California hospital accused of overpaying for executive services

SEIU Local 521, a union representing employees of the Bakersfield, Calif.-based Kern County Hospital Authority, has accused the system of overpaying two private consulting firms that provide its top executives. 

The union alleges the hospital's payments to Cantu Management Group and Meridian Healthcare Partners — both based in Bakersfield — have exceeded contractual amounts by 40 percent to 147 percent, leading to $23 million in unauthorized compensation over the past four years. 

Andrew Cantu of Cantu Management Group is also the CFO of Kern County Hospital Authority and its management representative for independent audits. Russell Judd served as the hospital's CEO until December 2021, and remains president and owner of Meridian Healthcare Partners. 

A nine-page report from the union, obtained by Becker's, alleges the hospital failed to disclose management compensation accurately, failed to properly correct the issue when notified and attempted to conceal this failed disclosure from the public. 

SEIU Local 521 obtained the hospital's executive compensation information using the California Public Records Act, according to the report. It claims to have repeatedly brought questions about the hospital's financial management to the hospital and received "no substantive response." The union hired Scott McHone, a certified forensic accountant, to better understand the financials alongside their investigative team.

Cantu Management Group's maximum payable was $7.2 million between Sept. 1, 2019, and Aug. 31, 2021, but its compensation exceeded that amount by January 2021, according to the report. By August 2021, the firm had received $10,121,528. 

The report alleges that approximately five days after the union questioned this, the hospital posted the agenda for its 2022 board meeting. The agenda requested the board retroactively increase Cantu Management Group's maximum payable to $20,243,284 to cover the term without any changes to the services rendered. 

The union report also indicates that Meridian Healthcare Partners was overpaid. Mr. McHone and the investigative team found that invoices filed with the California Department of Health Care Access and Information show the hospital paid the firm $39.9 million, although the union says the invoices it received documented only $19.3 million. The day after the union requested these payment records, the hospital's legal department took action to remove Meridian's name from financial disclosures, according to the report. 

Kern County Hospital Authority denies the allegations of contractual overpayment, financial mismanagement and concealment of information, according to a June 28 statement shared with Becker's. The hospital stated that services offered by the outside management firms have been beneficial to its patients, but did not directly comment on the compensation discrepancies noted by the union.

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