Monday, December 31, 2012

MedHab Raising Funds via Gust

MedHab is in their third capital raise according to SEC documents.  The company is listed on GUST, a website that matches angel investors with firms needing capital.  Gust, formerly AngelSoft, was renamed in September 2011.

Early MedHab funding came from the Concho Valley Angel Network.  GUST had this to say about our local angel funder:

Exit strategy. Our members typically seek returns of at least ten times their initial investment within seven years. This level of return on investment is essential due to the high risk and likelihood of failure among early stage ventures. Thus, a clearly articulated exit strategy - how angel investors will extract such returns - is essential. For example, do you plan to sell the company to an established corporation in your industry? Or, will your exit be through subsequent rounds of financing - venture capital or the public markets? Angel investors are not just interested in the strategy you select, but more importantly in the how - the operational strategy that shows specific steps you will take to achieve the exit.

Concho Valley Angel Network Expects Their Investments To Generate

  • Expected Revenue By Year 5: USD10,000,000 - USD50,000,000
  • Expected Returns: 10x Investment - 30x Investment
  • Expected Years to Exit: 2 Years - 7 Years
  • Expected Years to Break Even: 1 Year - 3 Years
The site matches private money with companies needing seed capital.  A year ago the City of San Angelo offered MedHab a $3.6 million economic incentive to setup a production facility.  In August MedHab agreed, promising 3 to 11 jobs by year end.  So far city leaders have been silent on MedHab's performance.  Maybe the new year will bring information in this regard?  One can hope.

Monday, December 24, 2012

Medicare: Santa/Grinch for Area Hospitals

Which San Angelo hospitals have been naughty or nice, according the the Center for Medicare/Medicaid Services (CMS)?

Medicare published a list of hospitals receiving bonuses or penalties from two extrinsic motivation programs, Value Based Purchasing and Hospital Readmissions.

Shannon Medical Center gets a .22% bonus, while San Angelo Community Medical Center receives an extra .15% under the Value Based Purchasing initiative.

The Readmissions program only issues penalties.  Shannon avoided this lump of coal, but SACMC was awarded a .38% Medicare penalty.

Overall, CMS Santa left Shannon a .22%  increases in Medicare payments, while Community received a -.23% lump of coal.

Medicare Grinch or Santa?

Ginch--Your soul is an appalling dump heap overflowing with the most disgraceful assortment of deplorable rubbish imaginable, Mangled up in tangled up knots.

Santa--But I heard him exclaim, ‘ere he drove out of sight, "Happy Christmas to all, and to all a good-night!"

It's the sharpened blade of reward/punishment.  Medicare wants the public to believe it's rewarding good providers.  If that's the case, why would all these "bonuses" add up to an average .15% payment reduction across all Texas hospitals.  The aim is Grinch-like, to save money. 

Unfortunately, it gets worse.  Next up is 30% of hospitals cheating to get the reward.  That's the rate CEO's backdated stock options to maximize their income.  Surely, doctors and nurses are as smart as corporate executives.

Saturday, December 22, 2012

Council Approved without Identified Funds

San Angelo City Council approved two items in December without expressly identifying a funding source.  The first was a surprise New Year's Eve holiday. while the second approved funding Phase 1 of a downtown Master Developer.  It's rare for this council to authorize anything without a clear funding stream.

The last time Council approved a new holiday, the cost was estimated at $135,000.  Phase 1 of the Catalyst Urban Development proposal came in at a $90,000 estimated maximum.  These total $225,000.

Will Santa deliver a surprise $225,000 to Council?  Should that not happen, what plans does the city have to fund these two decision?

The last time council gave an extra holiday to staff, it passed on huge health insurance premium increases to employee and retiree dependents.  That move drove nearly 200 people from city sponsored health insurance coverage.

The New Year's Eve holiday comes before Council revisits its pension plan.  This is the next area for huge funding increases or benefit cuts.  If elected leaders go the same route as under health insurance, expect city contributions to remain steady.  Employees will have the choice of stepping up to fund the difference or face dramatic cuts in retirement benefits.

Remember the city can only do what it wants to when funding isn't there. 

Saturday, December 15, 2012

One Master Developer Leaves, Another Rides into Town

If this were a Western, it would show one man riding out of town toward the setting sun.  The next morning a gaggle of fancy dressed men would ride into downtown San Angelo, ablaze in morning sunlight.

The man riding out is Economic Development Director Shawn Lewis.   Lewis is headed to Longmont, Colorado where he'll work as Assistant City Manager for his old boss, Harold Dominguez.  The Longmont Times-Call had this to say about Lewis:

According to his resume, Lewis coordinated 16 downtown building rehabilitations in San Angelo, completed the creation of the city's first tax increment reinvestment zone for downtown and aging corridors, doubled the number of dangerous buildings that were demolished or repaired, and cut the time for the city to review development plans. He also wrote the reorganization plan that created San Angelo's new development services department; as director of that department, among other things, he oversaw $22 million of capital projects and oversaw the privatization of the city's social services division to the Concho Valley Community Action Agency.

On reaching his current position, he organized the creation of the San Angelo Business Resource Center, which put all the city's economic development partners into a "one-stop shop," housed in a former Coca-Cola warehouse. He also led a reorganization to cut costs in economic development and recruited a medical device manufacturing company to the city.

The San Angelo Standard-Times named him in November as one of the city's top 20 leaders under 40. 

Riding into San Angelo to develop downtown is Catalyst Urban Development.  The Master Developer proposes a four phase engagement, with fees associated with each chunk of work.  The outline of their proposal showed:

Phase 1: Implementation Action Plan - $68,000 (plus expenses) and up to $22,000 for outside groups. 

Phase 2: Horizontal Development Positioning - $10,000 per month for the life of this phase, estimated at six months.  Fee of 3% of purchase price.

Phase 3: Vertical Development Positioning - Public-private partnership stake would identify compensation.  Firm will submit a fee proposal for direct sale to outside investor

Phase 4: Construction Management / Project Oversight - 1.5% of improvements

Other On-Going Tasks - Fees developed as services are needed outside the scope above

How long will it take Catalyst to achieve 16 downtown rehabs using public private money?  Continuing the Western theme, Was San Angelo not big enough for Lewis and Catalyst to work together?

Update 12-20-12:  Council approved phase 1 of Catalyst's proposal.  Is it the beginning of a long term franchise, with hundreds of thousands in public money?

Update 3-9-13:  Shawn Lewis' Longmont will contribute $27.5 million of the estimated $80 million Twin Peaks Mall redevelopment project.  The city's bonds will be repaid by the additional sales and property tax the mall generates.

Final MedHab Update from Shawn Lewis?

2012 began with City Council endorsing a $3.6 million incentive package to bring MedHab's production facilities to San Angelo.  The sales pitch had MedHab

Donna Osborne, the city's economic development coordinator, said if it takes the deal, the company plans to start operations in San Angelo in March, creating 11 jobs in the first year and 23 the following year.
March turned into August before MedHab accepted San Angelo's incentive package.  The company returned to equity markets in October, seeking $750,000,

City Council's final meeting of 2012 is also Economic Development Director Shawn Lewis' last.  Lewis accepted an Assitant City Manager job in Longmont, Colorado where he'll rejoin former City Manager Harold Dominguez.

Will Shawn give an update on MedHab as his final present to area citizens?  Did the product launch in Australia in June as visioned?  How many of MedHab's promised 11 jobs materialized in San Angelo?  It'd be nice to get a report.

Update 12-27-12:  Shawn's final public update, published in the Standard Times, did not include MedHab.

Thursday, December 13, 2012

Where Are Fredd's Handlers?

Three weeks after being arrested for Driving While Intoxicated, potentially his third DWI conviction, San Angelo City Councilman Fredd Adams gave a "no comment"when asked about the arrest.

Locals harken back to State Representative Scott Campbell and his antics with drunk driving.

Campbell survived late-breaking election news in 2004; a few weeks before the general election, news reports of a drunk driving arrest and of his allegedly seeking an illegitimate massage in a legitimate massage parlor got out.

Three years later the Standard Times reported:

* An investigation into an October 2004 suspected drunken-driving incident, which led Campbell to say he had recently undergone treatment for alcohol abuse.
It took Republican incumbent Campbell two years to seek treatment.  Scott had a Republican Party structure to keep him out of trouble.

Councilman Fredd Adams has the Baptist Church structure.  Unfortunately, I've seen few congregations, of any denomination, with the ability to conduct an intervention when their priest or pastor was in severe crisis. 

Today I noticed a light colored Mitsubishi (with a broken driver side mirror) swerving erratically on North Bryant.  The driver acted like they'd just finished a three martini lunch.  Part of me wanted to get close enough to see if it was Fredd, but the rational part screamed to keep my distance. 

Does Adams have his foot to the floor on self-destruction?  He had three weeks to control this story.  First, arrange for treatment, take a hiatus from City Council until he could get his life in order, then release the story on his terms.  That didn't happen.

Stay tuned for developments.  Will Fredd sell his funeral home and move to Austin, like Scott Campbell?  Or will he face the music at home, seek help and make amends?  The ball's in Fredds court.

Update 12-24-12:  U.S. Senator Mike Crapo (R-ID) was arrested for drunk driving in Virginia.   His office released a statement the same day.  Crapo is a Mormon.  His faith does not allow practitioners to drink alcohol.

Wednesday, December 12, 2012

Oilfield Boom: Bane to Roads

Representative Drew Darby described how oilfield trucks around Big Lake tore up roads.  Tom Green County will experience an oil boom, thanks to the Cline Shale.  The Standard Times reported:

An oil industry bonanza appears to be looming over Tom Green County. The Cline Shale, a massive oil-bearing geological formation that intrudes into the northern part of the county, is coming under development, and Tom Green County Commissioners Court members talked giddily about it in the Commissioners Court meeting.

The toll on area roads will not be borne by oil companies, not under the current system.  First, Texas relies on federal money for highway construction and maintenance.

Texas has relied almost exclusively on revenue generated by the gasoline tax, vehicle registration fees and federal funds to build and maintain its highways.

Second, oil production taxes effectively are saved.

If any oil and gas production taxes collected are higher than the taxes taken in 1987, then 75 percent of those taxes go to the Rainy Day Fund.
Thus far, the Texas Legislature refused to tap the Rainy Day fund for education or healthcare.  Early suggestions have $1 billion going to develop a water infrastructure development bank.

Will the oilfield boom and bust before Texas Legislators get their hands out of their pockets and design something?  If education and healthcare are an indication, the answer is no.  That said, Representative Darby is ready to lead the charge on roads.  Will it involve any of the coming oilfield bonanza money?

Update 12-21-12:  Roads may be the purview of a new Energy Caucus.

Update 1-31-13:  Pioneer Natural Resources sold a portion of its Wolfcamp Shale holdings to a Chinese energy company.

Councilman Adams' Political Move?

San Angelo City Councilman Fredd Adams was arrested and booked for driving while intoxicated on November 18th.  On November 20th Fredd missed the vote on granting city employees an additional day off on New Year's Eve, a noted party night.


Human Resources Director Lisa Marley presented background information.
Motion, to close City offices on Monday, December 31, 2012, as presented, was made by Councilmember Silvas and seconded by Councilmember Alexander. AYE: Alexander, Morrison, and Silvas. 
NAY: New, Hirschfeld, and Farmer. Motion tied 3-3, thereby rendering the issue null and void.

The minutes don't reflect the discussion, i.e. the number of holidays already given, the ability for employees to use vacation time if they want New Year's Eve off.  I looked for Lisa Marley's presentation on the City's Slideshare site, but it hasn't been uploaded.

Adams did get the item returned to Council agenda for December 4.  

Discussion and consideration of closing City of San Angelo offices on Monday, December 31, 2012 and Tuesday, January 1, 2013 to coincide with Tom Green County offices New Year’s holiday
(Requested by Councilmembers Adams and Silvas)

The discussion was remarkable in its lack of depth.  The main reason for giving the extra holiday was Councilman Adams requested it.  Was that a move to build political good will before news leaked regarding his DWI?

For a council that cut an essential program to save $139,000, it cavalierly spent $135,000.  In hindsight it reads "Help Fredd Adams."

Addiction is no laughing matter.  Fredd needs help and plenty of it.  It begins with a harsh examination of his personal accountability, then a serious treatment and follow up regimen.  I wish Councilman Adams courage and tenacity in facing the many ways addiction destroys oneself and others. 

Update 12-13-12: If Councilman Fredd Adams was driving a Mitsubishi with a broken driver side mirror this afternoon on North Bryant, this story is far from over. The driver was all over the road, swerving in erratic movements. Whoever was behind the wheel drove like they had a three martini lunch.  Should that've been Fredd Adams, the self-destruct button remains on.

Monday, December 10, 2012

Men Who Brought MedHab Work in Longmont

With the announcement that Shawn Lewis will join Harold Dominguez in Longmont, Colorado, San Angelo will have lost the two City leaders that brought MedHab to our community.  Shawn's last day will be December 24. 

Harold and Shawn built an economic development palace, while health care became an afterthought, at least someone else's responsibility.  Why did neither stay to enjoy the splendor they created, a newly renovated City Hall, Business Resource Center and hundreds of jobs coming for local citizens?  Only they know for sure.

If Longmont pays well enough, Lewis and Dominguez can own a stake in MedHab.  The company is on its third capital raise in three years.  Minimum investment is $2,083.  

Harold's consistent in adding senior leadership staff during a tight budget.  Shawn Lewis is the beneficiary of that.  Who else might have Longmont in their future?

Update 3-9-13:  Lewis made it to Longmont, where his city was the first in Colorado to ban hydraulic fracking.  That's in direct contrast to San Angelo, which expects an fracking energy boom.

Sunday, December 09, 2012

Add City Health Insurance to Audit Request

The City of San Angelo stuck to their original 2011-2012 budget for health insurance, long after City Council approved an exclusive provider arrangement with Aetna - San Angelo Community Medical Center.  Finance staff surprised City Council with a last minute budget amendment in September.  The amendment had been prepared by staff in early July.

However, the amendment wasn't sticky enough to make the 2012-2013 budget, reflected by the UT burnt orange colored notes in the image below.  Red lines lead to numbers in Council's approved budget amendment.  Green boxes and lines show the savings promised relative to the prior year.  Blue boxes are where the city has told a number of stories.  On September 18th Human Resources Manager Lisa Marley presented a fund balance of nearly $1.6 million.The image below shows virtually no change in fund balance from the prior year.

I see $1.7 million unaccounted for in the year ended 9-30-12.  Of that, nearly $700,000 made it into fund balance.  Another $200,000 went to higher reinsurance costs.  That leaves roughly $800,000 in premiums, paid by the city, employees and retirees, unaccounted for by my estimation.  That doesn't mean anyone absconded with it. 

Add this to the list of things needing audit at City Hall.  Employees and retirees should know how their premium contributions are being spent or saved.

For better viewing, click on an image to make it larger.

Thursday, December 06, 2012

Council Cuts, Feds to Backfill?

San Angelo City Council drastically cut the Nursing Department budget beginning October 1, requiring the "closure" of the Sexually Transmitted Disease Clinic and reduction in Immunization services.  Below are the city's STD statistics:

A state health department physician testified before Council in September.  She pleaded with Council members not to hack what little remained in the City Health Department.  The Nursing budget was reduced by 47% or $138,000.  Council chose to lecture the good doctor, saying the state wasn't doing its part financially, so the City would do likewise (my interpretation).  It read shakedown. 

The City put out a news release stating immunizations would be drastically curtailed and the STD clinic closed September 28.

However, a nurse told council on December 4th the clinic was still treating STD patients.

"Anyone who is identified as positive by the state can be treated through us."

Might this revelation blow a hole in the City's basis for asking for 1115 waiver money?  A Standard Times piece confirms that services were curtailed but not eliminated:

"If someone has context ... is positive for STD, but can't access treatment, we can still do that (provide STD treatment)," Villarreal said.

The feds don't like paying for services already provided and Weise told council it could not be an "ongoing program."  His presentation included Medicaid waiver goals: 

There was nothing in the presentation delineating how the clinic explicitly meets any of the above goals.  Infrastructure development was underlined several slides later, but this City Council just destroyed that infrastructure to save $138,000.  Restoring that which was eliminated does not seem an improvement.  It's building back what was.

Additional oddities included Rick Weise providing little detail on STD clinic operating costs and stating that the grant had already been submitted.   Also, the packet mentioned buying a building near City Hall to house the clinic, yet Rick would clearly tell any staff their jobs would only be funded for 4-5 years.  Who buys a 30 year asset for a 4 year program?  Also, the grant would fully fund this new location.

The final absurdity came from City Council approving another holiday.  The last time Council did such, adding Veteran's Day, the cost was estimated at $135,000.  That's virtually the same number that eliminated the STD clinic, $138,000.  Apparently, the city had an extra $135,000 laying around.  Funny, they didn't ask about the cost of the extra holiday.

Update 12-7-12:  The Standard Times did a story on the new holiday.

Update 12-10-12:  The grant application posted on Texas Regional Health Plan 13 shows a December 3rd date.  City Council met on December 4th to consider applying for the Section 1115 waiver money.  Oddly, the grant shows incentive payments for certain milestones vs. detailed budget projections.  There were no operating projections in the application, which explains why Rick Weise was stumped by what appeared to be a simple question.

Update 3-5-13:  The State will backfill the void with the assistance of city health department staff.