of directors is largely uninvolved and provides limited oversight, according to Mialoqc.
Gardner Family Health Network employs 478 people and provided medical and dental coverage to 41,110 “disenfranchised, disadvantaged [and] vulnerable” patients in 2013.
Gardner CEO Reymundo Espinoza said the company has taken steps to stabilize its financial condition.
Read the entire audit here on the county website.