Adopted Surprise Valley Healthcare District - 2026

Surprise Valley Health Care District Municipal Service Review final adopted april 14, 2026 Prepared for Modoc LAFCo Submitted by Policy Consulting Associates, LLC TABLE OF CONTENTS .............................................................................................................. 2 List of Figures ......................................................................................................................... 4 Acronyms and Definitions ....................................................................................................... 5 Preface ................................................................................................................................... 8 Context ............................................................................................................................................. 8 Credits .............................................................................................................................................. 8 1. Executive Summary ...................................................................................................... 9 Providers .......................................................................................................................................... 9 Governance and Accountability ........................................................................................................ 9 Planning and Management ............................................................................................................. 11 Growth and Population Projections ................................................................................................ 11 Financing ............................................................................................................................................................ 11 Sphere of Influence ............................................................................................................................................ 12 Summary of Determinations/Recommendations ............................................................................ 12 2. Background ................................................................................................................. 14 LAFCo Overview .............................................................................................................................. 14 Municipal Services Review Legislation ............................................................................................ 14 Municipal Services Review Process ................................................................................................. 15 Sphere of Influence Updates ........................................................................................................... 15 Disadvantaged Unincorporated Communities ................................................................................. 17 3. Overview .................................................................................................................... 19 California Healthcare Districts ......................................................................................................... 19 4. Surprise Valley Health care District ............................................................................. 25 District Overview ............................................................................................................................ 25 Accountability and Governance ...................................................................................................... 29 Disadvantaged Unincorporated Communities ................................................................................. 32 Growth and Population Projections ................................................................................................ 33 Land Use ............................................................................................................................................................. 33 Financial Ability to Provide Services ................................................................................................ 35 Overview of Financial Capacity and Disclosure Concerns .................................................................................. 35 Financing Sources and Constraints .................................................................................................................... 35 Surprise Valley Health Care MSR Draft Final Financial Planning and Reporting ....................................................................................................................... 36 Balanced Budget ................................................................................................................................................ 36 Fund Balances, Reserves and Liquidity .............................................................................................................. 37 Net Position ........................................................................................................................................................ 38 Emergency Cash-Flow Crisis and Loan Dependence .......................................................................................... 38 Deficiencies in Legal Oversight ........................................................................................................................... 39 Capital Assets ..................................................................................................................................................... 39 Pension and OPEB Liabilities .............................................................................................................................. 40 Conclusion .......................................................................................................................................................... 40 Healthcare Services ......................................................................................................................... 41 Service Overview ................................................................................................................................................ 41 Service Demand ................................................................................................................................................. 45 Planning and Management ................................................................................................................................ 47 Staffing ............................................................................................................................................................... 47 Facilities .............................................................................................................................................................. 50 Facility Sharing ................................................................................................................................................... 50 Challenges .......................................................................................................................................................... 51 Surprise Valley Health Care District MSR Determinations ................................................................ 58 Growth and Population Projections ................................................................................................................... 58 The Location and Characteristics of Disadvantaged Unincorporated Communities Within or Contiguous to the Agency’s SOI ....................................................................................................................................................... 58 Present and Planned Capacity of Public Facilities and Adequacy of Public Services, Including Infrastructure Needs and Deficiencies ...................................................................................................................................... 58 Financial Ability of Agencies to Provide Services ............................................................................................... 59 Long-term service sustainability is uncertain, and without major reforms, SVHCD may face continuing or escalating financial distress that threatens service continuity. Status of, and Opportunities for, Shared Facilities .............................................................................................................................................................. 60 Accountability for Community Service Needs, Including Governmental Structure and Operational Efficiencies ........................................................................................................................................................................... 60 3 Table of Contents Policy Consulting Associates, LLC Surprise Valley Health Care MSR Draft Final Figure 1-1: Surprise Valley Health Care District Map ....................................................... 10 Figure 1-2: Surprise Valley Health Care District Estimated Population and Growth Projection 11 Figure 4.1: Surprise Valley Health Care District Profile .................................................... 26 Figure 4-2: Surprise Valley Health Care District Boundaries and SOI ................................ 28 Figure 4-3: Modoc County Population Estimate 2018-2020 ............................................. 34 Figure 4-5: Surprise Valley Community Hospital 5 Year Utilization Data .......................... 45 Figure 4-6: Surprise Valley Health Care District Organizational Chart .............................. 49 Figure 4-7: Structural Performance Categories for SVHCD Facilities ................................. 50 Figure 4-8: Surprise Valley Health Care District PQI Comparison Chart 2023 .................... 54 Figure 4-9: Surprise Valley Health Care District Patient Origin Data ................................ 56 4 List of Figures Policy Consulting Associates, LLC Surprise Valley Health Care MSR Final AAA: Abdominal aortic aneurysm repair AMSL: Above Mean Sea Level AB: Assembly Bill ACA: Affordable Care Act ACHC: Accreditation Commission for Health Care AHRQ: Agency for Healthcare Research and Quality AMSL: Above Main Sea Level ALS: Amyotrophic Lateral Sclerosis BLM: Bureau of Land Management CABG: Coronary Artery Bypass Graft CAFR: Comprehensive Annual Financial Report CAH: Critical Access Hospital CARF: Commission on Accreditation of Rehabilitation Facilities CDPH: California Department of Public Health CEQA: California Environmental Quality Act CHA: California Hospital Association CHAP: Community Health Accreditation Program CHHS: California Health and Human Services Agency CHIP: Community Healthcare Implementation Plan CHNA: Community Healthcare Needs Assessment CIP: Capital Improvement Plan or Program CKH: Cortese-Knox-Hertzberg Local Government Reorganization Act of 2000 CMS: Centers for Medicare and Medicaid Services COPD: Chronic Obstructive Pulmonary Disease DAC: Disadvantaged Community DHCS: Department of Health Care Services DNVHC: DNV Healthcare, Inc. DOF: California Department of Finance DUCs: Disadvantaged Unincorporated Communities ED: Emergency Department 5 Acronyms and Definitions Policy Consulting Associates, LLC Surprise Valley Health Care MSR Final EKG: Electrocardiogram EMS: Emergency Medical Services FPPC: California Fair Political Practices Commission FTE: Full-Time Equivalent FY: Fiscal Year GIS: Geographic Information Systems GP: General Plan HCAHPS: Hospital Consumer Assessment of Healthcare Providers and Systems HCAI: Department of Health Care Access and Information HFAP: Healthcare Facilities Accreditation Program HHS: Health and Human Services HMO: Health Maintenance Organization HQAA: Healthcare Quality Association on Accreditation IHHS: In-Home Support Services IMI: Inpatient Mortality Indicators JC: Joint Commission LAFCo: Local Agency Formation Commission Medi-Cal: California Medical Assistance Program MCPHD: Modoc County Public Health Department MSR: Municipal Service Review NPC: Non-structural Performance Categories OPEB: Other Post-Employment Benefits OSHPD: Office of Statewide Health Planning and Development (now HCAI) PCI: Percutaneous Coronary Intervention PPACA: Patient Protection and Affordable Care Act PQI: Prevention Quality Indicators PSI: Patient Safety Indicators SB: Senate Bill SCHIP: State Children's Health Insurance Program SOI: Sphere of Influence SPC: Structural Performance Categories SVCH: Surprise Valley Community Hospital 6 Acronyms and Definitions Policy Consulting Associates, LLC Surprise Valley Health Care MSR Final SVHCD: Surprise Valley Health Care District USFS: U.S. Forest Service 7 Acronyms and Definitions Policy Consulting Associates, LLC Surprise Valley Health Care MSR Final Prepared for the Local Agency Formation Commission of Modoc County (LAFCo), this report is a Municipal Service Review (MSR) for the Surprise Valley Health Care District (SVHCD). Modoc LAFCo is required to prepare this Service Review by the Cortese-Knox- Hertzberg Local Government Reorganization Act of 2000 (CKH), (Government Code §56000, et seq.), which took effect on January 1, 2001. The MSR examines services provided by public agencies whose boundaries and governance are subject to LAFCo. The agency providing healthcare services in Modoc County is the focus of this review. The authors extend their appreciation to those individuals at the agencies that provided planning and financial information and documents used in this report. LAFCo staff provided project coordination and GIS support. This report was prepared by Policy Consulting Associates, LLC, and Jill Hetland was the primary author. 8 Preface Policy Consulting Associates, LLC This report is a municipal service review (MSR) report on healthcare services prepared for Modoc LAFCo. A service review is a State-required comprehensive study of services within a designated geographic area, in this case, the County of Modoc. The service review requirement is codified in the CKH (Government Code Section 56000 et seq.). The intent of this MSR is to conduct comprehensive review of services provided by the Surprise Valley Health Care District (SVHCD). The proposed MSR determinations are located at the end of Chapter 4. The MSR conducted prior to this was completed in April 2012. This report covers the Surprise Valley Health Care District, which consists of the Surprise Valley Community Hospital, the Surprise Valley Rural Health Clinic, Surprise Valley Ambulance, and Surprise Valley Distinct Part Nursing Facility. Each provides healthcare services and programs in eastern Modoc County. The location of the District is shown in Figure 1-1. The healthcare district reviewed in this MSR must meet Brown Act requirements, including public noticing and posting of meetings and agendas, communication and outreach to residents, and ADA-compliant websites that provide links to meeting information, contacts, and documents such as financial reports. There are extensive website requirements for healthcare districts as outlined in Senate Bill 929, Assembly Bill 2257, and Assembly Bill 2019. The District meets the majority of the requirements outlined. To ensure compliance with all regulations, it is recommended that SVHCD create and provide up-to-date financial reports such as annual budgets. Since the drafting of this report, the District has consolidated the two websites that were hosted by the District to ensure clean accessibility. With the disconnection of its unused website, the District should verify functionality of links and updated resources on its live site. Overall, the District demonstrated accountability and transparency in their disclosure of information and cooperation during the process of this MSR. The District responded in a timely manner and cooperated with document requests. Ch.1 Executive Summary 9 Policy Consulting Associates, LLC Surprise Valley Health Care MSR Final Figure 1-1: Surprise Valley Health Care District Map R 09 E California/Oregon State Line kj kj kj 1 3 2 2 1 1 2 1 3 2 1 2 2 1 3 1 1 2 1 1 3 2 1 3 2 2 1 3 2 2 1 1 2 1 2 1 1 1 1 2 3 3 2 1 1 1 2 1 2 1 1 3 3 1 1 2 6 5 4 3 2 4 3 1 1 6 4 3 5 4 2 6 3 2 5 3 3 1 3 2 6 5 3 3 1 1 6 5 4 2 6 4 5 3 6 4 3 5 2 2 3 7 5 6 6 4 6 3 2 4 9 5 7 1 0 8 1 0 9 1 0 9 8 1 1 3 3 7 6 1 1 3 1 1 3 1 6 3 3 3 1 3 7 8 1 9 1 1 1 6 1 0 3 3 3 3 7 6 7 6 1 1 7 8 1 3 1 7 6 9 0 3 3 3 9 8 1 8 6 6 7 0 1 1 9 0 1 1 7 8 2 3 9 8 9 2 6 1 0 1 0 3 7 9 8 1 8 0 9 3 2 2 0 1 1 5 8 9 1 8 0 0 2 2 9 3 2 5 8 7 2 9 0 7 0 9 2 2 2 1 1 2 3 8 5 1 2 3 2 3 1 1 2 5 0 0 7 7 2 3 2 2 8 9 1 2 2 2 5 5 3 3 2 8 8 8 5 7 2 1 1 2 5 0 3 8 2 9 2 2 3 5 2 7 7 0 · 5 8 9 2 0 9 1 | 8 7 þ 2 } 0 9 2 2 5 2 2 9 3 2 8 9 7 7 0 1 1 2 3 2 2 9 0 2 4 7 1 9 0 2 2 1 9 3 3 8 4 9 6 3 1 8 3 6 1 8 3 1 kj 2 2 3 4 9 9 2 1 2 3 4 9 1 2 2 6 3 2 2 3 2 1 9 1 8 3 1 4 4 2 3 2 2 9 9 3 4 1 6 2 1 9 4 8 3 2 1 9 3 2 3 2 · 6 1 1 | 9 4 4 3 1 8 3 8 6 þ} 1 4 6 2 2 2 9 8 3 8 1 3 2 3 1 1 8 6 1 2 3 1 6 3 2 8 3 1 3 1 1 6 2 2 1 2 8 3 4 7 3 0 1 5 2 4 7 3 A 5 0 7 2 4 6 1 1 2 2 3 1 3 2 1 2 3 9 2 1 2 1 1 3 0 5 2 1 2 3 2 3 1 7 4 1 1 2 3 3 2 3 2 1 2 0 3 1 2 5 2 1 3 3 7 4 2 2 1 3 2 3 d 2 0 7 5 0 3 3 2 5 7 4 1 4 0 5 0 2 1 2 7 4 7 5 2 3 2 2 2 3 4 0 2 5 1 1 7 2 5 2 2 4 7 4 3 2 1 0 2 1 2 5 2 3 5 6 3 7 1 2 1 4 3 6 5 1 3 4 i 6 5 0 1 1 2 2 3 n 1 2 1 2 2 3 1 2 1 2 1 2 1 3 1 4 3 2 3 2 1 6 1 1 2 1 5 2 2 2 1 2 4 3 3 1 6 3 1 2 2 1 5 2 2 1 2 1 2 3 1 3 4 6 3 2 2 5 4 1 6 5 3 1 4 4 1 2 1 6 6 3 3 2 2 2 1 2 5 5 1 4 1 1 6 3 4 3 2 2 6 5 3 5 1 1 2 1 2 3 2 M 1 4 3 1 6 5 4 6 2 3 4 5 6 3 2 3 4 6 5 o 1 1 2 2 3 1 1 1 2 2 3 1 2 1 1 1 2 3 1 2 2 d 3 4 2 3 5 1 1 1 1 6 2 1 2 2 1 2 3 3 2 3 4 1 1 1 5 6 1 2 1 2 1 2 2 3 3 2 4 3 2 1 6 3 5 4 1 5 6 1 o 2 2 3 1 1 3 3 4 3 4 5 2 6 5 6 2 1 2 2 1 1 3 4 3 4 3 3 5 6 6 5 6 1 1 7 3 9 3 kj 3 2 1 0 6 7 c 4 5 9 8 1 0 9 8 0 1 1 1 C 3 3 6 7 1 1 3 3 3 1 1 3 3 6 1 7 8 3 1 1 6 9 3 3 1 6 7 0 3 7 6 1 1 1 7 3 o 8 9 1 1 1 1 6 1 0 8 9 0 1 3 7 1 3 3 3 6 8 7 0 9 8 2 7 6 1 0 9 2 1 3 9 8 1 0 1 1 3 6 8 9 8 2 2 3 7 u 9 0 5 1 0 1 C 8 2 1 0 3 2 9 5 2 8 8 7 9 0 0 9 2 n 0 7 2 9 1 2 2 3 2 2 3 t 1 5 8 2 1 5 1 2 3 8 a 5 5 y 1 2 8 7 2 2 8 9 0 3 2 2 9 0 2 3 5 7 1 8 2 2 1 2 3 0 7 1 2 7 9 2 2 5 3 2 8 8 5 7 0 3 5 9 0 8 2 9 2 2 3 2 7 1 2 0 9 7 0 2 1 2 5 7 9 3 2 2 0 8 n 2 9 4 2 1 2 9 3 2 1 4 3 8 9 7 0 6 9 3 8 1 6 1 3 8 1 2 2 2 3 3 1 2 4 b 9 1 2 4 3 2 9 1 4 4 2 9 6 1 2 2 9 8 1 3 2 8 3 3 6 1 4 3 1 1 9 2 2 2 3 6 1 2 3 8 2 1 6 2 3 9 9 4 4 1 3 6 8 8 4 3 1 2 9 3 2 3 6 6 2 1 8 1 1 3 1 2 1 2 4 8 2 y 1 6 3 9 8 3 1 3 3 1 2 2 3 2 3 4 7 1 6 5 2 0 8 7 4 0 5 2 7 4 1 1 2 1 2 1 2 2 3 3 3 1 2 1 1 3 2 3 1 3 3 2 0 5 1 1 2 2 5 2 0 2 2 7 7 3 3 4 4 1 1 1 3 0 1 2 2 2 2 5 0 2 1 3 7 2 1 4 5 3 3 3 2 2 3 0 5 7 3 7 2 1 2 2 4 4 3 1 0 5 0 2 1 5 7 2 2 1 2 2 3 7 0 4 2 2 5 3 4 2 1 7 4 2 1 2 3 0 6 3 2 5 5 1 2 4 3 7 6 5 1 3 4 6 5 1 1 1 2 2 2 3 1 2 3 2 1 1 2 1 2 1 2 3 2 2 2 1 1 2 1 4 4 3 2 2 1 3 6 5 3 6 5 3 1 1 1 2 1 2 1 1 3 4 2 3 2 4 6 2 1 1 5 3 2 2 2 3 2 3 1 4 3 2 6 6 2 2 1 5 3 1 5 4 1 1 kj 1 3 4 2 1 2 2 2 6 5 3 2 1 6 4 3 5 3 1 1 1 6 5 2 3 2 1 5 4 1 6 4 2 3 3 4 6 5 6 2 3 4 6 5 1 1 2 1 2 2 2 1 3 3 1 1 1 1 2 1 T 1 2 3 1 2 1 2 3 1 1 4 2 2 2 3 5 5 4 2 3 6 6 1 3 1 1 2 2 3 1 2 4 1 2 u 3 5 1 2 2 3 6 3 1 2 1 1 4 2 kj 2 3 3 3 1 5 4 5 3 1 6 1 2 6 3 1 2 4 1 2 2 1 3 4 1 2 5 5 6 3 3 l 6 6 3 4 5 1 1 7 6 0 9 3 1 3 e 2 6 7 L 3 8 4 5 9 1 0 9 8 0 1 l o 1 a 3 1 N 3 3 3 1 1 6 7 1 1 3 6 7 3 o 1 6 7 1 k 6 8 3 1 1 7 0 9 3 1 0 1 8 9 3 3 6 e 7 9 8 1 1 0 1 1 1 3 3 3 8 1 3 1 k 7 6 6 9 3 3 2 e 7 0 9 8 2 3 0 6 1 1 1 7 w 1 8 9 3 6 9 8 0 1 0 1 2 7 5 8 1 9 2 o 0 1 0 1 3 8 9 2 2 2 8 3 9 5 0 8 e 7 0 9 u 7 2 0 9 2 ·|}þ l 1 2 2 1 1 2 2 3 3 t 5 1 kj 5 8 2 2 8 l 3 3 5 1 8 5 2 1 7 0 9 7 2 0 9 2 2 2 5 8 2 3 3 8 7 1 9 0 9 2 2 2 1 2 3 2 5 5 7 2 2 3 8 0 7 3 1 8 0 2 9 9 3 2 2 2 1 5 7 2 5 8 0 2 9 7 0 8 2 9 1 4 9 0 2 2 2 7 3 2 9 1 1 S H 3 8 2 7 2 3 0 9 9 4 M 6 1 3 8 6 1 8 3 u e 1 2 1 2 3 2 2 3 9 4 4 9 1 2 2 r a 3 4 1 9 4 6 2 1 6 8 3 1 2 1 8 2 3 2 9 3 3 4 p 9 6 1 1 8 2 1 2 2 l 3 2 3 4 4 6 3 2 o 9 1 2 1 9 6 1 3 2 8 3 8 2 t 3 1 3 1 4 2 9 6 1 2 4 r 1 6 8 1 2 9 8 3 3 h 3 1 8 6 3 2 3 2 7 1 2 1 i 6 4 0 2 1 3 kj 5 8 3 2 s 4 7 c 0 2 5 d 7 4 3 1 1 2 1 e 2 2 1 2 3 a 1 3 1 3 2 2 3 1 3 1 3 A 4 2 1 0 0 7 5 1 2 2 2 5 2 2 3 7 4 3 kj 3 r 0 1 5 1 1 1 7 2 2 2 2 V 4 0 3 2 o 3 5 2 1 1 3 2 0 3 2 3 5 7 2 d e 7 2 4 3 1 2 3 4 1 0 2 1 0 5 5 1 2 3 7 2 2 4 7 2 2 a 2 0 5 2 4 7 4 3 3 5 0 6 1 i 1 5 2 1 2 2 3 4 7 2 C n D 3 6 l 5 c 1 4 R 3 l 6 5 3 B 2 1 a 1 2 2 e 2 1 1 i 3 1 2 1 2 2 2 1 1 2 s 1 2 1 5 2 1 1 6 1 2 n 4 3 3 2 3 1 y 6 4 3 2 1 2 5 1 1 4 2 e 1 3 6 2 2 2 4 3 1 2 1 t 4 1 2 3 1 2 3 R 3 2 i 4 6 3 2 2 1 3 5 1 2 b 5 6 1 4 1 C 2 r 3 2 1 6 3 6 2 2 1 5 3 g 1 4 3 5 2 5 6 3 1 6 5 4 s · 1 1 | W i 4 þ 2 } y 2 3 2 3 3 1 4 6 c 5 5 2 e 6 2 3 4 6 5 e L t 1 i 2 1 2 1 2 3 2 1 3 o 1 1 S 1 9 2 2 l 1 n 1 1 1 i 1 2 2 2 1 l 4 3 2 3 1 5 2 5 3 1 2 2 1 6 4 3 6 1 r 3 2 2 1 1 k 4 5 2 o 2 2 3 1 2 1 3 1 3 2 2 1 2 4 5 3 3 3 1 3 1 9 4 6 6 2 5 5 1 a 1 3 2 1 n 4 2 3 1 v e 4 5 5 6 1 3 u w 6 2 6 3 7 5 3 4 3 6 0 2 1 9 1 3 S 1 4 3 3 8 l 6 7 9 6 0 g 1 kj y o e 8 9 1 0 R 1 1 3 3 n p 6 7 1 1 1 1 3 3 3 6 6 kj 7 7 8 1 e r 9 1 1 1 i 0 3 3 a A 1 3 3 6 7 6 7 9 8 8 1 1 9 0 0 1 1 3 3 1 6 3 r 7 6 8 1 7 o 9 8 9 1 2 3 2 0 0 3 3 3 n 6 1 1 7 1 l 8 8 1 9 9 0 1 1 t 6 2 7 · 0 2 |}þ t 5 L 8 3 8 9 9 1 0 3 2 0 1 2 1 3 c 8 3 2 9 u 5 7 8 0 o 9 y 2 9 1 0 7 h 2 9 a 1 r 5 2 2 3 5 8 1 kj 1 2 2 2 3 2 a 5 3 5 8 n 8 7 1 2 1 9 0 1 2 kj 2 2 3 5 3 2 5 8 7 8 k 7 0 9 3 E 0 2 9 2 2 1 s 2 2 5 8 5 7 0 7 2 1 8 7 9 2 3 0 2 2 3 2 2 5 D 2 9 3 8 1 e 2 2 0 9 7 a 0 1 5 2 2 8 9 7 3 kj 4 e 0 2 9 8 2 9 1 3 2 1 7 2 a 0 3 4 g 9 6 A 1 8 3 R r F 1 C 1 6 8 v 3 1 2 2 l 3 4 9 1 o 6 1 2 2 e 3 2 4 e 2 i 4 9 3 9 6 2 1 8 1 3 1 2 3 2 s 4 R a 2 4 9 6 3 9 6 8 1 2 3 2 v r L 3 1 1 kj 4 d 8 2 l 9 3 1 1 6 2 2 9 4 3 6 8 3 2 4 1 3 2 t 9 8 2 3 3 1 3 8 1 i a 6 2 1 1 1 C t 4 k a 6 2 9 8 1 2 3 3 3 8 l 3 2 1 1 e 7 B 4 2 2 kj 6 3 kj l k 3 1 0 5 r 2 7 4 e r u 0 5 e 7 2 v 4 1 e 1 2 e i 2 s 3 1 3 1 1 d 1 2 2 2 R 3 2 3 3 i 0 1 3 5 2 1 1 kj e 7 3 2 1 2 r 4 2 · l 0 1 2 |}þ C 3 3 0 5 2 3 5 2 2 1 r w 2 7 3 1 3 e 4 7 1 2 2 l 0 4 1 0 5 2 2 k 3 4 7 5 2 2 2 3 3 3 e 0 7 2 2 4 9 2 3 7 0 1 1 4 5 2 i e 0 2 1 3 1 5 2 e 7 2 3 2 a a 7 t 2 9 4 4 1 r 3 1 1 6 5 2 2 5 0 3 2 2 1 4 y 3 l 5 6 1 s 4 5 v 6 3 l 5 n 1 1 2 2 3 2 1 1 s 1 1 2 2 2 3 2 2 3 1 2 1 4 1 e 1 3 2 1 2 6 5 2 3 1 1 o 2 1 2 2 1 4 3 4 2 d 3 3 6 2 3 2 1 5 6 1 1 5 1 1 4 2 2 2 6 4 3 2 3 5 4 2 3 1 2 6 3 2 5 2 3 3 r 1 1 6 5 1 1 2 4 1 1 1 2 2 i 3 3 3 2 6 1 6 5 1 5 4 1 5 2 2 1 6 3 · 1 4 4 3 v kj | r 2 þ} 3 4 6 5 T 2 3 3 4 5 6 1 1 2 3 2 2 1 1 1 1 1 o 2 2 2 2 1 1 3 3 3 2 1 1 9 4 1 1 2 h 6 5 6 2 2 3 2 2 1 2 1 3 1 3 3 1 2 4 4 3 2 1 5 5 1 6 6 1 2 3 2 1 1 3 2 4 2 5 4 6 3 i 1 5 2 2 1 2 6 3 3 1 3 4 3 1 5 6 5 2 1 2 1 2 o 2 4 3 3 3 r 1 5 6 6 7 5 4 9 1 6 0 8 1 1 2 3 3 3 3 6 4 9 5 7 1 0 8 9 m 1 0 0 3 3 1 1 1 1 1 3 1 L 6 7 3 2 6 3 7 1 1 1 1 2 0 1 3 3 3 8 3 3 2 2 3 7 6 6 5 8 9 1 7 8 1 3 9 0 7 3 1 9 6 1 1 1 3 7 6 8 8 1 3 0 7 9 9 9 3 1 0 1 0 3 7 6 a 1 0 9 2 3 8 9 0 1 1 1 3 8 8 2 7 6 9 0 1 9 0 1 1 2 8 2 9 8 5 0 s e 1 7 0 9 kj 8 7 2 1 3 2 1 2 3 8 5 5 8 3 1 1 2 2 9 2 2 2 3 R 5 7 2 3 2 8 5 8 2 1 0 7 2 9 2 3 1 5 2 2 5 8 7 7 3 2 2 2 8 0 0 3 5 4 0 9 9 2 g 2 9 0 7 1 9 2 9 2 2 2 5 7 1 8 0 2 0 9 9 2 e 7 2 0 D 1 9 6 R 8 1 s 9 3 2 1 2 1 2 6 3 2 4 3 o 9 4 9 3 e 1 2 2 2 2 3 3 3 D G 4 2 9 4 1 6 2 1 e 8 6 1 2 3 2 e 3 8 1 4 3 L 2 9 3 2 2 2 P 4 6 1 1 3 9 8 8 3 4 9 3 2 1 6 1 2 r 8 3 7 2 4 6C 1 9 8 1 8 M P H 3 r S ( s ·| o 6 1 }þ 8 r W a a n i v M 3 i e 3 k 1 o 1 1 1 2 2 2 y o a 3 2 s 1 3 3 3 i e 1 1 3 1 o 9 3 2 2 2 o 4 2 v 3 0 1 3 5 0 5 r 2 2 7 1 1 g 4 7 2 2 1 3 1 3 0 4 2 0 2 2 2 3 5 4 5 3 4 7 2 2 s n 3 7 0 1 e i 5 2 1 0 5 2 v u r D 7 2 0 4 5 i 3 d 2 c 2 7 7 4 d 0 i l 2 5 r 7 e h e c 3 o M s l l 3 n t 3 4 1 1 2 1 2 1 2 3 o B 2 3 2 2 y o 5 0 1 1 1 e w i 2 1 i 5 2 2 2 L 2 3 1 1 2 1 6 4 3 4 1 1 3 5 N 1 2 2 6 5 2 3 1 1 2 2 2 r 1 2 2 o 4 3 3 t 3 4 o 6 6 3 2 5 1 1 2 1 1 4 2 4 3 6 1 2 c 3 5 C 3 6 6 5 5 a w 1 y l & 1 3 4 6 2 a s n 4 d e 4 1 3 k 1 2 2 3 1 1 2 1 1 2 2 3 2 r 1 1 2 6 3 1 M 3 W 1 1 C 5 4 M y 6 1 2 1 2 3 2 B a 2 2 1 e 1 o 4 3 3 1 1 w 4 5 2 1 6 5 3 2 6 2 2 2 1 2 1 1 1 3 2 2 3 3 3 4 e R 5 6 5 1 1 2 1 2 3 2 R 4 3 2 1 6 5 4 5 2 4 3 5 6s 6 o 2 c 3l e 4 5 o o ) e 3 e 1 1 3 3 a 7 o s 1 G 1 1 1 3 3 6 P 1 3 3 6 7 8 7 9 u 1 0 1 1 u 1 3 3 3 6 s 7 6 / 8 7 8 9 1 k 9 0 0 1 1 2 1 1 1 3 3 1 2 6 6 t 1 3 7 n 3 1 3 3 3 7 8 9 8 0 0 1 n 7 5 6 8 9 8 0 7 0 0 9 9 e 8 2 1 9 0 1 1 n n L i 1 r V kj n 9 r L c 1 3 i 2 3 2 8 1 t a 2 d a 2 1 2 2 v 5 8 d 7 2 3 3 5 8 9 1 2 0 2 2 3 2 2 1 3 2 1 5 5 7 8 y a 0 9 7 1 8 9 0 2 1 4 e 2 2 2 2 5 5 h 2 3 8 8 7 1 3 l 0 9 3 8 1 6 2 2 s 2 9 7 3 o · 8 | 5 a7 þ} 0 7 9 0 k l 9 2 7 2 9 0 3 2 2 e i s 2 1 3 kj B 0 e 1 2 3 9 2 r 2 r 4 3 9 C 8 6 y 3 1 1 9 2 2 2 2 4 6 1 3 3 3 4 9 1 9 8 1 3 2 3 2 2 2 1 1 i e 3 2 4 4 9 5 6 6 9 1 1 1 8 8 1 2 3 3 3 2 2 4 4 2 9 6 9 e 7 4 8 1 2 6 5 1 3 o 3 8 2 2 3 9 6 4 6 1 3 1 8 2 r 8 n 6 3 1 1 8 3 1 2 2 3 3 1 1 1 s 0 2 u 3 3 e 5 2 1 3 7 2 2 1 4 2 3 3 5 0 1 7 1 1 1 3 4 2 2 2 2 3 0 4 3 3 3 2 2 5 1 7 1 1 1 4 2 2 2 2 2 1 C 3 3 2 S 3 0 3 0 5 5 2 2 1 1 1 n 7 7 1 2 2 e 4 4 2 2 3 3 0 3 5 0 5 2 6 2 3 2 7 4 3 M A5 4 7 1 1 2 2 0 0 5 3 5 2 7 2 3 o 4 7 4 0 5 2 S 1 7 1 2 2 o 2 3 3 2 d k 4 1 1 2 2 u 3 1 2 d 4 3 3 1 6 5 1 5 2 2 1 2 4 3 o 3 1 6 1 1 5 1 2 2 1 3 2 2 2 2 u 4 3 1 r u 3 2 1 1 1 a 6 2 2 2 1 5 2 3 2 2 1 3 1 2 2 4 1 4 1 1 3 3 1 2 1 o 5 6 6 2 1 2 c 5 2 3 1 2 3 4 4 2 6 5 4 3 3 6 6 3 6 d 5 1 1 1 1 4 2 4 3 2 6 3 2 2 n 3 5 2 6 e r 5 3 kj r 3 1 1 4 1 3 2 6 2 1 p 5 4 3 5 1 1 6 2 2 5 3 1 o 2 1 y 3 1 : p 4 2 5 t 6 2 1 2 3 3 1 4 5 1 6 2 1 1 3 2 2 2 2 1 1 4 3 3 t 1 1 1 5 2 y 6 1 2 1 3 3 1 M 2 2 3 2 3 1 2 1 1 1 1 c 3 3 2 1 5 4 4 5 1 2 1 1 6 6 6 6 2 3 3 1 e r 2 3 2 2 3 7 4 3 5 9 1 0 8 3 1 5 6 4 1 1 2 1 3 3 3 2 2 1 7 6 4 8 2 3 5 9 3 1 4 6 0 5 1 6 8 3 9 o i 2 1 0 4 3 5 6 2 1 2 L d 3 5 8 6 s L 3 1 2 0 7 1 2 5 d 9 1 2 3 8 2 2 2 5 2 3 3 8 5 8 1 1 2 1 2 2 2 5 7 2 2 2 8 0 3 2 3 1 8 5 5 7 9 8 i 7 0 2 2 2 1 2 : 0 9 3 3 9 2 2 o 7 A 7 0 7 e 9 0 1 5 9 0 9 1 6 2 0 2 7 5 8 n 3 7 0 9 7 9 3 2 2 1 1 3 8 3 6 9 3 7 c 0 1 1 2 3 8 2 4 9 9 0 1 2 1 2 0 e F 6 8 2 4 9 3 3 1 1 2 3 2 V 4 3 1 1 9 6 2 4 L 1 1 2 2 2 4 9 2 3 2 9 8 3 1 3 2 1 4 6 1 3 2 2 9 8 2 3 3 9 4 3 6 6 1 1 6 1 8 1 3 2 2 8 3 8 C 3 6 1 6 3 4 9 A 8 1 1 4 8 2 3 3 5 2 6 3 8 a 3 1 8 1 3 2 5 7 3 2 8 0 9 1 2 1 2 2 F 3 7 3 0 2 9 1 1 2 o 0 2 3 l 5 3 7 2 1 1 3 4 2 1 1 2 0 1 1 3 3 3 5 2 2 1 C 2 2 1 3 7 3 2 3 2 2 l 4 3 0 1 1 3 5 4 2 1 2 0 2 2 2 0 7 3 3 5 5 4 3 2 2 0 7 5 1 2 2 1 4 7 4 7 2 3 e 4 0 5 2 5 1 3 7 2 7 2 4 3 4 o 4 2 9 3 5 7 2 0 R 4 1 2 4 6 3 2 9 1 8 3 1 1 2 2 y 6 2 1 3 3 8 1 1 2 2 3 1 2 4 3 1 1 1 6 2 3 1 5 2 1 1 4 3 1 2 2 2 3 2 2 1 e 2 1 2 3 2 6 5 2 3 3 2 1 1 1 1 4 1 3 5 4 2 2 2 1 6 3 2 5 4 3 2 1 3 6 6 4 3 5 3 1 6 5 1 2 2 5 3 1 1 4 4 1 3 2 H 3 6 3 2 kj 5 2 2 6 3 1 s 5 1 4 6 3 1 5 0 2 2 3 3 5 2 7 4 1 1 0 5 2 1 2 2 7 4 3 3 1 1 2 o 2 3 2 3 3 1 1 e 4 1 1 5 3 2 2 1 1 6 1 2 2 6 2 1 3 1 3 2 4 1 1 2 1 5 3 2 6 2 3 2 1 1 1 3 2 2 1 6 4 4 3 2 2 5 5 2 3 1 3 6 1 4 2 1 2 3 2 5 3 1 C l 6 4 1 2 2 2 5 6 3 2 2 3 3 a 4 3 1 5 1 4 6 1 1 2 1 u 5 4 2 2 6 2 3 7 3 4 5 3 6 6 3 5 L 1 4 3 3 0 6 6 1 1 5 6 1 7 l 1 1 3 0 3 e 3 t 9 8 3 1 3 1 1 1 6 t 8 3 3 7 9 1 3 3 6 a 0 1 7 1 3 0 3 6 6 i 1 1 1 7 8 1 3 1 6 6 7 1 1 1 9 8 9 3 3 3 7 7 0 0 3 3 6 8 1 1 7 h 9 1 1 2 o 0 3 1 1 d 1 3 3 1 6 6 9 8 3 7 8 0 8 7 9 9 0 1 0 1 1 6 k 9 8 0 0 0 8 9 1 0 7 1 8 1 2 5 n 2 c 3 8 5 a 1 5 7 U 2 kj 8 0 3 e 9 2 2 1 2 3 3 3 2 2 1 3 5 7 2 8 1 2 kj 0 2 1 3 5 2 2 2 2 5 8 a : 9 3 1 2 5 8 7 9 2 3 2 2 0 8 9 1 r 5 7 2 2 2 1 8 0 2 3 5 7 9 2 8 5 p 0 7 2 3 8 4 0 9 9 2 7 0 2 7 5 0 0 7 8 9 2 2 9 2 v r C p 1 3 8 2 2 4 3 9 1 4 e 6 3 2 1 6 1 9 8 2 3 3 3 2 i 2 e 3 4 6 2 1 9 2 1 2 1 6 3 1 4 2 B 4 9 8 3 2 1 2 3 2 9 4 i F 9 3 3 1 l 8 1 1 4 3 2 2 2 9 1 6 3 4 4 1 6 8 2 9 9 3 6 3 1 r 3 8 6 8 3 1 t l 4 6 6 9 1 1 8 3 D 8 1 3 o y 2 e o 1 1 2 5 2 2 3 L 3 1 2 1 0 M 2 5 7 1 o 3 2 2 7 1 4 3 1 3 3 1 0 1 i 5 2 2 2 1 2 3 1 3 3 a 5 2 r 7 1 1 3 3 0 3 2 3 4 0 1 4 1 1 3 0 2 2 1 1 5 2 3 t 3 3 3 s 2 2 7 0 2 4 5 4 3 7 1 i 0 5 4 4 2 4 0 5 0 t 3 k 2 7 5 5 2 4 7 d 4 0 L t 1 1 2 2 3 2 e 1 1 1 2 d 2 4 2 3 B r 3 6 2 1 1 5 3 3 a 1 0 1 2 1 1 4 2 1 2 2 kj 3 3 2 6 5 3 1 2 1 3 4 3 1 5 1 2 1 5 1 1 i 2 2 1 1 1 2 2 l 4 3 2 2 1 2 3 4 2 2 6 6 3 2 5 2 k 1 5 1 1 5 1 4 3 1 e 4 2 c 6 3 4 5 3 6 4 6 i 5 3 C 3 1 e 2 1 1 d 3 2 1 1 1 1 1 1 1 1 t 2 3 0 A 4 3 2 2 2 3 2 2 6 5 1 1 o 0 3 · 2 2 3 |þ 1 2 } 3 3 1 1 1 1 2 4 6 2 2 5 4 2 3 1 1 6 5 5 2 3 2 2 3 1 6 1 1 2 w 6 1 2 1 2 4 2 2 1 3 2 3 3 2 1 2 1 4 2 1 5 4 3 w l 5 6 6 4 E 1 2 3 2 4 3 5 2 1 9 5 4 0 6 4 3 5 k 5 6 2 3 3 1 1 1 3 0 3 9 1 6 e a 1 1 6 a 1 1 6 7 7 0 3 7 1 9 8 3 H 9 0 3 1 1 1 3 6 8 3 3 3 7 7 8 8 1 1 6 9 9 1 1 0 3 3 6 6 0 3 3 7 7 l 1 7 8 9 1 0 1 0 3 1 1 1 3 1 1 l 6 6 8 8 3 3 7 g 9 9 3 7 i 0 0 1 1 e 6 0 8 9 8 6 7 1 9 8 l 1 0 3 1 5 1 1 L 2 2 2 a 5 5 2 3 8 8 8 1 2 l 2 7 7 0 2 1 5 9 0 2 2 2 3 8 7 3 1 2 0 2 a e 9 3 3 2 d 1 8 5 0 7 2 1 0 9 1 2 2 5 9 3 2 2 5 8 2 3 8 5 2 7 0 8 9 2 1 2 2 9 2 1 3 2 5 7 2 2 5 8 0 7 3 8 7 9 0 k 2 9 0 2 0 7 9 7 5 v 2 0 8 9 1 M 2 L 1 e 2 4 2 L 4 9 3 9 2 1 1 2 2 6 1 4 i 1 2 8 2 a a 3 3 9 1 8 2 3 6 2 3 2 2 1 3 8 o 9 4 6 1 1 l 1 2 1 2 4 8 2 2 2 9 4 3 3 3 9 4 6 3 9 1 3 1 p 8 3 8 2 1 3 2 2 k 4 3 9 4 6 6 2 9 1 6 1 3 l 8 8 1 3 3 3 M 6 w 4 1 6 4 1 8 9 3 8 3 e e 1 1 1 1 C 2 2 3 2 2 i 3 3 3 1 1 1 l 0 2 5 0 2 2 0 3 3 5 3 1 3 2 2 2 1 e 3 e 7 7 2 2 4 4 3 3 1 0 0 1 1 1 5 2 3 2 2 3 2 3 3 7 7 1 2 3 2 3 r 4 0 4 1 2 5 1 1 s 7 7 2 1 3 4 4 2 3 2 0 2 2 3 5 0 5 1 3 7 4 2 r 4 7 1 e 5 2 4 2 2 3 0 2 5 0 2 5 3 7 4 2 1 7 7 0 4 1 1 5 2 3 2 2 3 2 7 1 1 2 a 4 2 0 3 2 1 1 L 1 2 1 4 3 2 2 3 1 6 5 2 2 1 2 1 4 2 1 2 3 3 2 6 3 1 2 5 1 4 1 1 3 2 t 5 6 2 2 4 3 1 3 6 6 4 3 1 5 6 5 a 1 e 2 4 3 3 6 1 5 1 2 1 2 2 3 1 5 1 2 1 k 2 d 4 2 3 3 6 1 5 1 4 2 3 6 5 1 N e C a 8 lifo rn ia/N evad a S tate L in e D O e /2 L w u 8 a c / k Y 2 k e 0 e L 2 a 5 a r ke Ch.1 Executive Summary 10 Policy Consulting Associates, LLC N 74 T Modoc County LAFCo Surprise Valley Healthcare District N 64 T N 54 T N 44 T N 34 T N 24 T N 14 T N 04 T N 93 T R 10 E R 11 E R 12 E R 13 E R 14 E R 15 E R 16 E R 17 E Surprise Valley Healthcare District Area contains 428,152 acres +/- and 668.987 square miles +/- with a perimeter of 134.566 miles +/- "This map does not depict a legal property boundary and may not be used as a legal description as defined in the Subdivision Map Act" Surprise Valley Healthcare District Surprise Valley Healthcare District Sphere of Influence Boundary Surprise Valley Health Care MSR Final As mandated by the Affordable Care Act, many healthcare districts prepare significant planning documents, including the Community Health Needs Assessment (CHNA) and Community Health Implementation Plan (CHIP). SVHCD compiled the CHNA report and, as an alternative to the CHIP, developed a 2025 strategic plan and goals to guide future program and service efforts according to five pillars: Service, People, Financial, Quality, and Growth. The District is located in a remote, rural region of California's eastern Sierra Nevada Mountains. It primarily serves four towns (Fort Bidwell, Lake City, Cedarville, and Eagleville) and the Native American groups (the Fort Bidwell Indian Community and the Cedarville Rancheria) with a secondary service area outside of its boundaries that includes portions of Oregon and Nevada. co According to the 2020 US Census, Modoc County has a population of 8,700. The population within the District, however, was estimated to be 1,200, based on the census data available for the communities within the District bounds at the time the last MSR was conducted in 2012. Population projections for the County have been decreasing each year. Limited employment opportunities and geographical challenges further reflect declining growth and impacts on the health care district. Currently, the annual growth projections for the County are declining by one percent annually with an estimated population total of 6,661 by 2045. Figure 1-2: Surprise Valley Health Care District Estimated Population and Growth Projection projected annual projected projected population growth population population district (2020) rate (2030) (2045) SVHCD 1,200 -1% 1,080 900 Financing is frequently a significant challenge for healthcare districts in the State as they struggle to compete with for-profit providers and dedicate high levels of funding to charity care in an attempt to address the problem of an underserved population. SVHCD is no exception. Ch.1 Executive Summary 11 Policy Consulting Associates, LLC Surprise Valley Health Care MSR Final SVHCD's primary funding sources is from State and Federal allocations, while tax assessments are a secondary source of income. Inpatient services provide additional revenue. SVHCD has struggled with the uncertainty of the existing funding sources, limited additional financing options, and high capital improvement costs, which resulted in filing for Chapter 9 bankruptcy in 2018. SVHCD continues to experience significant and undisclosed financial instability, marked by critically low cash reserves, a current ratio far below solvency thresholds, and recurring operating deficits. When the MSR process began and the report was drafted in late 2024 and early 2025, the District financial condition differed from its current situation. Although the District appeared to have a degree of financial stability during the drafting period, it was unable to meet required state obligations without securing emergency multimillion-dollar loans from Modoc County and partner agencies. This outcome highlights an underlying structural reliance on external financing and Intergovernmental Transfers (IGT) that the District cannot sustain on its own. Financial reporting remains inadequate, with no adopted budget, delayed audits, and limited transparency, while governance concerns—including inconsistent legal oversight and lack of long-term planning—further undermine fiscal reliability. As a result, the District faces high ongoing financial risk, and its ability to sustain service levels remains uncertain without substantial improvements in financial management, transparency, and oversight. SVHCD has a sphere of influence (SOI) that is coterminous with its boundaries. The SOI was reaffirmed in 2012. No need for changes has been indicated, and it is therefore recommended that the SOI be reaffirmed once again. The District does have a secondary service area that extends into portions of Nevada and Oregon, however, LAFCo does not have jurisdiction in other states and therefore, expansion is not an option. Throughout this MSR, determinations are made regarding various aspects of the administration and operation of the agency and its services. There are challenges faced by the District that are unique to rural areas and special districts. The primary difficulty for SVHCD, however, is financial sustainability. This not only effects the hiring and retention of staff and physicians but their Ch.1 Executive Summary 12 Policy Consulting Associates, LLC Surprise Valley Health Care MSR Final workload, funding for capital improvements, and the types of services offered. The following is an overview of recommendations for the District: • Develop and provide more comprehensive financial reports such as an annual adopted budget and a capital improvement plan; • Continue to ensure all required information and documents are uploaded, current, ADA accessible, and easily located; • The fiscal position of the District is improving since filing for Chapter 9 bankruptcy. However, the population of Modoc County and that of the District is expected to continue decreasing while the age of the population will increase. Therefore, finding ways to lessen the long-term financial burden on SVHCD should be a priority. This could include partnerships with Modoc Medical Center, a healthcare system, or State or federal assistance; • Current and future submissions of Form 700 be made available on the District website as a best management practice; • Continue ethics training, sexual harassment training, and SB 827 training for necessary staff and board members and make these certificates available online; • Continue with next steps to complete the seismic compliance needs of the District's facilities with the grant money allocated for this project; • Continue to engage in outreach to ensure the community is aware of all services provided by the District; • Provide an annual progress report with documentation to LAFCo addressing the status of these recommendations and the District's ongoing efforts. • Given the circumstances, it is strongly recommended that LAFCo undertake a more detailed financial review of the District to obtain a comprehensive and current assessment of its financial condition and long-term sustainability. Ch.1 Executive Summary 13 Policy Consulting Associates, LLC Surprise Valley Health Care MSR Final This report is prepared pursuant to legislation enacted in 2000 that requires LAFCo to conduct a comprehensive review of municipal service delivery and update the spheres of influence (SOIs) of all agencies under LAFCo's jurisdiction. This chapter provides an overview of LAFCo's powers and responsibilities. It discusses legal requirements for preparation of the municipal services review (MSR), and describes the process for MSR review, MSR approval and SOI updates. LAFCo regulates boundary changes proposed by public agencies or individuals through approval, denial, conditions, and modification. It also regulates the extension of public services by cities and special districts outside their boundaries. LAFCo is empowered to initiate updates to the SOIs and proposals involving the dissolution or consolidation of special districts, mergers, establishment of subsidiary districts, and any reorganization, including such actions. Otherwise, LAFCo actions must originate as petitions or resolutions from affected voters, landowners, cities, or districts. The composition of LAFCo Commissions varies from county to county but typically consists of members who represent all levels of local government. The Cortese-Knox-Hertzberg Act (CKH) requires LAFCo review and update SOIs not less than every five years and to review municipal services before updating SOIs. The requirement for service reviews arises from the identified need for a more coordinated and efficient public service structure to support California's anticipated growth. The service review provides LAFCo with a tool to study existing and future public service conditions comprehensively and to evaluate organizational options for accommodating growth, preventing urban sprawl, and ensuring that critical services are provided efficiently. Government Code §56430 requires LAFCo to conduct a review of municipal services provided in the county by region, sub-region or other designated geographic area, as appropriate, for the service or services to be reviewed, and prepare a written statement of determination with respect to each of the following topics: Ch.2 Background 14 Policy Consulting Associates, LLC Surprise Valley Health Care MSR Final • Growth and population projections for the affected area; • The location and characteristics of any disadvantaged unincorporated communities (DUCs) within or contiguous to the SOI; • Present and planned capacity of public facilities and adequacy of public services, including infrastructure needs or deficiencies (including needs or deficiencies related to sewers, municipal and industrial water, and structural fire protection in any DUCs within or contiguous to the sphere of influence); • Financial ability of agencies to provide services; • Status of and opportunities for shared facilities; • Accountability for community service needs, including governmental structure and operational efficiencies; and • Any other matter related to effective or efficient service delivery, as required by commission policy. The MSR process does not require LAFCo to initiate changes of organization based on service review findings, only that LAFCo identify potential government structure options. However, LAFCo, other local agencies, and the public may subsequently use the determinations to analyze prospective changes of organization or reorganization or to establish or amend SOIs. Within its legal authorization, LAFCo may act with respect to a recommended change of organization or reorganization on its own initiative (e.g., certain types of consolidations), or in response to a proposal (i.e., initiated by resolution or petition by landowners or registered voters). MSRs are exempt from the California Environmental Quality Act (CEQA) pursuant to §15306 (information collection) of the CEQA Guidelines. LAFCo's actions to adopt MSR determinations are not considered "projects" subject to CEQA. The Commission is charged with developing and updating the SOI for each city and special district within the county.1 SOIs must be updated every five years or as necessary. In 1 The initial statutory mandate, in 1971, imposed no deadline for completing sphere designations. When most LAFCos failed to act, 1984 legislation required all LAFCos to establish spheres of influence by 1985. Ch.2 Background 15 Policy Consulting Associates, LLC Surprise Valley Health Care MSR Final determining the SOI, LAFCo is required to complete a municipal service review which provides the basis for any recommendations. An SOI is a LAFCo-approved plan that designates an agency's probable future boundary and service area. Spheres are planning tools used to provide guidance for individual boundary change proposals and are intended to encourage efficient provision of organized community services and prevent duplication of service delivery. Territory cannot be annexed by LAFCo to a city or a district unless it is within that agency's sphere. The purposes of the SOI include the following: to ensure the efficient provision of services, discourage urban sprawl and premature conversion of agricultural and open space lands, and prevent overlapping jurisdictions and duplication of services. LAFCo cannot regulate land use, dictate internal operations or administration of any local agency, or set rates. LAFCo is empowered to enact policies that indirectly affect land use decisions. On a regional level, LAFCo promotes logical and orderly development of communities as it considers and decides individual proposals. LAFCo has a role in reconciling differences between agency plans so that the most efficient urban service arrangements are created for the benefit of current and future area residents and property owners. CKH requires LAFCOs to develop and determine the SOI of each local governmental agency within the county and to review and update the SOI every five years. LAFCOs are empowered to adopt, update and amend the SOI. They may do so with or without an application and any interested person may submit an application proposing an SOI amendment. LAFCo may recommend government reorganizations to particular agencies in the county, using the SOIs as the basis for those recommendations. In addition, in adopting or amending an SOI, LAFCo must make the following determinations: • Present and planned land uses in the area, including agricultural and open-space lands; • Present and probable need for public facilities and services in the area; • Present capacity of public facilities and adequacy of public service that the agency provides or is authorized to provide; • Existence of any social or economic communities of interest in the area if the Commission determines these are relevant to the agency; and Ch.2 Background 16 Policy Consulting Associates, LLC Surprise Valley Health Care MSR Final • Present and probable need for water, wastewater, and structural fire protection facilities and services of any disadvantaged unincorporated communities within the existing SOI. By statute, LAFCo must notify affected agencies 21 days before holding the public hearing to consider the SOI and may not update the SOI until after that hearing. The LAFCo Executive Officer must issue a report including recommendations on the SOI amendments and updates under consideration at least five days before the public hearing. On October 7, 2011, Governor Brown signed SB 244, which makes two principal changes to the CKH. SB 244 requires LAFCos to: (1) deny any application to annex to a city territory that is contiguous to a disadvantaged unincorporated community (DUC) unless a second application is submitted to annex the disadvantaged community as well; and (2) evaluate disadvantaged unincorporated communities in a MSR upon the next update of a SOI after June 30, 2012. The intent of the statute is to encourage investment in disadvantaged unincorporated communities that often lack basic infrastructure by mandating cities and LAFCos to include them in land use planning. SB 244 defines a DUC as any area with 12 or more registered voters, or as determined by commission policy, where the median household income is less than 80 percent of the statewide annual median. SB 244 also requires LAFCos to consider disadvantaged unincorporated communities when developing spheres of influence. Upon the next update of a SOI on or after July 1, 2012, SB 244 requires LAFCo to include in an MSR (in preparation of a SOI update): 1. The location and characteristics of any disadvantaged unincorporated communities within or contiguous to the sphere; and 2. The present and planned capacity of public facilities, adequacy of public services and infrastructure needs or deficiencies including needs or deficiencies related to sewers, municipal and industrial water, and structural fire protection in any DUC within or contiguous to the SOI. In determining spheres of influence, SB 244 authorizes LAFCo to assess the feasibility of a reorganization and consolidation of local agencies to further orderly development and improve the efficiency and affordability of infrastructure and service delivery. LAFCos should revise their Ch.2 Background 17 Policy Consulting Associates, LLC Surprise Valley Health Care MSR Final local policies to include the requirements imposed by SB 244 to ensure they fulfill their obligations under this legislation. Ch.2 Background 18 Policy Consulting Associates, LLC Surprise Valley Health Care MSR Final The Local Hospital District Law was originally enacted in 1945 (Division 23, Section 32000 et seq. of the Health and Safety Code, now referred to as the "Local Health Care District Law"). The law enabled local communities to establish special districts and utilize public financing options for the construction and operation of local community hospitals and healthcare institutions in rural, low-income areas without access to acute-care hospital facilities, and to recruit physicians for medically unserved areas. Formed by voter approval, local hospital districts were empowered to impose property taxes, enter into contracts, purchase property, exercise the power of eminent domain, issue debt, and hire staff. Following the establishment of local hospital districts in the 1940's and 1950's, many of the previously rural service areas have grown into highly populated urban and suburban communities. The current residents of these urbanized communities may now have multiple options for local and regional healthcare facilities and healthcare service opportunities from both private and public providers. During the 1970s and 1980s, the nonprofit health care market dramatically changed with the advent of Health Maintenance Organizations (HMOs), which introduced managed care and created large health systems comprised of network-affiliated hospitals, physician groups, and medical service providers that pool resources and direct patients to preferred facilities and groups. The conglomeration of healthcare providers and incentivized patient referrals within affiliated health system networks placed independent fee-for-service hospitals at a competitive disadvantage for attracting patients. In response to the competitive market environment, the focus of hospital districts expanded from primarily owning and operating local acute-care hospital facilities to also supporting community healthcare and healthcare-related programs and services within their service areas. In 1994, the State Legislature broadened the scope of hospital districts and renamed the statute to its current reference, "The Local Health Care District Law". This action redesignated hospital districts to healthcare districts to better reflect the diverse healthcare services provided, in addition to the operation of local hospital facilities. The 1994 legislative update also expanded the definition of healthcare facilities as improvements in technology have allowed many medical procedures and services that Ch. 3 Overview 19 Policy Consulting Associates, LLC Surprise Valley Health Care MSR Final previously required acute-care facilities and services to be handled on an out-patient basis. Authorized services granted to healthcare districts under current law includes, but is not limited to: • Operating healthcare facilities such as hospitals, clinics, skilled nursing facilities, adult day health centers, nurses' training school, and childcare facilities; • Operating ambulance services within and outside of the district; • Operating programs that provide chemical dependency services, health education; • Wellness and prevention, rehabilitation, and aftercare; • Carrying out activities through corporations, joint ventures, or partnerships; • Establishing or participating in managed care; • Contracting with and making grants to provider groups and clinics in the community; • Other activities that are necessary for the maintenance of good physical and mental health in communities served by the district. The move towards managed care and large healthcare systems with preferred providers created significant financial sustainability problems for many stand-alone healthcare district hospitals in the State. While many healthcare districts receive a portion of local property taxes, the enactment of Proposition 13 in 1978 resulted in restricted access to property tax revenues for local public agencies, including healthcare districts. Healthcare districts can utilize bonded debt financing to fund capital projects such as hospital construction. Issuance of General Obligation bonds requires approval by two-thirds of the local electorate, and revenue bonds are backed by user fees. Healthcare districts may also issue promissory notes and receive loans from state and federal governments. Healthcare districts have generally evolved to meet the changing demands of the healthcare market; however, many have been dissolved, and only about half of the remaining ones still operate hospitals. To retain their local acute-care hospital facilities and services, many healthcare districts have created nonprofit corporations to transfer or sell their local hospital facilities and/or contract their hospital facility operations with for-profit or nonprofit health systems. The divestitures of district hospital facilities and/or operations are allowed under current law, and approval by local voters is required when certain thresholds of district assets are proposed for transfer or sale. Ch. 3 Overview 20 Policy Consulting Associates, LLC Surprise Valley Health Care MSR Final The U.S. Department of Health and Human Services (HHS) is the principal healthcare agency of the U.S. federal government. The Centers for Medicare and Medicaid Services (CMS), a component of HHS, administers Medicare, Medicaid, the State Children's Health Insurance Program (SCHIP), and most aspects of the Patient Protection and Affordable Care Act (PPACA) of 2010. Medicare and Medicaid together provide healthcare insurance for one in four Americans. Medicare is a national social insurance program, administered by the U.S. federal government since 1966. Medicare is the nation's largest health insurer, handling more than one billion claims per year. Medicare uses approximately 30 private insurance companies across the United States to provide health insurance for Americans aged 65 and older who have worked and paid into the system. Medicare also provides health insurance to younger people with disabilities, end-stage renal disease, and amyotrophic lateral sclerosis (ALS). The Social Security Administration is responsible for determining Medicare eligibility and for determining eligibility for and payment of Extra Help/Low Income Subsidy payments. Reimbursement to healthcare providers averages approximately 48 percent of the charges for the patients enrolled in Medicare. The remaining approved healthcare charges are the responsibility of the Medicare patient and are generally covered with supplemental insurance or with another form of out-of-pocket coverage. Medicaid is a social health care program for U.S. families and individuals with low income and limited resources. Medicaid recipients must be U.S. citizens or legal permanent residents, and may include low-income adults, their children, and people with certain disabilities. Medicaid is jointly funded by the state and federal governments and is the largest source of funding for medical and health-related services for people with low income in the United States. Medicaid is a means-tested program managed by the states, with each state currently having broad discretion to determine eligibility and for implementation of the program. All states currently participate in the program but are not required to do so. The Patient Protection and Affordable Care Act (PPACA), known as the Affordable Care Act (ACA), is a United States federal statute signed into law by President Barack Obama on March 23, 2010. The ACA is regarded as the most significant regulatory overhaul of the U.S. healthcare system since the passage of Medicare and Medicaid in 1965. Enactment of the ACA was intended to increase the quality and affordability of health insurance, lower the Ch. 3 Overview 21 Policy Consulting Associates, LLC Surprise Valley Health Care MSR Final uninsured rate by expanding public and private insurance coverage, and reduce the costs of healthcare for individuals and the government. The ACA requires healthcare insurance companies to cover all applicants within new minimum standards and offer the same rates regardless of pre-existing conditions or sex. The ACA introduced mechanisms like subsidies, and insurance exchanges, and restructured Medicare reimbursements. The ACA expanded both eligibility for and federal funding of Medicaid by qualifying all U.S. citizens and legal residents with income up to 133 percent of the poverty line, including adults without dependent children; however, some states have declined the expansion and continue their previously existing Medicaid eligibility requirements and funding levels. The California Health and Human Services Agency (CHHS) is the state agency responsible for administration and oversight of "state and federal programs for healthcare, social services, public assistance and rehabilitation" in California. CHHS oversees 11 departments and boards, and four offices that provide a wide range of healthcare services, social services, mental health services, alcohol and drug treatment services, public health services, income assistance, and services to people with disabilities. The California Department of Health Care Services (DHCS) is a department within the CHHS that finances and administers a number of individual healthcare service delivery programs, including Medi-Cal, which provides healthcare services to people with low incomes. The California Medical Assistance Program (Medi-Cal) is the name of the California implementation of the federal Medicaid program that serves low-income families, seniors, persons with disabilities, children in foster care, pregnant women, and certain low-income adults. Approximately 30 percent of California's population is enrolled in Medi-Cal. Medi-Cal is jointly administered by the California DHCS and the federal CMS, with many services implemented at the local level by the counties of California. Covered California is the health insurance marketplace in California, the state's implementation of the American Health Benefit Exchange provisions of the PPACA. Beginning in 2014, those with family incomes up to 138 percent of the federal poverty level became eligible for Medi-Cal, and individuals with higher incomes and some small businesses may choose a plan in Covered California with potential federal subsidies. Ch. 3 Overview 22 Policy Consulting Associates, LLC Surprise Valley Health Care MSR Final The California Office of Statewide Health Planning & Development (OSHPD), now known as the Department of Health Care Access and Information (HCAI), was created in 1978 to review and report on the structure and function of healthcare delivery systems in California. HCAI collects and disseminates healthcare data and information about California's healthcare infrastructure, monitors the construction, renovation, and seismic safety of hospitals and skilled nursing facilities, and provides loan insurance to not-for-profit healthcare facilities. The Alfred E. Alquist Seismic Safety Act of 1983 (California Health and Safety Code Section 129675 et. seq.) provides a seismic safety building standards program under OSHPD's jurisdiction for hospitals built on or after March 7, 1973. The Act was originally established in response to the loss of life from the collapse of hospitals during the Sylmar earthquake of 1971. Following the Northridge earthquake in 1994, Senate Bill (SB) 1953 was enacted, which amended the Alquist Act to require that all licensed acute-care hospitals in California be capable of remaining operational after a seismic event or other natural disaster, with an initial compliance deadline of 2013. SB 1953 required OSHPD to develop seismic performance categories for evaluating both the seismic resistance of the hospital structures as well as the adequate anchorage and bracing of non-structural features such as electrical, mechanical, plumbing, and fire safety systems for their continued use following a disaster event. Hospitals are required to prepare both a comprehensive evaluation report and a compliance plan to attain the specified structural and nonstructural performance categories. Subsequent changes to the legislation have established a final compliance deadline of 2030, by which any licensed acute-care hospital facilities not in compliance with seismic safety standards must be replaced or cease acute-acre operations. Private Health Care Providers in the state are licensed and regulated by the California Department of Managed Health Care (DMHC). The DMHC oversees full-service health plans, including all California HMOs, as well as specialized plans such as dental and vision. Health plans are required to apply for and maintain a license from the DMHC to operate as a health plan in California. The DMHC reviews all aspects of the plan's operations to ensure compliance with California law. This includes, but is not limited to, Evidence of Coverage, contracts with doctors and hospitals, provider networks, and complaint and grievance systems. Overall, the DMHC regulates more than 90 percent of the commercial healthcare marketplace in California. Ch. 3 Overview 23 Policy Consulting Associates, LLC Surprise Valley Health Care MSR Final The Modoc County Public Health Department (MCPHD), located in the City of Alturas, is responsible for providing a broad range of health and social services in Modoc County that augment the District's care. MCPHD offers a range of services in the areas of behavioral health, public health, and environmental health. These services are rooted in educational opportunities, prevention, testing, and emergency preparedness. While clinical support is available, including immunizations, reproductive health services, and various testing options, the primary focus of the County healthcare system is on informative and preventive care, with an emphasis on community outreach. Ch. 3 Overview 24 Policy Consulting Associates, LLC Surprise Valley Health Care MSR Final The Surprise Valley Health Care District is comprised of the Surprise Valley Community Hospital, the Surprise Valley Rural Health Clinic, Surprise Valley Ambulance, and Surprise Valley Distinct Part Nursing Facility. Located in Cedarville, California in Modoc County, the District is an area roughly 60 miles in length from north to south. This area is considered the "Tricorner Region" of the northeastern portion of the State because of its intersection with Oregon to the north and Nevada to the east. The District covers the entirety of a medically underserved area which is comprised of four towns – Fort Bidwell, Cedarville, Eagleville, and Lake City – along with two Native American groups – the Cedarville Rancheria and the Fort Bidwell Indian Community. Patients are seen from throughout the County and from parts of Oregon and Nevada as well. Topographically, this is part of the Sierra Nevada Mountain region. The District sits in the valley, east of the seat of Modoc County which is in Alturas, California. This area is considered part of the Great Basin, east of the Cedar Pass, and extends across most of the northern half of Nevada and into Utah. The majority of the valley is more than 4,000 feet above mean sea level (AMSL) and is described as a high-altitude desert valley with alkaline lakes throughout low-lying areas and forested mountains on the west side of the valley. The District began as Cedarville Hospital in the 1940s. It was closed in March of 1983 by Mercy Hospital in Redding; however, Surprise Valley residents endeavored to form a hospital district. SVHCD eventually opened the Surprise Valley Clinic in January of 1985 and then, proceeded to lease the hospital from the County due to the discovery of a lease of the land from the Alice Wylie family that indicated the land could only be used for a healthcare facility. At that point, legislation was introduced by a State Senator requesting $200,000 in funding to reopen SVCH. While the bill never passed, the money was nevertheless apportioned as a budget item, and the money was presented to the District in July 1985. This funding, in addition to the area tax assessment and donations, allowed the hospital to reopen. Now, SVCH is a critical access hospital (CAH) with 26 beds. It is the smallest hospital in California but still maintains a wide variety of services from outpatient physical therapy to skilled nursing and laboratory services. Despite its size, it does offer 24-hour care and the ability Ch. 4 SVHCD 25 Policy Consulting Associates, LLC Surprise Valley Health Care MSR Final to stabilize critical care patients who can then be flown to several other regional hospitals. The District also provides basic life support ambulance service that is operated on a rotating basis by volunteer first responders in the area.2 See the table in Figure 4-1 below for a summarized profile of the District. Figure 4.1: Surprise Valley Health Care District Profile surprise valley health care district Contact Information Contact: Frances Hannah, Administrator Email: hannah@svhospital.org Surprise Valley Health Care District PO Box 246 Mailing Address: Cedarville, CA 96104 Website: https://www.svhospital.org/ Surprise Valley Hospital 741 North Main Street Physical Address: Cedarville, CA 96104 Hospital Phone: 530-279-6111 Formation Information Date of Formation: 1985 District type: Hospital District Governing Body Governing Body: Board of Directors Members: 5 Manner of Selection: Election Length of term: 4 years Cedarville Community Hall Bonner St. 4th Wednesday of the month Meeting Location: Cedarville, CA 96104 Meeting date: at 1:30 p.m. Mapping and Population 8,700 Modoc County/~1,200 GIS Date: 2025 Population (2020): SVHCD Purpose Medical services, emergency medical, ambulance, and Local Healthcare District services relating to the Law Health and Safety Empowered protection of residents' health Enabling Legislation: Code §32000-32492 Services: and lives Services Provided Hospital, 24-hour emergency room, clinic, ambulance, long-term care Area Served 2 SVHCD, https://www.svhospital.org/about-us/, 2025. Ch. 4 SVHCD 26 Policy Consulting Associates, LLC Surprise Valley Health Care MSR Final Modoc County/Surprise Valley (Ft. Bidwell, Cedarville, Lake City, Eagleville, The Fort Bidwell Indian Community, the Cedarville Rancheria), parts of Size: 668 square miles Location: Oregon and Nevada Most recent SOI Current SOI: 668 square miles update: 2012 Facilities Surprise Valley Community 741 North Main Street Hospital Name: Hospital Location: Cedarville, CA 96104 Number of Licensed Beds: 26 Other Facilities: Surprise Valley Clinic Altogether, the boundaries of SVHCD encompass approximately 668 square miles. Its boundaries span roughly 60 miles north-south from Fort Bidwell down to Eagleville along Highway 1. The towns of Cedarville and Lake City are located within these bounds. SVHCD's current boundaries are shown in Figure 4-2 in the next section. The District's SOI was reaffirmed in 2012 at the time of the last Municipal Service Review and is coterminous with its boundaries. There has been no indication from the District that any updates are wanted or needed. Additionally, the District's secondary service area encompasses portions of Nevada and Oregon which lie beyond LAFCo's jurisdiction; therefore, expansion into these areas is not possible. Ch. 4 SVHCD 27 Policy Consulting Associates, LLC Surprise Valley Health Care MSR Final Figure 4-2: Surprise Valley Health Care District Boundaries and SOI Ch. 4 SVHCD 28 Policy Consulting Associates, LLC Surprise Valley Health Care MSR Final As a special district, SVHCD is a form of local government guided by its own Board of Directors to represent the distinct healthcare needs of its community. The District is governed by a five-member Board elected by the residents of the communities within its boundaries. The Board consists of a president, vice-president, secretary, treasurer, and a board member. The term of office for Board members is four years, and the terms are staggered for election cycles every two years. Regular District Board meetings are held on the fourth Wednesday of each month at 1:30 pm. These meetings are located at the Cedarville Community Hall at the corner of Bonner and Center Streets, unless otherwise posted, and the public is invited to attend. Meeting agendas are posted on the District's website in compliance with the Brown Act3 (Government Code §§ 54954.2 and 54956), as amended by California Assembly Bill (AB) 2257. This bill governs the location, platform, and methods by which an agenda must be made accessible on an agency's website for all meetings occurring on or after January 1, 2019. This includes requirements for not placing links to agendas in a "contextual menu" (such as a drop- down tab), and that agendas be shared in a publicly accessible physical location at least 72 hours prior to regular meetings and at least 24 hours prior to special meetings. Board approved minutes are also available in the District office and on the District's website. The District's voluntary Board Members have completed Form 700 as required by the California Fair Political Practices Commission (FPPC). Form 700 is a Statement of Economic Interests that is required to be submitted annually by elected officials and public employees who are influential in governmental decisions to allow for transparency and accountability regarding potential personal and financial conflicts of interest. While not a legal requirement, it is recommended that the District make these forms available on their website to build trust with the public. Ethics training is also required once every two years, beginning with an odd-numbered year (AB 1234, Chapter 700, Statutes of 2005). Training is available online on the FPPC website. It is recommended that all appropriate District staff complete timely ethics training to be compliant with these requirements. Other training to meet legal requirements are also recommended, including sexual harassment training, and newly instituted SB 827 financial 3 California Government Code, Section 54950, commonly known as the "Brown Act" or "Open Meeting Law," establishes requirements and restrictions for meetings of local legislative bodies. The law ensures public access to these meetings, facilitating public participation and promoting transparency in local government decision-making. Ch. 4 SVHCD 29 Policy Consulting Associates, LLC Surprise Valley Health Care MSR Final training, which is due within six months for new officials and by January 1, 2028 for existing officials and every two years thereafter. SVHCD maintains a website with various information readily available to the public, as required by the Special District Transparency Act (SB 929), signed into law in 2018. This act requires that special districts in California have websites as of January 1st, 2020. The website is mandated to clearly list the District's contact information in addition to the recommended agendas and minutes, budgets and financial statements, compensation reports, and other relevant public information and documents. A district may be exempt from the law by a resolution adopted by a majority vote of its governing body declaring detailed findings regarding a hardship that prevents the district from establishing or maintaining a website. The resolution must be adopted annually as long as the hardship exists. While the District does abide by some of these mandates, it would need to develop and post more comprehensive financial documents such as an annual budget, an annual financial report, and compensation reports, as well as MSRs, in order to meet all website requirements pertaining to SB 929. The website should be kept current and ADA-compliant. Of note, SVHCD hosted two websites online. The District explained its primary website is www.svhospital.org, and that they have finally been successful in removing a second site on Google (https://sites.google.com/view/svhealthcaredistrict/home). To eliminate confusion and streamline online traffic, the Google site was removed. The District should focus on the function of its website to ensure it and the documents on it are all easily accessible. The website is not easily findable with a simple internet search without knowing the exact URL. Also, once on the website the search function on the site does not find documents that are recognizably on the home page or elsewhere. AB 2019, signed into law in 2018 by Governor Jerry Brown, imposes additional posting requirements on California's healthcare districts. There are additional requirements outlined in this bill for healthcare districts that provide assistance or grant funding, which are discussed in more detail in the Service Adequacy section. AB 2019 also requires all healthcare districts to notify LAFCo if they file for bankruptcy. As of March 2026, the District's website either provided or lacked the following required or recommended documents. Required Documents Document Code Readily Available Ch. 4 SVHCD 30 Policy Consulting Associates, LLC Surprise Valley Health Care MSR Final Gov. Code §53087.8 (a) Contact Information Yes (3) (SB 929) Health & Safety Code § Board Information Yes 32139 Health & Safety Code § Meeting Information Yes 32139 Gov. Code §54954.2(a)(1) Board Meeting Agendas Yes & (a)(2) Board Meeting Minutes Gov. Code § 54957.5(a) Yes Government Code § Most Recent Agenda on Home Page No 54954.2 (AB 2257) Health & Safety Code § Current Fiscal Year Budget No 32139 FYs 22, 23, and 24 on website, but Most Recent Audit Gov. Code § 53908(b) not on Financials page. Gov. Code § 53891(g)(2), Financial Transaction Reports (or links) Gov. Code §53908(a) & No (b) Gov. Code § 53893(c), Compensation Reports (or links) Gov. Code §53908(a) & Yes (b) Contact info is Gov. Code § 7922.700 et available, but not How to Request Public Records seq. specific to records requests. Gov. Code §6270.5 (SB Enterprise Systems Catalog No 272) Health & Safety Code § Municipal Service Reviews (or link) No 32139 Recommended – Best Practices Form 700s No Community Health Needs Assessment Yes Ethics and Other Training Certificates No Prior Audited Financial Statements Yes Conflict of Interest Code No Policies No Planning Materials (CIP, Master Plans) No In order to facilitate communication with the public and encourage voter interest, District staff and Board members actively promote community involvement through various in-person Ch. 4 SVHCD 31 Policy Consulting Associates, LLC Surprise Valley Health Care MSR Final promotional events and trainings such as an annual health fair, Halloween Trick-or-Treating at SVCH, onsite mobile mammograms, and blood pressure checks. This public outreach is primarily conducted online using its own website, an electronic newsletter, and Facebook, LinkedIn, and Nextdoor social media channels. The public may submit comments or complaints on the District's website through a "Contact Us" link. SVHCD indicated that complaints are typically brought straight to the hospital administrator, who handles issues directly. Occasionally, complaints will be brought to the Board first. LAFCo is required to evaluate disadvantaged unincorporated communities as part of this service review, including the location and characteristics of any such communities. The purpose of SB 244 (Wolk, 2011) is to begin to address the complex legal, financial, and political barriers that contribute to regional inequity and infrastructure deficits within disadvantaged unincorporated communities (DUCs). Identifying and including these communities in the long-range planning of a city or a special district is required by SB 244. Government Code §56033.5 defines a DUC as 1) all or a portion of a "disadvantaged community" as defined by §79505.5 of the Water Code, and as 2) "inhabited territory" (12 or more registered voters), as defined by §56046, or as determined by commission policy. The statute allows some discretion to LAFCos in the determination of DUCs. There are ten DUCs within Modoc County, according to its General Plan. Four of these communities are within SVHCD: Cedarville, Eagleville, Fort Bidwell, and Lake City. Also, while not technically DUCs, the tribal lands that are part of the District are considered Disadvantaged Communities (DACs), according to SB535.4 Amongst the four DUCS within the District boundaries, the population is estimated to be 733, according to 2020 census numbers. Cedarville has the largest population, estimated to be 437 in the 2020 US Census, while Eagleville has the smallest with an estimated population of 45. Of these four DUCs, Lake City boasts a 100% employment rate, however, Eagleville only has an estimated employment rate of 37.5%, while Cedarville's is 44% and Fort Bidwell's is 54.3%. 4 ArcGIS, SB535 Disadvantaged Communities layer, updated 2024: https://www.arcgis.com/apps/mapviewer/index.html?panel=gallery&layers=15b93bb7650943dab83038359b6240ec Ch. 4 SVHCD 32 Policy Consulting Associates, LLC Surprise Valley Health Care MSR Final Modoc County had a population estimate of 8,700 in 2020, according to the US Census Bureau, equating to 2.2 people per square mile (see figure 4-3). Meanwhile, the General Plan indicates that density can be up to two persons per acre.5 There has been a downward trend in the population of the County though, with a decline of 10.2 percent between 2010 and 2020. This trend is expected to continue with the County's population anticipated to decline 23 percent to 6,661 by 2045. Additionally, the Cedarville Rancheria and the off-reservation trust land is listed as having a population of 19 in the 2020 US Census. The Fort Bidwell Indian Community has a population of 97. Modoc County has an older population with a median age of 49 years which is much higher than both the state and national median of 37.6 and 38.7, respectively. The majority of the population, 75.1 percent, is white, not of Hispanic or Latin background, followed by 15.8 percent being Hispanic or Latino American. The third largest demographic group by race is Indian and Alaskan Native, who represent 5.7 percent of the population. Females constitute 50.4 percent of the population. Additionally, people over the age of 65 constitute 30.7 percent of Modoc's population which is nearly double that of both the State and the nation, which are listed as 15.2 and 16.8 percent, respectively. The median household income in the District is $56,648 and 20 percent of the population is living in poverty. Less than half of persons 16 and older, 46 percent, were reported to be in the civilian labor force, likely due to the advanced age of the population within the County. Health data provided by the census shows that 10.9 percent of Modoc County lives with a disability and eight percent of persons under age 65 do not have health insurance.6 In relation to SVHCD, most of the land west of Surprise Valley Road, which is the main north-south highway in the area, is U.S. Forest Service (USFS) land. Most land to the east of the road is owned by the Bureau of Land Management (BLM) and its recreational facilities are generally part of the US Fish and Wildlife Service and Sheldon National Wildlife Refuge in Nevada (formerly called Sheldon Antelope Refuge). There are many opportunities to hike, fish, camp, and mountain bike in the region. Big game and bird hunting are other popular activities 5 County of Modoc, 1998 General Plan – 2018 Update, p. 33. 6 US Census Data: https://www.census.gov/quickfacts/fact/table/modoccountycalifornia/INC110223? Ch. 4 SVHCD 33 Policy Consulting Associates, LLC Surprise Valley Health Care MSR Final for some area visitors. May to June snowstorms are not unusual and the area is home to many hot springs and abandoned mine shafts as well.7 Considering declining population projections, an aging county, the District's rural landscape, and lack of employment opportunities, the County's General Plan is essential for understanding growth opportunities. In the most recent plan update, it indicates that any small lot and higher residential land use should be located within existing towns or unincorporated areas, providing attention is given to hazard areas and conservation of open space and wildlife habitats. That said, it is vital that any rural developments can be sustained by the availability of public services and facilities.8 Rural, agricultural land use is closely tied to economic viability; therefore, it is important that a balance be struck between the two, although there has been little consensus on how to achieve this. It is recommended, however, to keep small parcels to a minimum, and that 15–20-acre buffering areas should exist between subdivided land while simultaneously developing a right-to-farm ordinance to accompany the buffering policy.9 No major development projects within the District are known to be taking place at the time of this report. Figure 4-3: Modoc County Population Estimate 2018-2020 population population population estimate estimate estimate modoc county 1/1/2018 1/1/2019 1/1/2020 Incorporated 2,734 2,764 2,720 Balance of County 6,209 6,116 5,993 Total County Population 8,943 8,880 8,713* Source: California Department of Finance *Note: years selected to align with the US Census data that has been referred to from the 2020 census, however, these numbers differ slightly (e.g. 8700 vs 8713). 7 Modoc County LAFCO, Last Frontier Healthcare District and Surprise Valley Health Care District MSR, Adopted April 2012. 8 County of Modoc, 1998 General Plan - Update 2018, p. 16. 9 County of Modoc, 1998 General Plan - Update 2018, p. 30-31. Ch. 4 SVHCD 34 Policy Consulting Associates, LLC Surprise Valley Health Care MSR Final The financial ability of SVHCD to provide services cannot be evaluated solely by reviewing revenue totals or year-to-date operating income. The District's actions in late 2025 reveal fundamental concerns regarding transparency, cash-flow practices, reporting quality, and financial governance. Most notably, when the MSR process started, the District was not having cash flow issues, however; following release of the report and during the LAFCo consideration process, the District did not disclose that the financial position had changed and it was experiencing an acute cash-flow crisis, despite simultaneously informing the U.S. Bankruptcy Court and the County of Modoc that it lacked the resources to meet mandatory financial obligations. The District's failure to provide timely or complete disclosure is a major concern, as LAFCo relies on accurate information to assess service viability. While the District reported that its operations were supported by grants, property taxes, investments, and patient revenues, these descriptions did not reflect the severity of its liquidity position or the extraordinary measures being taken behind the scenes to remain solvent. For the seven months ending January 31, 2025, SVHCD reported $8,492,396 in operating revenues and $6,435,487 in expenses, for an operating income of $1,669,371. However, financial statements alone significantly overstated the District's financial stability. The District provided no indication during the MSR process that these figures were accompanied by extreme short-term cash shortages. By October 2025, the District's actual cash position had deteriorated significantly. According to the November 19, 2025 Financial Report, total cash on hand as of Oct. 31, 2025 was $125,382—representing an exceptionally low number of days cash on hand for a hospital.10 Charts in the handout show Days Cash on Hand at only ~90 days, compared to national medians near 192 days and a listed CA median of 90.11 The District therefore meets only the minimum threshold and is well below targeted benchmarks. These new data points, which 10 Surprise Valley Health Care District, Financial Handout, November 19, 2025. 11 Ibid, p.3. Ch. 4 SVHCD 35 Policy Consulting Associates, LLC Surprise Valley Health Care MSR Final reflect conditions during the MSR period, directly contradict the District's earlier characterization of its financial stability. State oversight bodies—including the California Department of Health Care Access and Information (HCAI) and the State Controller's Office—require ongoing, audited financial disclosures for healthcare districts. Yet: • The District does not maintain an adopted budget, Capital Improvement Plan, or Annual Report. • Monthly financial reports lack accompanying explanations, reconciliations, and narrative context. The quality of internal reporting remains inadequate. Financial handouts, such as the November 19, 2025 packet, include charts and metrics but do not explain significant month-to- month volatility or differences from prior statements. Moreover, the District's internal numbers differ from what it reports in bankruptcy filings and correspondence to the County—raising concerns about consistency and accuracy. These deficiencies limit the District's ability to forecast cash needs, manage liabilities, or communicate material risks to stakeholders. The District reports that inpatient services provide most of its operating revenue, supplemented by taxes, grants, and contributions. However, updated financial statements from October 31, 2025 reveal that these revenue sources do not meet the needs of the District and there are substantial structural concerns. • Operating revenue: $1,207,331 • Total expenses: $967,126 • Operating income: $150,912 • Net income after non-operating items: –$56,683. Ch. 4 SVHCD 36 Policy Consulting Associates, LLC Surprise Valley Health Care MSR Final Despite strong patient revenues, continued deficits highlight the District's vulnerability to shifts in reimbursement timing, high operating expenses, and limited reserves. Frequent month-to- month swings evident in the November 19, 2025 financial handout illustrate persistent instability rather than a predictable budget environment. Salaries and wages remain the District's largest expense category. While SVHCD reports that staffing has decreased since the COVID-19 era, updated data show that wage and contract labor costs remain high relative to revenue and cash reserves. The Revenue vs. Expense by Month chart in the Nov. 19 handout displays months where expenses exceed revenue, contributing to prolonged negative cash trends. Recurring operating deficits—particularly when obscured by one-time reimbursements or Intergovernmental Transfer (IGT) returns—indicate that the District has not achieved financial balance in a sustainable or reliable manner. Updated balance sheets underscore substantial liquidity risk. Current assets: $3.12 million Current liabilities: $7.13 million Current ratio: 0.44 Current assets: $3,857,164 Current liabilities: $7,372,147 Current ratio: 0.52 Although slightly improved from March 2025, this ratio remains far below acceptable levels and indicates that the District cannot meet short-term obligations without external assistance. The November 19, 2025 financial handout additionally shows projected cash balances declining into negative territory, necessitating the District's emergency request to Modoc County for Ch. 4 SVHCD 37 Policy Consulting Associates, LLC Surprise Valley Health Care MSR Final short-term financing. This pattern indicates that SVHCD's cash reserves are chronically strained—not merely temporarily low. An agency's "Net Position", as reported in its audited financial statements, represents the amount by which assets (e.g., cash, capital assets, other assets) exceed liabilities (e.g., debts, unfunded pension and OPEB liabilities, other liabilities). A positive Net Position provides an indicator of financial soundness over the long-term. The District's net position deteriorated significantly between FY24 and FY25, driven by rapid accumulation of accounts payable and other liabilities. The District attributes some of these fluctuations to the timing of IGT funding and Medicare payment withholdings, yet the October 2025 financials reflect continued deterioration. Total liabilities: $7.37 million Total net assets: $731,954 (down from $866,359 earlier in FY25). This weakening net position is consistent with a district that in the past has relied on external loans and delayed reimbursements to cover operating expenses. The weakening financial position of the District puts its long-term solvency at risk. Despite representing to LAFCo that operations were stable, SVHCD disclosed elsewhere that it could not make its required $2.543 million IGT payment due Nov. 21, 2025, without financial rescue. The District reported that it "currently cannot make" the payment and would lose eligibility for $6 million in Medi-Cal supplemental revenue without immediate assistance. To address its shortfall, the District sought a complex package of emergency loans and promissory notes from Modoc County, including:12 • $822,012 Government Code §23010 loan • $1.6 million Treasury Pool loan 12 Modoc County, IGT Flow Chart, November 10, 2025. Ch. 4 SVHCD 38 Policy Consulting Associates, LLC Surprise Valley Health Care MSR Final • $121,030 tax-anticipation note • $500,000 promissory note (Last Frontier Health Care District) • Associated legal and transaction fees Loan terms include: • Interest rates ranging from LAIF + 100 bps to 7%, plus legal and transaction costs; • Automatic redirection of SVHCD's IGT reimbursements to the County for payback; and • County lien rights on SVHCD property tax revenues in case of default. These terms and the District's inability to self-fund statutory obligations demonstrate that SVHCD was financially insolvent on a cash basis during late 2025, even while stating that it was financially stable. While the District is represented by bankruptcy counsel (Brown Rudnick LLP) in its Chapter 9 case, evidence from recent financial and operational documents suggests a lack of consistent legal review in major district decisions, including: • IGT submissions • County loan negotiations • Financial handouts and disclosures • Operational policies underlying cash-flow management No attorney signatures or approvals appear on the District's narratives, financial packets, or correspondence outside of bankruptcy filings. This gap raises concerns that SVHCD may not have legal counsel advising routine or high-risk financial decisions—a troubling governance issue for a public district in bankruptcy. The District reports capital assets totaling approximately $8.5 million, with net capital assets of around $3.9 million after depreciation. However, the District does not maintain a Capital Improvement Plan and lacks formal planning for necessary future facility upgrades. Ch. 4 SVHCD 39 Policy Consulting Associates, LLC Surprise Valley Health Care MSR Final SVHCD has stated it was awarded a seismic compliance grant, which is good through 2030, but funds are deliverables-based and must be advanced by the District before reimbursement—an approach currently incompatible with SVHCD's limited liquidity Unfunded pension and Other Post-Employment Benefits (OPEB) liabilities present one of the most serious fiscal challenges facing many special districts in California today. As mentioned above, SVHCD has not made any contributions to its retirement plans since 2017, after which it filed for bankruptcy. The absence of contributions for nearly eight years highlights ongoing financial strain and may create long-term workforce planning challenges. Across all financial indicators—liquidity, solvency, reliance on emergency financing, lack of reporting transparency, absence of a budget, and weakening net position—SVHCD demonstrates significant financial instability. The District's failure to disclose its cash crisis during the MSR process, despite knowing it could not meet its obligations, is particularly concerning. SVHCD's survival currently depends on: • Emergency loans from Modoc County, • Cash loans through the Treasury Pool, • Timely federal and state reimbursements, and • Participation in IGT programs requiring large upfront payments. Given the District's narrow and unreliable cash position, lack of comprehensive financial planning, and ongoing bankruptcy status, SVHCD faces substantial risk of service disruption without major governance, planning, and financial reforms. Ch. 4 SVHCD 40 Policy Consulting Associates, LLC Surprise Valley Health Care MSR Final After the Cedarville Hospital closed in 1983, the residents created a hospital district to offer much needed care to their outlying community. By 1985, a rural health clinic was opened, however, the fate of the local hospital was embattled between the County Board of Supervisors, the Modoc Medical Center, and Mercy Hospital. Once it was discovered that the deed specified the land could only be used for a healthcare facility though, the County relented and leased the hospital to the District for one dollar per year. Eventually, with donations, a tax assessment, and help from a State Senator who managed to earmark $200,000 in the budget, enough money was available to remodel and reopen the hospital. Today, the Surprise Valley Community Hospital is the state's smallest Critical Access Hospital. The District prioritizes the patient's physical, emotional, and spiritual wellbeing. To achieve this, its mission is to provide an array of services that are safe, high-quality, and provide professional excellence to all while striving to contain costs in a way that will not diminish the high level of services. The District offers a comprehensive menu of health-related services, ranging from basic needs to ongoing care. Both inpatient and outpatient care are available, and an emergency room is staffed 24 hours a day. Critical patients can be stabilized locally, and air transportation is able to transfer patients to larger nearby hospitals in Redding, CA, Reno, NV, or Klamath Falls, OR. A basic life support ambulance is available 24 hours a day, staffed by volunteer EMTs. Hospital inpatient services include 24-hour coverage for nursing care for acute, emergency, and skilled nursing patients, nutritional needs, and respite care while physical therapy is available Monday through Friday. At the District's rural clinic, outpatient services are available Monday through Thursday from 9 am to 5 pm and include: • Telemedicine Appointments and Consultations • Family Medicine Ch. 4 SVHCD 41 Policy Consulting Associates, LLC Surprise Valley Health Care MSR Final • Immunizations • Wound Care • Telemedicine Consultations • Diagnostic and Therapeutic Services • Physical Therapy • Diabetic Teaching • Podiatry Services - one day per month, by appointment only • Holter Monitoring • Diabetes Education Diagnostic services include X-Ray (available Monday through Friday from 8am to 4:30pm or 24 hours from emergency services), EKG, (available 24 hours as an emergency service) general hematology testing and chemistry testing as well as prothrombin time (available Monday through Friday 8am - 5pm or as an emergency service on a 24-hour basis), laboratory, pathology and transfusion services. The District's skilled nursing facility also incorporates services such as 24-hour nursing care, physical therapy, podiatry, social services, activities, and a dietitian. SVHCD's Community Health Needs Assessment (CHNA) describes the District's most requested services as largely being met by offerings already being provided such as emergency services, immunizations, and primary care. In fact, the needs assessment explained that 63 percent of survey respondents use SVHCD or one of its related locations for their primary healthcare needs, which emphasizes the loyalty of the residents and their satisfaction with the quality of services they receive.13 Considering the small population of the District and its limited funding, SVHCD strives to balance the need for services with the types of services that won't compromise the financial sustainability of the District. This can impact offerings such as specialty services but ensures the District is keenly aware of the needs of the community to be able to focus on what results in a cost benefit for patient and provider. One such example is that of Assisted Living and Home Health and Hospice care. These services would help meet the needs of the aging population within the District but are a challenging prospect financially and operationally with 13 Surprise Valley Health Care District, CHNA and Strategic Plan, 2021, p. 14. Ch. 4 SVHCD 42 Policy Consulting Associates, LLC Surprise Valley Health Care MSR Final respect to the ability to provide these services. Pharmacy services is another example that needs to continue to be weighed by the board.14 Generally, users are pleased with the services already provided by SVHCD; however, in the Community Health Needs Assessment, there are areas that patients have identified as needing improvement, including: • Outreach • Counseling/Assessment • Health Education • Transportation • Facilitated Enrollment Services for Medicaid It was also outlined in the Community Health Needs Assessment that specific populations within SVHCD may not be having their particular needs met and that the District should improve services to do so. Children were listed as number one on this list followed by adults, seniors, women of childbearing age, and people underserved with minimum insurance coverage. These needs should continue to be addressed along with further reviews of the community's desire to add services that do not yet exist within the District as mentioned above, e.g. Home Health and Hospice care. Lastly, it was determined in the 2021 Community Health Needs Assessment that the community was unaware that certain services were provided by the District, such as tele-health and podiatry. Therefore, patients were traveling outside of the service area to fulfill these needs. It is recommended that the District enhance its marketing and outreach efforts to better engage the community. This could be done through creating more active online engagement, offering more mobile clinics, or publicly posting flyers in strategic areas within the District's communities. Although SVHCD encompasses a rural region of the state, that has not limited its ability to pursue collaborative relationships that support healthcare throughout the community. By and large, these are informal relationships rather than contractual agreements. One such partnership is between SVHCD and the California Department of Public Health which oversees local health services and provides information, coordination and assistance with 14 Surprise Valley Health Care District, CHNA and Strategic Plan, 2021, p. 16. Ch. 4 SVHCD 43 Policy Consulting Associates, LLC Surprise Valley Health Care MSR Final matters of public health. Of course, there is also the collaborative relationship between the District's clinic and the hospital to coordinate care. Memberships and Regional Partnerships SVHCD is a member of the California Hospital Association (CHA), an organization that provides information and resources to local hospitals and is dedicated to influencing policy decisions that advocate for better and more accessible healthcare in the state. The CHA also works with the Hospital Quality Institute and the Patient Safety Movement Foundation to share publicly available quality data for its member hospitals. One of the most notable membership services used by the District is its transportation services. SVHCD categorizes available companies in two ways. One is for non-emergent health transport, which is provided by Southern Cascades Community Services District for pharmacy, medical, dental, and vision appointments. The other category is air ambulance membership services which encompasses emergency and acute care needs. Companies providing these services are PHI Air Medical (based in Redding, CA), AirMedCare Network, which includes REACH Air and is based out of Redding, CA, and SEMSA Air (based in Susanville and Adin, CA). Use of these services requires coordination with receiving hospital facilities that are outside of the District. For emergent situations, SVHCD relies on assistance from first responders who are volunteer firemen from Fort Bidwell, Lake City, Cedarville, and Eagleville. Typically, dispatch services are provided by the County Sherriff's Office. The District inidcated it has applied for and receives limited grant funding that is dedicated to services related to the SVHCD ambulance transport. The District indicated these are typically Small Rural Hospital Improvement Program (SHIP) grants and are primarily used for HCAPPS and medical records coding. According to the 2021 Community Health Needs Assessment, the Robert Wood Johnson Foundation and the University of Wisconsin Population Health Institute collaborate with County Health Rankings. The program they have created awards grants to local coalitions and partnerships. Although this type of grant funding is possible, it appears that the District has never been awarded these funds to date.15 15 Surprise Valley Health Care District, CHNA and Strategic Plan, 2021, p. 6. Ch. 4 SVHCD 44 Policy Consulting Associates, LLC Surprise Valley Health Care MSR Final SVHCD has contracts with four physicians on staff. The District did not report any other contract services or formal agreements. The District was created out of a need for healthcare services to accommodate a rural area in an underserved portion of the state in the County of Modoc. Due to the District's terrain and broad coverage area, other healthcare facilities are not easily accessible to the community. Modoc Medical Center is the nearest hospital facility outside of the District, yet it is still nearly 25 miles away. Eventually, due in large part to community advocacy, the rural clinic opened, followed by the Surprise Valley Community Hospital which is a general acute care hospital that provides 26 licensed beds: 22 long-term care beds and four acute care beds. As previously mentioned, SVHCD is home to one of the oldest populations in the nation with more than 30 percent being over age 65. This certainly affects an ongoing need for healthcare and potentially changing or adding services to accommodate this demographic through home health and hospice needs. Additionally, the Community Health Needs Assessment highlights a high ratio of risk factors necessitating care, despite boasting near top ranking physician to population ratios across types of care. For instance, in Modoc County, adult smoking is 14 percent compared to 11 percent across the rest of the state. Adult obesity is also higher than in California as a whole, with 28 percent of the adult population being obese compared to 24 percent. Excessive drinking is on par with the rest of the state at 18 percent, but alcohol impaired driving deaths are drastically higher at 67 percent versus 30 percent and 11 percent for top performers. Other factors contributing to demand for services are the large percentage of the population that is living in poverty (18.8 percent, 31 percent of which are children), a higher rate of teen pregnancies, and a lack of access to exercise by essentially half compared to the rest of California (46 percent compared to 93 percent). These statistics imply a need for primary care, affordable care, and chronic disease prevention and management. Basic utilization data from the Department of Health Care Access and Information (HCAI) is available for the most recent years between 2018 and 2022 (see Figure 4-5). Figure 4-5: Surprise Valley Community Hospital 5 Year Utilization Data Ch. 4 SVHCD 45 Policy Consulting Associates, LLC Surprise Valley Health Care MSR Final utilization data for surprise valley community hospital from 2018-2022 Utilization Data Type 2018 2019 2020 2021 2022 Licensed Beds 26 26 26 26 26 Discharges 25 51 40 40 65 Patient Days 7,161 6,994 7,756 7,292 8,202 Outpatient Visits 4,464 4,079 4,053 4,533 6,171 Total Full-Time Equivalents 92 40 44 44 37 Surgeries (inpatient and outpatient) 0 0 0 0 0 Avg. Length of Stay (excl. nursery) 286.44 137.14 193.90 182.30 126.18 According to the datasets from July 1, 2021 to June 30, 2022, the majority of inpatient and outpatient revenue comes from Medicare with a fee for service. In general, inpatient revenue was responsible for $6.6 million during that time frame. This was more than 2.5 times that of outpatient revenue $2.4 million. For inpatient care, the revenue payments represented 27.7 percent, six percent more than the remainder of the state, and this number increases significantly to 49 percent for outpatient care which is more than double statewide statistics. Meanwhile, average patient days were also drastically higher than statewide averages, due to Medi-Cal managed care plans which accounted for more than 41 times the average patient days compared to statewide averages. Overall, the average patient days for SVCH were 126.2 versus 6.4 statewide.16 The data presented indicates a high demand for healthcare services in SVHCD as is evident by the dramatic differences compared to averages for statewide care. The reliance on Medicare and long inpatient stays in relation to the rest of the State is particularly significant. This utilization aligns with that of an aging, rural population that is heavily reliant on government funded insurance and likely managing chronic disease or facing the limitations of rural facilities without other places to turn for care. Despite inevitable obstacles to services within the District, it is clear that there is an overwhelming need for access to healthcare within the Surprise Valley. Utilization reports are not available specifically for the Surprise Valley Clinic. 16 Department of Health Care Access and Information, 7/1/21-6/30/22 reporting timeframe: https://hcai.ca.gov/facility/surprise-valley-community-hospital/?utm_source=chatgpt.com Ch. 4 SVHCD 46 Policy Consulting Associates, LLC Surprise Valley Health Care MSR Final As part of the District's ongoing strategic planning efforts, the District regularly reviews and utilizes a wide range of information about the communities it serves. SVHCD collects and analyzes demographic and market data to assess, evaluate and plan for future health needs in the community. The most recent planning document is its Strategic Plan that was completed in early 2025 and guides long-term goal planning and implementation for the District. There is also a Master Plan which specifically relates to work needed to be compliant with seismic requirements. SVHCD has completed many documents that provide transparency into how the District operates, especially those which are legally mandated. For example, as mentioned in a previous section, the ACA requires strategic planning documents such as a Community Health Needs Assessment. At the time of the drafting of this review the most recent of which was published in 2021. The District also submits yearly Form 990 reports, which are required IRS filings relating to its tax-exempt status as a nonprofit entity. At the time of this review, the most recent Form 990 was completed for fiscal year ending in June 2023. Additionally, financial balance sheets are posted monthly on its website. The County of Modoc is considered the land use authority for the area that includes the District. Guided by its General Plan, most recently updated in 2018, it provides a thorough review of long-term planning and implementation policies that impact SVHCD with regard to growth and development. Still, there are opportunities for the District to improve and provide additional documentation that would benefit its transparency and planning efforts. A Capital Improvement Plan is one such document, along with yearly adopted budgets, as previously stated. Annual audits have been conducted in the past, but the report for 2010-2011 was the most current provided at the time of this MSR process. Since then, the District has completed audits for FYs 22, 23, and 24 and posted on their website. The District indicated it currently employs nearly 27 full-time equivalent staff positions across both the hospital and clinic. This is consistent with the numbers listed in FY22 reports published by the HCAI. The FY26 breakdown classified these positions as follows: four licensed vocational nurses, four administrative staff, eight management staff, five environmental/food services staff, four registered nurses, one technical specialist, and one position listed as "other". Ch. 4 SVHCD 47 Policy Consulting Associates, LLC Surprise Valley Health Care MSR Final As stated previously, four doctors are contracted with the District. Each work eight hours at the clinic during the week and one physician is always available around the clock to provide 24-hour emergency coverage at the hospital on a seven-day rotation. The District conducts annual employee evaluations for all its staff. The employee's supervisor performs the evaluations in their respective departments. The Board of Directors performs the evaluation of the Administrator. The District's organizational chart is provided in Figure 4-6. Ch. 4 SVHCD 48 Policy Consulting Associates, LLC Surprise Valley Health Care MSR Final Figure 4-6: Surprise Valley Health Care District Organizational Chart Ch. 4 SVHCD Policy Consulting Associates, LLC 49 Surprise Valley Health Care MSR Final The District operates the 26 bed Surprise Valley Community Hospital. The number of beds includes mostly general beds with four for acute care and one for the emergency room. Original construction was completed in 1952 and renovated under the newly formed healthcare district in 1985. SVHCD also owns and operates a basic life support ambulance. Seismic requirements exist for all general acute care facilities in California, as outlined in SB 1953. This bill developed compliance deadlines to ensure these facilities would remain operational after an earthquake by January 1, 2030. There are different categories to measure structural (SPC) and non-structural performance (NPC), and they range from 1 to 5, which is the highest level of performance. Figure 4-7 lists the facilities, along with their corresponding performance category, as determined by the HCAI. There are six buildings associated with the hospital. SVHCD specified that the buildings are in good condition and only have typical cosmetic and preventive maintenance needs. Figure 4-7: Structural Performance Categories for SVHCD Facilities structural performance categories for svch facilities building category year built Main Hospital SPC2, NPC2 1949 Pump House Building SPC2, NPC2 1949 Heating and Storage Building SPC2, NPC2 1949 Generator Building SPC2, NPC2 1970 South Wing Addition SPC5s, NPC2 1996 Walk-in Box SPC5s, NPC4 1996 Being that SVHCD is a rural District and provides the only healthcare options in the area, there is currently no reported facility sharing. The Surprise Valley Community Hospital and the Surprise Valley Medical Clinic do not explicitly share facilities — each has its own infrastructure — they are, however, closely connected and are used to coordinate care between inpatient and outpatient needs. As discussed in the Services section, offerings are continually being considered as to what would best meet the community's needs while balancing costs. It is recommended that the Ch. 4 SVHCD 50 Policy Consulting Associates, LLC Surprise Valley Health Care MSR Final District continue exploring other opportunities for resource sharing that could benefit the community through partnership with the hospital. Infrastructure needs facing the District are minimal and largely due to wear and tear on the facilities. As mentioned above, the significant, ongoing effort is the need to make the buildings compliant with seismic requirements (at least achieving an SPC3 rating) by 2030. The District explained that most other infrastructure needs are cosmetic in nature and will be addressed as the seismic remediation is completed. At present, the District only has a master plan for these seismic requirements and construction has not begun. Based on current demand, the District has sufficient capacity to accommodate service needs. This is exemplified by the 23.15 percent utilization rate as it relates to the District's four acute care beds with a total of 338 inpatient days (in FY22 – the most recent data). Capacity is also affected by the lack of growth throughout the District. Not only is there a declining population, the geography of the region also prohibits substantial development due to the need for appropriate infrastructure access. Based on the utilization rate along with the diminishing growth and population projections, capacity appears to be sufficient for acute care. Conversely, the utilization rate across 22 skilled nursing beds was 7,864 patient days (FY22) over the course of the year, which is equivalent to a utilization rate of 97.9 percent. This will be a growing concern in the years to come with the District's population aging at a disproportionate rate compared to elsewhere in the country. This indicates the need for the District to reassess services to consider if the burden of long-term and chronic care patients can be met in other ways, such as through home health and hospice care, as previously mentioned. As a rural district, SVHCD faces significant financial challenges, highlighted by the bankruptcy proceedings it initiated in 2018. With a limited population and limited room for development, as well as all the communities within the District being DUCs, revenue options are limited, and expenses need to be frequently reviewed and monitored. The District will need to continue Ch. 4 SVHCD 51 Policy Consulting Associates, LLC Surprise Valley Health Care MSR Final working to stabilize its financial situation, perhaps through health system partnerships or state or federal assistance. Due to its location, staffing is often a serious challenge as well. It is a matter of both finding and retaining staff that is difficult, given the rural lifestyle. Hiring people who understand the limitations the geography and financial situation the area presents, and the ability to assimilate in a tight-knit community, all plays a role.17 Currently, many positions are multi-fold to be able to provide the necessary task coverage. According to the District, this also makes hiring difficult in terms of how to market job listings. Demographic disparities and healthcare issues identified in previous sections impact the efficiency of the District as well. Again, with a drastically aging population compared to the rest of the country, and higher than average rates of risk factors tied to chronic disease, steps will need to be taken to address preventative measures and partnerships that ease the workload associated with higher hospital utilization rates. Lastly, the District has concerns that potential cuts to Medicare and Medicaid programs could have a negative impact on its sustainability. Grant funding is a vital method for the District to be able to conduct various infrastructure upgrades to adequately provide services. SVHCD stated that grant funding has most recently resulted in the installation of new CT scanning equipment. Grant funding is also responsible for the District's ability to undergo facility upgrades to meet seismic requirements. In this case, SVHCD is taking part in a grant program through HCAI. It is a milestone-based program which would reimburse the costs District incurs. According to SVHCD, grant applications submitted by the District are generally rejected for a variety of reasons. In order to continue receiving future grant funding, it will be imperative that the District complete financial planning documents and make them publicly available. There are several benchmarks that may define the level of healthcare service provided by a hospital. Indicators of service adequacy discussed here include 1) Prevention Quality Indicators 17 Surprise Valley Health Care District, CHNA, 2021, p. 14. Ch. 4 SVHCD 52 Policy Consulting Associates, LLC Surprise Valley Health Care MSR Final (PQIs), 2) Inpatient Mortality Indicators (IMIs), 3) hospital volume indicators, 4) Emergency Medical Services (EMS) ambulance diversion rates, 5) the extent to which residents go to other hospitals for service, 6) patient satisfaction, 7) hospital safety, and 8) accreditation. As discussed in the service demand section, according to the District's Community Health Needs Assessment, there are several areas where SVHCD's population falls above average for health risks, correlating to the potential for more needed care. The HCAI has compiled a variety of data across California hospitals including the types and number of medical procedures based on information provided from inpatient quality indicators, HCAI patient discharge data, and the Agency for Healthcare Research and Quality (AHRQ). For example, in the five years from 2010 to 201518, no procedures were done at SVCH for six types of procedures including, esophageal resection, abdominal aortic aneurysm (AAA) repair, coronary artery bypass graft surgery (CABG), percutaneous coronary intervention (PCI), and carotid endarterectomy. Rates of preventable hospitalizations are also listed by county in HCAI data. Conditions that are tracked include: • Diabetes short-term complications • Diabetes long-term complications • Chronic obstructive pulmonary disease (COPD) or asthma in older adults (age 40 and over) • Hypertension • Heart failure • Community-acquired pneumonia • Urinary tract infection • Uncontrolled diabetes • Asthma in younger adults (age 18-39) • Lower-extremity amputation among patients with diabetes Based on these categories, rates of these conditions were consistent with elevated risk factors for the population of SVHCD as described in the Community Health Needs Assessment. This includes increased levels of smoking, older adults, and obesity throughout the District. This is 18 Note: 2015 data is for the months of January through September - coding changes took place beginning in October and therefore, reflects a shorter time frame of comparison as well as a more accurate procedural analysis. Ch. 4 SVHCD 53 Policy Consulting Associates, LLC Surprise Valley Health Care MSR Final most apparent in terms of COPD or asthma, which has an observed rate that is 188.5 percent more than statewide figures and a 33 percent higher risk adjusted rate.19 This is particularly notable considering the obviously vast difference in the size of the two populations. Also, considering these are generally preventable chronic diseases, the data could suggest that early interventions in terms of preventive care and informational resources might help reduce these statistics. Four of the PQIs and how they compare to statewide statistics are shown in the following Figure 4-8. Figure 4-8: Surprise Valley Health Care District PQI Comparison Chart 2023 modoc performance quality indicators county statewide Cases 0 21,485 Population 6,906 30,519,524 Diabetes Short-Term Care Observed Risk 0 70.4 Risk Adjusted Rate 0 72.3 Cases 2 33,067 Population 6,906 30,519,516 Diabetes Long-Term Care Observed Risk 29 108.3 Risk Adjusted Rate 15.2 114.9 Cases 20 24,904 Population 5,145 18,484,430 COPD or Asthma in Older Adults (40+) Observed Risk 388.7 134.7 Risk Adjusted Rate 214 144.1 Cases 1 14,944 Population 6,906 30,519,524 Hypertension Observed Risk 14.5 49 Risk Adjusted Rate 7.3 52.2 IMIs reflect quality of care by measuring inpatient mortality rates for individual hospitals against state averages for specific medical conditions and surgical procedures. Evidence suggests that high mortality rates may be associated with deficiencies in the quality of hospital care provided. In the case of SVHCD, IMIs are not available. HCAI explains that, as of 2022, the most recent reporting data available, AHRQ software does not report results for IMIs if a 19 AHRQ Prevention Quality Indicators (PQIs), 2023. Ch. 4 SVHCD 54 Policy Consulting Associates, LLC Surprise Valley Health Care MSR Final given hospital has fewer than three cases for all indicators.20 Those indicators are comprised of five surgical procedures: • Abdominal aortic aneurysm repair – open and unruptured • Abdominal aortic aneurysm repair – endovascular and unruptured • Carotid endarterectomy • Pancreatic resection • Percutaneous coronary intervention And six medical conditions • Acute myocardial infarction • Acute stroke • Acute stroke, hemorrhagic • Acute stroke, ischemic • Acute stroke, subarachnoid • Gastrointestinal hemorrhage • Heart failure • Hip fracture • Pneumonia The ambulance diversion rate is another indicator of a hospital's service adequacy. Ambulance diversion may occur due to emergency room closure, inability to accommodate the incoming volume of patients or the inability to transfer admitted patients from the emergency department (ED) to inpatient beds. Ambulance diversion has been found unsafe for patients because it increases transport times, which interferes with continuity of care, causes delays, and increases mortality for severe trauma patients.21 According to California's open data portal for emergency department services trends for 2013- 2017 (most recent statistics), SVCH had no ambulance diversion hours, indicating the hospital's ED was always able to accommodate the incoming volume of patients.22 The lack of 20 HCAI, https://data.chhs.ca.gov/dataset/california-hospital-inpatient-mortality-rates-and-quality-ratings/resource/f8f27af4-35f0- 4d90-966b-e79272ff53c8, pgs. 10-11 21 Reducing Ambulance Diversion in California: Strategies and Best Practices, California Healthcare Foundation, July 2009 https://www.chcf.org/wp-content/uploads/2017/12/PDF-ReducingAmbulanceDiversionInCA.pdf 22 State of California, www.ca.gov, https://lab.data.ca.gov/dataset/emergency-department-services-trends/7840bcc0-bf99-4992- bfda-72e0897b47bd, data tab. Ch. 4 SVHCD 55 Policy Consulting Associates, LLC Surprise Valley Health Care MSR Final ambulance diversions is also likely an indicator of the lack of alternative hospitals within a drivable distance. The adequacy of hospital facilities and services in meeting the needs of district residents can be gauged by the extent to which residents travel outside their region to receive hospital services. The rates were calculated based on patient origin and market share data from the California Health and Human Services (CHHS) open data portal. Here, it indicates that 6,781 patients were treated in Modoc County in 2023, of which 672, or 9.9 percent, originated in one of the four communities within the District. Primarily, these patients originated in Cedarville (451 patients), and Fort Bidwell (123 patients). SVHC accounted for the care of 513 patients during 2023, the date of the most recently reported data. These numbers were similar in 2022, although elevated compared to 2020 and 2021, likely due to challenges associated with the COVID-19 pandemic (see figure 4-9). Figure 4-9: Surprise Valley Health Care District Patient Origin Data patient origin in modoc county Zip Code/ Community 2020 2021 2022 2023 96104/Cedarville 64% 67% 76% 67% 96110/Eagleville 9% 7% 4% 4% 96112/Fort Bidwell 19% 19% 13% 18% 96115/Lake City 8% 7% 7% 10% There are multiple ways hospital performance is evaluated. Medicare, the Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) as well as Cal Hospital Compare each have a reporting system that reports data regarding clinical care, patient safety, and patient experience. In the case of Cal Hospital Compare, their reporting initiative was established to develop a statewide reporting system using public data for all acute care hospitals in California. As with IMIs, however, there is no data available for SVCH, likely due to not meeting the reporting requirements. For HCAHPS, for example, hospitals need a minimum of 25 surveys completed over the course of a four-quarter period to be publicly reported.23 Patient safety indicators (PSIs) are recorded by a number of entities, including AHRQ and the Leapfrog Group which is an independent nonprofit organization that provides hospital safety 23 HCAHPS, https://hcahpsonline.org/en/technical-specifications Ch. 4 SVHCD 56 Policy Consulting Associates, LLC Surprise Valley Health Care MSR Final grading. It bases its scores on infection rates, problems with surgery, safety issues, and the performance of doctors, nurses, and hospital staff. The Leapfrog Group states that SVCH did not participate in its ratings survey. There are several major healthcare-related accreditation organizations in the United States, including Healthcare Facilities Accreditation Program (HFAP), Joint Commission (JC), Community Health Accreditation Program (CHAP), Accreditation Commission for Health Care (ACHC), The Compliance Team – Exemplary provider programs, Healthcare Quality Association on Accreditation (HQAA), and DNV Healthcare, Inc. (DNVHC). For the State of California, the primary accreditation organization is the Joint Commission. The JC is a not-for- profit organization that accredits and certifies more than 19,000 health organizations and programs in the country. Accreditation can be earned by an entire healthcare organization, for example, hospitals, nursing homes, office-based surgery practices, home care providers, and laboratories. In California, the JC is part of the joint survey process with State authorities. Hospitals are not required to be accredited in order to operate, however. Accreditation generally recognizes outstanding performance by a healthcare provider. SVCH is accredited by the State of California as a general acute care hospital. It is also accredited as a Critical Access Hospital (CAH) for Medicare. Ch. 4 SVHCD 57 Policy Consulting Associates, LLC Surprise Valley Health Care MSR Final • The population of SVHCD is roughly 1,200, compared to 8,700 for Modoc County as a whole. The County's population is expected to decline 23 percent by 2045. • The District's demographics pinpoint a median age of 49 that is much higher than both the state and national median, and in general, it is a population at higher risk of many preventable and chronic conditions. With the anticipated increase of an elderly population prone to health issues, comes changing needs related to healthcare. SVHCD will need to be proactive to address this, perhaps considering more services related to home care and long-term care. • SVHCD is in a medically underserved area. Four communities within the District are considered DUCs. • The DUCs within the District are Cedarville, Eagleville, Fort Bidwell, Lake City. Cedarville is the largest of the four and therefore understandably accounts for the highest percentage of patient origin in Modoc County. The unemployment rate of these communities ranges from approximately 46-63%, with the exception of Lake City which reports 100% of its population is employed. Two tribal lands are also considered Disadvantaged Communities (DACs): the Cedarville Rancheria and Fort Bidwell Indian Community. • Present capacity of the District's acute services is considered sufficient with a 23.15 percent utilization rate among four acute care beds; however, when skilled nursing beds were considered, the utilization rate is a concerning 97.9 percent. Ch. 5 Determinations 58 Policy Consulting Associates, LLC Surprise Valley Health Care MSR Final • Services will need to be continually re-assessed. Adding home health and/or hospice care should be considered by the District to address the long-term and chronic needs of an aging population. These evolving needs will have to be weighed against the financial constraints of the District. • SVHCD is currently providing adequate services and is, by all accounts, considered a much-needed part of the community despite its limitations. • The amount of cosmetic infrastructure needs for the District are minimal and mostly considered part of typical maintenance due to wear and tear. These items will be addressed during the seismic updates. Infrastructure needs to achieve seismic compliance, however, are significant. Currently, SVHCD has developed a master plan for these upgrades and steps should be taken to reach the next phase of the project. • SVHCD is presently at high financial risk, and its ability to sustain service delivery depends on external financial interventions and timely supplemental reimbursements. • When the MSR process started, the District was not having cash flow issues, however; following release of the report and during the LAFCO consideration process, the District did not disclose that the financial position had changed, which constitutes a significant transparency concern and impedes LAFCo's ability to assess service viability. • The District's financial reporting practices are insufficient for a public agency, and substantial improvements in budgeting, forecasting, delayed audit completion, and public transparency are required. • SVHCD's participation in IGT programs is essential but fiscally hazardous, as the District is unable to finance required upfront contributions without borrowing. • The District's reliance on multiple short-term loans over several years indicates ongoing structural insolvency, not temporary cash-flow fluctuation. • Governance and legal oversight improvements are necessary to ensure that financial decisions, disclosures, and contracts receive appropriate review and comply with public-sector standards. • It is strongly recommended that LAFCo undertake a more detailed financial review, perhaps a forensic audit, of the District to obtain a comprehensive and current assessment Ch. 5 Determinations 59 Policy Consulting Associates, LLC Surprise Valley Health Care MSR Final of its financial condition and long-term sustainability and identify strategies to stabilize the District's revenues and expenses from month to month and year to year for long-term stability. • SVHCD does not currently share facilities, although the clinic and the hospital have a collaborative relationship. There is potential to collaborate with an entity like Modoc Medical Center in a way that is mutually beneficial. • The District mainly conducts outreach via its website and social media. It makes information and documents available to the public and partakes in in-person events to encourage community involvement. Magnifying these efforts to make SVHCD's offerings more widely known and to reach the most at-risk populations within the District is recommended. • The website complies with most SB 929, AB 2257, and AB 2019 requirements, however, SVHCD should also develop and make additional documents available online such as an annual budget, an annual financial report, and a capital improvement plan to ensure all legislative requirements are met as well as best management practices in place to build transparency with the public. All previously completed MSRs, current Strategic Plans, Community Health Needs Assessments, and similar documents should be updated online as well. As recommended in this report, the District has taken steps to discontinue hosting the outdated Google site to ensure it is removed from search engine results and that all traffic is directed to www.svhospital.org. Finally, the website should be kept current and made ADA- compliant. • The District stated that all voluntary board members have completed Form 700 and they are on file with the County. However, these forms are not available on its website. It is advised that current forms be submitted and that future forms are provided online in a timely manner annually. Ch. 5 Determinations 60 Policy Consulting Associates, LLC Surprise Valley Health Care MSR Final • Accountability is best ensured when contested elections are held for governing body seats, constituent outreach is conducted to promote accountability and ensure that constituents are informed and not disenfranchised, and public agency operations and management are transparent to the public. The District demonstrated accountability with respect to these factors and was eager to assist in the MSR process. • Governance structure options are limited given the remote nature of the District. Ch. 5 Determinations 61 Policy Consulting Associates, LLC