The fate of the DePaul Urgent Care Center and medical office building – or at least the length of time before its fate is known – could be determined by the Morgan Hill City Council March 19.
The Planning Commission has recommended to include a General Plan amendment and rezoning proposal by the Daughter of Charity Health System into the City’s ongoing comprehensive General Plan update process for further study.
The other option would have been to immediately process the amendment request, potentially allowing a quicker path to a senior residential project on the site as the Daughters of Charity Health System has proposed.
Toward the beginning of a meeting that considered the DePaul proposal along with nine other unrelated General Plan amendments submitted at the last minute before a two-year moratorium on such requests, the Commission heard public testimony both for and against the DePaul rezoning.
Doctors currently housed at the DePaul site doubted DCHS’ promise to build a new medical facility elsewhere in town to house those who would be displaced by a new senior residential complex on the DePaul Drive property.
Daughters representatives said time is essential, as the mode of delivery for the entire healthcare industry is rapidly changing to one where the need for hospital beds is on the decline. Rezoning the 24.5-acre DePaul campus for a 234-unit senior housing project would be coupled with a new, larger medical office project on a smaller parcel elsewhere in town that would do “everything except inpatient” medical services, according to DCHS CFO David Carroll.
Planning Commissioners had their own uncertainties, leading them to unanimously recommend the Council take the longer of two paths to determine if the proposal is the best fit for the long-term growth of Morgan Hill as City staff advised.
“How do we make a General Plan amendment conditional on another facility being built?” Commissioner John McKay said. He added that over the next two years as consultants, City staff, a citizens committee and the Council continue to study and “vet” the proposal, more knowledge in the hands of the public could translate to less resistance to the DCHS project.
The Council will consider all 10 General Plan amendments and the Commission’s recommendations at its March 19 meeting.
Earlier this year, DCHS reported that its entire health system, including Saint Louise Regional Hospital in Gilroy, is for sale. Just a few weeks later, DCHS submitted the General Plan amendment request to rezone the DePaul property.
DCHS representatives described the DePaul campus rezoning and construction of a new medical office facility as a single, two-phased project that would continue to support the organization’s values of helping those who are sick and less fortunate.
“The senior project is dependent on our ability to relocate, enhance and expand healthcare services in Morgan Hill,” Carroll said. “The healthcare project is dependent on our ability to obtain entitlements and repurpose the DePaul campus. Both projects need to be linked together, and both projects will improve Morgan Hill.”
Studying the proposal for two years will result in a likely four-year delay in project fruition because of the local permitting process that would follow a rezoning.
It is “probable” that SLRH and the DePaul campus will have a new owner within a year, and DCHS will “may not be part of the local healthcare landscape,” according to Carroll.
Doctors at DePaul don’t just think the campus should remain as a medical use for the foreseeable future; they also think Morgan Hill needs a full-service acute-care hospital – if not at the DePaul site, which used to house SLRH, then somewhere else in town.
When SLRH’s former owner, Catholic Healthcare West, closed the Morgan Hill hospital in 1999 and moved it to Gilroy, local doctors noticed a flight of patients to hospitals farther north when they needed inpatient or emergency care.
“I practice in Morgan Hill, but all my patients go to Good Samaritan or O’Connor” or other hospitals in San Jose, said pediatrician Mazhar Khan, who’s practice is in in the DePaul medical buildings.
Furthermore, the DePaul doctors don’t trust DCHS to build, open and successfully run a new medical facility for which a site hasn’t even been finalized. DCHS has “not found a formula for success,” noted cardiologist Anu Chirala, who has run her practice out of the DePaul property for 17 years.
SLRH and other hospitals owned by DCHS have experienced numerous consecutive years of financial losses, DCHS representatives and state regulators have reported.
The new medical building concept is “just a teaser to get the (DePaul) campus rezoned and maximize the sale price,” Chirala said.
Carroll said it is undetermined if DCHS, the future new owner of SLRH or some other provider would eventually own and operate the completed Morgan Hill medical building. Out of 26 properties in Morgan Hill evaluated by DCHS for a new medical facility, the organization has narrowed the choice down to two in the area of Cochrane Road between U.S. 101 and Monterey Road.
Some doctors have already “spoken with their feet,” and opened offices in office and industrial parks along Butterfield Boulevard, Carroll added.
Recent hospital financial losses and the desire to build a new medical facility are a matter of economics, DCHS representatives said. With advances in medicine and changes in state and federal health insurance law, medical services are shifting to priorities on outpatient care. The need for hospital beds is thus in decline, while a surplus of such beds remains in the 30-mile radius. Reimbursements to hospitals and doctors from Medicaid and other federal programs are declining due partly to a sharp drop in overnight visits.
“We’re getting out of the inpatient care business,” Carroll said. “The bulk of (the proposed new building) will be physician offices. Morgan Hill is a desirable market to be in, and this is not something a buyer would want to run away from.”
For long-term planning purposes, commissioners thought it was more important for DCHS to have all its ducks in a row before such a drastic change to the General Plan can take place.
“I don’t feel comfortable without a zoning that allows us to do (a new medical facility) somewhere else,” Commissioner Susan Koepp-Baker added. “We don’t have another site we have been told about that will handle an acute care facility.”
