For sale: Health care system

Saint Louise Regional Hospital

The “realities of modern healthcare” have forced South County’s largest healthcare facility to its knees, as the nonprofit organization that runs Saint Louise Regional Hospital this week announced its intent to sell their entire health system, according to the parent organization’s spokespeople.
Daughters of Charity Health Systems has to sell its 22 sites, including SLRH in Gilroy and five other California coastal hospitals, due to growing financial difficulties that have plagued the industry for years and have not let up, according to a statement released by DCHS on Monday.
South County officials and healthcare advocates who have established partnerships and strategies to expand both the quantity and quality of healthcare coverage in the region are hopeful the hospital’s new owner will commit to offering the same or better service as DCHS.
“Saint Louse is a critical component to our regional hospital system – particularly in South County – and because of that it’s important we have a close relationship with whoever ends up owning it,” said Santa Clara County Supervisor Mike Wasserman, who represents District 1 which includes South County on the board.
Local officials said there is probably little they can do to ensure the new owner of SLRH will be a qualified or committed provider of the current levels of service. Per the DOCHS policy, no one is turned away because of inability to pay. After a patient is cared for, a financial adviser will work with that patient if he or she is uninsured.
DCHS, in a press release, did not indicate if it will seek a single buyer for all 22 of its hospitals, or if it will attempt to sell them piecemeal to multiple parties as they receive interest. The charity also did not say if it has been contacted by any potential buyers.
The organization did not identify the specific circumstances that forced it to seek a buyer, but indicated this week’s announcement has been months in consideration. During that time, DCHS leadership “carefully reviewed its options to preserve its hospitals and access to care,” the press release said. An effort by DCHS to merge with Ascension Health Alliance, which started in 2011, failed recently.
“After careful consideration, our Board, management team and advisors have determined that the sale of our hospitals is the most sound and responsible business decision,” said Robert Issai, President and Chief Executive Officer of DCHS. “Like other health systems across the country, we recognize that the way health care is provided today – where it is offered, how it is paid for, how it is measured – is changing dramatically, and we believe that new ownership is in the best interest of the communities we serve.”
DCHS has owned the Gilroy hospital, and the DePaul Health Center in Morgan Hill, since 2011. The DePaul Center, which houses numerous specialty physicians’ offices and an Urgent Care Center that opened in 2010, is also for sale.
SLRH serves South County and northern San Benito County, and has 96 licensed beds, according to DCHS. It employs 554 people, including more than 200 physicians. Its emergency room served 26,000 patients in 2012, making it one of the busiest emergency rooms in northern California.
SLRH board member Allen Hayes referred questions and requests for comment to DCHS’ corporate offices. But he noted “it’s no secret” that the local hospital has been operating in the red.
For the fiscal year that ended June 30, 2012, SLRH posted a net income loss of about $4.3 million, according to financial disclosure reports submitted to the California Office of Statewide Health Planning and Development. The previous year, the hospital posted a loss of about $1.9 million, and about $690,000 in 2010.
Despite these financial hardships, SLRH has continued to expand its variety of services in recent years. The DePaul Urgent Care Center opened in 2010, and private physicians have almost completely filled the remaining offices at the Morgan Hill campus. The DePaul medical facility is the former site of SLRH, which moved to Gilroy in 1999.
Plus, the Gilroy site established a stroke center in 2011. On top of that, SLRH’s main campus offers a full array of medical services and state-of-the-art facilities including CT scans and MRIs, a breast cancer center, oncology, pediatrics, orthopedics, OB/GYN and more.
A key aspect of DCHS’ mission is to serve the poor, and SLRH has participated in a number of community partnerships, health fairs, and other programs to serve South County’s low-income population.
This has been important for the County, which runs the Santa Clara Valley Medical Center and provides medical services for local residents, according to County Director of Health and Hospital Systems Rene Santiago. The County has had a long-lasting “collaborative partnership” with SLRH, particularly for services such as OB/GYN and pediatric coverage.
“Part of their mission (is) they have served the sick and very poor,” Santiago said. “We’re very concerned about any potential ownership changes that could have a potential reduction of services.”
County health services reach about 250,000 residents annually, Santiago said.
The County has purchased health facilities, but only in response to persistent community urging.
“This county has stepped in, in prior situations where a…for-profit has purchased what we would consider community assets, and (was) determined to take certain actions that would have a negative impact on the residents of this community,” Santiago said.
He added that the County has communicated with DCHS about the intent to sell its health system, and will “monitor the situation closely to see what transpires.”
Nationwide, the healthcare industry has been a subject of intense scrutiny, with the recent implementation of the Affordable Care Act, and decades of continuous rising costs as well as changing delivery methods and business practices.
The California Attorney General’s office lists the sale or pending sale of seven nonprofit hospitals since January 2013, though it’s unclear if these sales were prompted by the same trends that have affected DCHS.
“The whole healthcare industry is going through a dramatic change now, in terms of the way they’re paid, and in the way they’re trying to deliver care,” said Joe Mueller, longtime Morgan Hill resident and board member of the Morgan Hill Community Health Foundation.
That foundation formed shortly after SLRH moved out of Morgan Hill in 1999, to develop strategies to expand medical services in South County and make sure they stay. The foundation was instrumental in the establishment of the DePaul Urgent Care Center in 2010.
“Healthcare has always been a challenge,” Mueller added. “South County is one of the most difficult challenges. We’re on that verge of a very well-served area, to an area that is more difficult to serve due to location and distance” from more well-heeled areas to the north.
$4.3 million: SLRH income loss for fiscal year 2012
96: Licensed beds
554: Employees
218: Staff physicians
56,200: Annual outpatient visits
720: Annual baby deliveries
6,640: Annual Urgent Care Center visits (at DePaul Health Center in Morgan Hill)
7: Notices of California nonprofit hospitals sold or in the process of sale listed on the Attorney General’s website since January 2013