Santa Clara County officials are in “high level discussions” with Daughters of Charity Health System executives to look into the purchase of Saint Louise Regional Hospital in Gilroy, according to County Board of Supervisors President Mike Wasserman.
At the supervisors’ regular meeting Feb. 25, the board will consider an agenda item asking the five-member elected body to “form a team to study the transaction and do all of our due diligence,” said Wasserman, who represents District 1 on the board which includes South County.
Such a team, if approved by the board, would also look into the possible purchase of O’Connor Hospital in San Jose, Wasserman said.
“Obviously the County is very concerned about the access to medical services in South County,” since the hospitals’ owner announced last month the facilities are up for sale, Wasserman said.
Among those keeping a close eye on the sale are private physicians at the Morgan Hill DePaul Medical Center, which is the subject of a recent rezoning request that would raze the medical office building in favor of a senior housing development.
SLRH, O’Connor Hospital and the DePaul medical buildings are owned by DCHS, which plans to sell all six of its hospitals in California due to the changing landscape of healthcare delivery and reimbursements from federal programs. Specifically, SLRH has posted growing annual financial losses for each of the last several years – including a loss of $4.3 million in 2012.
The County’s interest in SLRH and O’Connor Hospital is not necessarily exclusive.
“We will not comment or speculate on any potential buyers,” DCHS Vice President of Marketing and Communications Elizabeth Nikels said.
DCHS will be reaching out to potential buyers with a “confidential informational memorandum” about the nonprofit’s hospitals, which will be distributed this week to “qualified organizations that have executed a confidentiality agreement with DCHS,” Nikels added.
SLRH serves South Santa Clara County and northern San Benito County, and has 96 licensed beds, according to DCHS. It employs 554 people, in addition to more than 200 physicians. Its emergency room served 26,000 patients in 2012.
O’Connor Hospital has 358 licensed beds, and employs more than 1,500 staff and 546 medical physicians, according to the DCHS website. Its emergency room saw nearly 57,000 visits in 2012.
Santa Clara County is no stranger to healthcare delivery and hospital ownership. It owns and operates Santa Clara Valley Medical Center, which has 574 licensed beds and saw about 75,000 emergency room visits in 2012. That hospital also hosts the only burn center in the County, and the only rehabilitation center for spinal cord and brain injuries in the County.
The County also offers non-emergency public health services at facilities throughout the county, including in Gilroy.
Gilroy Mayor Don Gage said he has heard from DCHS executives that the hospital provider is hoping to receive applications from interested buyers by the end of March.
While he has not been kept fully “in the loop” on the DCHS sale, the former County supervisor thinks County ownership of SLRH would keep medical services as they are – if the County can find the money.
“It would be an ideal fit, because their philosophy is close to what the Daughters’ philosophy is, in terms of the less fortunate,” Gage said.
Both DCHS and Valley Medical Center provide medical services to any patient who walks into their doors regardless of their ability to pay.
While Wasserman said it’s “premature” to talk about how the County might finance the purchase of the two DCHS hospitals, it will be a key question when the County looks closer into the matter. He said one possibility is to issue bonds. The County, he noted, has a favorable credit rating which might facilitate a low-interest bond to finance all or part of any potential hospital purchase.
“But you still have to have a means of paying (the bonds) back,” Wasserman noted.
One possible funding source is the “Measure A” County sales tax approved by voters in 2012. Funds from that sales tax can be used for a variety of public services, including trauma and emergency room services and health coverage for low-income children.
DePaul doctors ‘don’t trust’ DCHS; lukewarm on County purchase of SLRH
SLRH’s new owner – whoever it is – could affect the delivery of outpatient services in South County – and especially in Morgan Hill, where DCHS proposes major changes at the DePaul Center medical office buildings it owns.
Private physicians who run their practices out of the DePaul Center, at 18500 DePaul Drive, have banded together to try to delay a recent rezoning request by DCHS for the 24.5-acre property.
DCHS has proposed selling the property to a residential developer, who would build a 234-unit housing complex for senior residents. In return for the rezoning and proposed displacement of medical offices, DCHS has proposed building a new medical office building in Morgan Hill that would have room for even more doctors and specialty facilities.
At a meeting in March, the City Council will consider whether to immediately process the DCHS and 10 other unrelated General Plan amendment requests, or to consider them in the overall General Plan update process which will last at least another two years, according to Morgan Hill Community Development Director Andrew Crabtree.
City staff will likely recommend the DCHS rezoning request be considered in the ongoing General Plan update, Crabtree said. That could buy the DePaul doctors the time they say is critical.
“We are asking for a delay until we know how the people of Morgan Hill and Gilroy will be served by a new owner,” said Cardiologist Rajesh Prasad, whose office is at the DePaul Medical Center. “My only concern is we don’t know who will buy (SLRH), and if the buyer will keep the Morgan Hill and Gilroy facilities open.”
The doctors have heard only rumors about who might purchase the DePaul property from DCHS, and it remains unknown who would own or operate the new medical facility proposed by DCHS elsewhere in town.
Prasad and four other doctors who met with the Times last week have other concerns and are even considering submitting their own proposal to purchase the DePaul center. But their long-term preference is to reopen an acute care hospital at the DePaul property, where SLRH was before it moved south in 1999.
“We can provide good outpatient care here,” added Cardiologist Anu Chirala.
They will not work with DCHS at a new medical office building because they “don’t trust” DCHS, Prasad added.
Furthermore, the County is not the best potential owner for SLRH, because publicly-funded hospitals are perceived as lower quality, and their patients have said they “don’t want anything to do with County medical” services, Chirala added.
County ownership, coupled with the closure of the DePaul site, could end up forcing residents farther north for outpatient or non-emergency services – a phenomenon which happened for several years after the Morgan Hill hospital closed, Chirala said.
Morgan Hill Mayor Steve Tate said he sees SLRH and DePaul Medical Center as a single entity in terms of serving local residents, and he sounds reluctant to act quickly on a rezoning of the DePaul property.
“In our opinion (DePaul) is really part of Saint Louise Hospital,” Tate said. “It’s part of how medical services are provided to South County, and it’s one total package and I hope it stays that way.”
Saint Louise Regional Hospital, Gilroy: $37 million
DePaul Medical Center, Morgan Hill: $12.6 million
Source: MLS Listings
