Awful failure of CA inspectors points to public-private competence gap

by Chris Reed | November 3, 2013 6:15 am

A nightmarish story[1] out of the Bay Area offers fresh evidence of the enormous gap in competence between the private and public sectors. This is from the San Francisco Chronicle:

“The owner of the Castro Valley care home where residents were all but abandoned after the state shut it down obtained her operating license even after government inspectors found she had put patients in ‘imminent jeopardy’ at nursing homes she used to run, records show.

“A spokesman for the state agency that granted the license conceded that officials hadn’t checked into Herminigilda ‘Hilda’ Manuel[2]‘s history of running nursing homes before clearing her to operate the Castro Valley assisted-living center in 2008. Nine years earlier, federal officials ordered Manuel to pay more than $800,000 after inspectors found a long list of problems at her nursing homes, including staffers’ practice of tying patients to their beds without good cause.

“Such cross-checks of records are ‘not something currently being done on a regular basis,’ said Michael Weston, spokesman for the California Department of Social Services.

“Unlike assisted-living homes, nursing homes provide medical care. The two that Manuel owned received Medicare payments, so federal officials entrusted the state Department of Health Services to inspect for problems.

“Starting in 1998, the inspectors found numerous violations of federal rules at the Wisteria Care Center in Castro Valley and the Milpitas Care Center, both of which Manuel had run since 1994, state records show.”

A culture of complacency and indifference

The contrast with the private sector could not be more striking. Yes, of course, every year bad companies screw up and go out of business. But in the big picture, U.S. productivity keeps improving year after year after year, primarily due to the information-technology revolution but also due to the related rise of “big data” modeling. The emphasis on MBA-driven “best practices” also continues to spread from industry to industry. (Look at the Red Sox’ mini-dynasty; thanks to a brilliant billionaire owner[3], they’re a big-data/best-practices “Moneyball” team with money[4].)

In the government sector, automatic “step” pay raises, pensions and great job security make workers want to preserve the status quo, not shake it up.

Given the amazing frequency of stories about information-technology debacles involving government — here’s California’s latest[5] — I wonder when someone will take a hard look at the possibility of passive-aggressive sabotage by implementers. Like the Luddites, they worry about losing their jobs.

CHSRlogoThere’s one more contrast between the public and private sector that’s worth noting: the utter lack of ethics and safeguards in government finance. The shady collapse of the tech and housing bubbles have produced a wave of regulation of Wall Street. But things are done routinely in California’s government that would generate prison time and SEC probes in the private sector.

On high-speed rail, the evidence is circumstantial but strong[6] that the staff of the California High-Speed Rail Authority knew before the November 2008 state vote authorizing $9.95 billion in bonds for the project that the project didn’t have a legal business plan because the state couldn’t legally offer revenue guarantees to entice investors. Imagine what would happen if a corporation sold bonds without disclosing something like that.

On pensions, even as the tsunami hits, the leaders of the California Public Employees’ Retirement System constantly assert there is no pension crisis, or that it is deeply exaggerated[7]. This even though it’s been four years since CalPERS’ then-actuary Ron Seeling warned that the agency’s status quo was unsustainable. Imagine what would happen if a corporation made such blatant misrepresentations about its financial health.

What will get the blame? Knowing CA’s media …

But this latest incompetence scandal, out of Castro Valley, already has a predictable arc. Instead of yielding stories about pervasive incompetence and corner-cutting in state government, we’re likely to see journalists lapping up the self-serving spin of government agencies. So the debacle will be blamed on … budget cuts.


  1. nightmarish story:
  2. Herminigilda ‘Hilda’ Manuel:
  3. brilliant billionaire owner:
  4. “Moneyball” team with money:
  5. California’s latest:
  6. circumstantial but strong:
  7. deeply exaggerated:

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