An ambitious turnaround plan for county-owned Natividad Medical Center will enter the next phase immediately, following county supervisors' approval Tuesday of an additional $1.25 million for the hospital's managing consultants.

But the question of how much functional authority the hospital's management will have still looms as hospital and union officials appear to be digging in on opposite sides of the debate.

Without discussion, supervisors unanimously approved the amendment to the county's existing two-year, now-$6.3 million contract with Huron Consulting's Wellspring Partners, aimed at restoring the fiscally struggling hospital's bottom line. The supervisors also unanimously approved a new compensation policy for the hospital's employees aimed at making their salaries competitive with other area hospital workers.

The policy allows the hospital's chief executive officer to develop and make recommendations regarding employee pay directly to the supervisors using the Hay Group Compensation Report for guidance. The policy is designed to improve the hospital's ability to recruit and retain employees.

After the county brought in Huron to manage Natividad on the heels of the hospital requiring a $22 million subsidy last year, the consultants installed an interim management team and produced a plan that promised to save the hospital nearly $30 million over the next three years.

The consultants recommended full implementation of their plan at an estimated cost of about $5 million, and delegation of functional authority to the hospital's board of trustees and administration.

But hospital trustees decided instead to implement the operational improvements in six-month phases so they could evaluate the consultants' progress.

The phased implementation plan and the compensation policy earned a thumbs-up from union officials who represent hospital employees after they had initially expressed concern about both.

Service Employees International Union Local 521 spokesman Joe Keffer called the policy "a step in the right direction." Keffer said the union's initial concerns were based on hospital management's failure to contact union officials before delivering recommendations to the hospital board.

However, SEIU 521 Executive Director Lena Valdez wasn't so accommodating regarding the consultants' recommendation that functional authority be ceded from the supervisors to hospital officials.

New CEO Bill Foley, who took over from Thomas Winston last month, said discussions continue between hospital and county officials on how to make it easier to implement improvements at the hospital while adhering to the county's legal procedures. He said a proposal should be ready for consideration by the supervisors within a few weeks.

But Valdez said the union is opposed to any such plan and predicted supervisors wouldn't approve it. She said the union would consider actions, such as protests, strikes or walkouts.

"It's very important to us, and we'd be holding the line on this," she said.

Hospital trustees Kurt Sligar and Liz Lorenzi said they believe Natividad needs to establish a more streamlined administrative process that will allow the hospital a degree of operational independence that other hospitals have.

Under the terms of the amendment, Wellspring will bring in three managers and a team of other experts to begin implementing parts of the business plan over the next six months. Amendment funds will pay their salaries and to $200,000 in expenses.

During the first phase, the consultants will focus on improving the hospital's revenue cycles, labor and productivity, and supply chain. A subcommittee of the hospital board will conduct monthly oversight meetings.

In September, five months into the first phase, the subcommittee will evaluate the consultants' progress. If the consultants live up to their promise to deliver a 2-to-1 return in cost savings, county officials can consider extending the plan.

Board president Dave Potter, filling in for Supervisor Jerry Smith on the hospital board, said the phased plan makes sense for the county.

"We wanted this to be a success-based contract," Potter said. "The big issue was should it be pay-for-performance or should (the consultants) just go ahead and put in the whole thing. (The business plan) sounded good, but what if it doesn't go right? If they do the job, we'll move on."