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Foreseen service cutbacks at Napa Valley hospital among concerns in Adventist Health-St. Joseph Health pact

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It was a long, drawn-out wait that didn’t turn out as some had hoped.

After an 18-month-long regulatory review process, the California Department of Justice on Oct. 31 denied the proposed joint operating company between Adventist Health West System and St. Joseph Health System.

Adventist Health and St. Joseph Health declined last week to provide additional comment beyond the joint statement released after the decision was announced.

The statement read, in part: “Both Adventist Health and St. Joseph Health are very disappointed in the outcome of this decision. Our intent has always been to better serve our communities, increase access to services, and create a stronger safety net for families in Northern California. … At this time, our organizations will need to take a step back and determine implications of this decision. The well-being of our communities remains our top priority.”

The health care systems’ proposal would have created the ST Network, which in the North Bay would have operated Queen of the Valley Medical Center in Napa, Santa Rosa Memorial Hospital, Petaluma Valley Hospital, Adventist Health St. Helena, Adventist Health Ukiah Valley, Adventist Health Clearlake Hospital Adventist Health Howard Memorial and St. Helena Hospital. The network also would have included Redwood Memorial Hospital and St. Joseph Hospital-Eureka, both in Humboldt County.

Attorney General Xavier Becerra’s office turned down the request saying the JOC would have failed to protect consumers.

Its Oct. 31 denial letter states: “In coming to this decision, the Office of the Attorney General has carefully considered the factors set forth … and concludes among other things, that the proposed transaction is not in the public interest, including but not limited to, having the potential for increased health costs and concerns over access and availability of health care services.”

The state DOJ supervises all charitable organizations in the state and referred to the California Corporations Code in its letter denying the transaction. The state DOJ supervises all charitable organizations in the state and referred to the California Corporations Code in its letter denying the transaction. Both health care systems are faith-based, nonprofit organizations: St. Joseph Health is rooted in Catholicism, Adventist Health in the Seventh-day Adventist Church.

For some, the verdict was the right one.

“This Adventist-St. Joseph’s merger raised several red flags, from the maintenance of emergency services to their willingness to provide specific treatment for women and the LGBTQ community,” said Anthony Wright, executive director of Health Access California, the statewide health care consumer advocacy coalition. “Bigger is not often better with hospital chains and health care in general, as consolidation is closely correlated with much higher costs for consumers.”

The California Nurses Association said it has opposed the JOC, or what it calls a merger, since “day one,” citing concerns about potential loss of services, particularly for women’s health and the LGBTQI community, based on both health care systems being faith-based.

“We know all too well that mergers most often result in service cuts and higher prices, both of which clearly have a negative impact on our patients and their health,” Lesley Ester, a registered nurse at St. Joseph’s Eureka hospital, said in an emailed statement. “During a number of public hearings, nurses expressed these concerns and called on the attorney general to put the public’s needs before corporate profits. We are very pleased to see Attorney General Becerra shared our concerns and decided to deny the merger of Adventist Health and St. Joseph Health Systems, and we thank him for this decision.”

Under the proposed deal, Kevin Klockenga, executive vice president and CEO of St. Joseph Health System-Northern California Region, would have been president and CEO of the joint operating company, the Business Journal previously reported. St. Joseph Health employees would have remained employees of their St. Joseph Health ministry, and Adventist Health employees would have still worked for Adventist Health.

The joint operation would have been governed by a 10-member board — five appointed by Adventist Health and five by St. Joseph Health — chaired by Bill Wing, president of Adventist Health.

JD Healthcare Inc. was retained in June to prepare health care impact statements for Becerra’s office to assess the potential impact of the proposed master formation agreement. Its 120-page report was released in June.

That assessment found that, based on Adventist Health’s commitments outlined in the agreement with St. Joseph’s, it would likely continue the availability and accessibility of health care services to the communities served for at least five years.

“It is anticipated that access for MediCal, Medicare, uninsured and other classes of patients will either remain unchanged or be improved,” the assessment also said.

However, JD Healthcare also found that after five years, Adventist Health St. Helena is expected to restructure and discontinue some services, including obstetrics and behavioral health.

“Unless otherwise provided for, reducing the complement of licensed beds and discontinuing these services will have a significant negative impact on the availability and accessibility for patients requiring these services,” the report added, proposing conditions that should be met if Becerra’s office were to approve the move.

Staff Writer Cheryl Sarfaty covers tourism, hospitality, health care and education. Reach her at cheryl.sarfaty@busjrnl.com or 707-521-4259.

Business Journal staff writer Chase DiFeliciantonio contributed to this report.

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