In March, during a frantic effort to equip the state for the pandemic, Gov. Gavin Newsom set an ambitious goal of buying 10,000 ventilators to ensure hospitals weren’t overwhelmed by a surge in COVID-19 patients.
That surge in critically sick patients didn’t materialize as forecast, which is fortunate for California — most of the ventilators the state ordered won’t be ready until the end of summer.
Currently, there are more than enough of the hospital breathing machines to go around. But the state’s largest ventilator contract — a mega-deal with a tiny Bakersfield medical supply company to purchased 8,000 devices — has brought in just 20 so far.
Ashli Healthcare Inc. delivered the first ventilators last month, as it agreed to under the terms of a $138 million contract with the Department of General Services. (The contract increases to $150 million when sales tax is included.)
Ashli is supposed to deliver another 150 units next week, another 1,000 in July, and 3,500 in August. The remaining are scheduled to arrive in September, said Brian Ferguson, a spokesman for the governor’s Office of Emergency Services.
The company and its ventilator supplier aren’t saying where things stand with the order. Ashli’s president, Heriberto Diaz, didn’t return The Bee’s messages this week. A spokesman for Ventec, the Washington manufacturer that Diaz is relying on to supply his company, didn’t return messages either.
But Diaz told The Bee last month he was “more than confident” he’ll receive the devices and, in turn, be able to provide to the state. Ventec echoed the optimism in a statement.
“We are in constant communication with the state of California and Ashli Healthcare to provide updates on production progress and we are confident that we will fulfill the order for critical care ventilators,” Chris Brooks, Ventec’s chief strategy officer, said in an email.
Newsom’s office says the state has received some 800 ventilators since setting the benchmark in March, mostly from smaller contracts rather than giant, more complex arrangements.
Ferguson said that if Ashli doesn’t fulfill its end of the bargain, taxpayers won’t suffer for it.
“The state has put provisions in our contracts in such a manner that if for any reason the vendors don’t live up to those expectations, taxpayers are protected,” he said. “If they deliver 1,000 of the 8,000 that’s 1,000 more ventilators than the state had before, and the taxpayers haven’t paid for anything that we’ve not received.”
Ferguson said officials also continue to shop for more in a global market where demand for personal protective equipment like masks and gowns and respiratory medical equipment like ventilators quickly outstripped supplies.
Like many governors and procurement experts, Newsom has likened the search for medical supplies to the “wild, wild West” as fly-by-night operators and scam artists tried to cash in.
“We continue to contract to try to bring additional capacity in house, either for a subsequent wave (of infections) or other issues in the future where we may need these things,” Ferguson said.
One of largest state COVID-19 contracts
Only three other no-bid deals for medical supplies in California are known to be larger than the Ashli Healthcare agreement. They’ve all been fraught with problems.
The state’s largest no-bid deal for equipment is the more than $1 billion contract with Chinese auto manufacturer BYD, which was supposed to start delivering masks last month. But the N95 masks purchased in the deal have been denied certification by federal regulators after they found problems with the masks’ “design, manufacturing and quality inspection.”
The Newsom administration on Friday gave BYD one more week to get federal certification after the company twice missed the deadline.
Last month, a $456 million deal for 100 million masks California ordered from a company called Blue Flame fell through. The Washington Post reported the company is now under criminal investigation by the Justice Department.
The deal, first reported by news outlet CalMatters, fell apart six hours after state officials initiated the wire transfer to the company for 100 million face masks. The state kept the money, but Newsom described it as a cautionary tale at a news conference last month.
California also canceled a nearly $800 million mask contract with Bear Mountain Development Co. LLC after the company failed to deliver most of the supplies, the Los Angeles Times reported. The state didn’t pay the company for any masks or face shields that weren’t delivered, according to the Times.
Ashli Healthcare itself has come under scrutiny by federal authorities, but not for the current deal. In 2013, the FBI raided Ashli’s one-story gray stucco warehouse and offices, coinciding with searches at two medical offices in Bakersfield.
An FBI agent wrote in an affidavit that the three businesses were suspected of cooperating on a scheme to bilk the taxpayers out of millions by billing Medicare for devices for patients who didn’t need them — including at least 125 who had already died.
Immediately after the raid, Ashli released a statement saying the investigation “will reaffirm our ongoing ethical business practices.” Diaz and the doctors whose offices were searched were never charged.
The U.S. attorney’s office said in a court filing two years ago that the investigation was closed without any indictments issued. It’s unclear if California officials knew about the raid before they awarded the contract to Ashli.
Urgent need for ventilators if pandemic grew
The push to buy ventilators came after health officials issued dire warnings about California’s and the United States’ supplies as the pandemic was hitting America’s shores.
A 2005 study by the U.S. Department of Health and Human Services said nearly 65,000 Americans would need to go on ventilators in case of a moderate influenza pandemic. The number would shoot up to 742,000 if a severe pandemic struck, comparable to the 1918 flu that killed millions around the world.
Yet a 2010 federal study calculated there are only 160,000 ventilators available at America’s hospitals, plus another 10,000 in a “strategic national stockpile” run by the U.S. Centers for Disease Control and Prevention.
What’s more, a Johns Hopkins University study calculated that America has only 135,000 respiratory therapists capable of operating the machines.
In a worst case scenario, experts warned that doctors would have to resort to lotteries to determine which patient gets placed on a machine, leaving the survival of someone’s loved one up to random chance.
So far, California hasn’t seen that dangerous and deadly surge materialize. Ferguson, the OES spokesman, said Thursday there are close to 10,600 ventilators in hospitals across the state.
“Of those, right now a little over 3,000 are in use,” he said.
But early in the pandemic, with the prospect of ventilator lotteries in mind, Newsom’s team was scrambling to find more of the machines to give to medical centers and put in state field hospitals.
There were problems with the state and federal supplies. At one point, Newsom said more than 500 of these ventilators kept in the California Department of Public Health stockpiles hadn’t been out of the box since 2011, and many of the batteries didn’t work.
The federal government also sent 170 more ventilators to Los Angeles County, but many of those were also unusable, Newsom said.
Meanwhile, Newsom faced a minor controversy when he loaned 500 ventilators to a few other states including New York, where hospitals were facing shortages.
Newsom on April 9 assured the public the loan wasn’t putting California at risk, because there were enough ventilators to “meet the needs.”
“We can’t just sit on assets when we can save lives and help our fellow Americans, so I just want to clear up any anxiety in that space or any ambiguity or any misinformation,” Newsom said.
Those remarks came three days after the state signed the deal with Ashli.