Officials seek solutions after Seton bankruptcy

Verity Health’s Aug. 31 bankruptcy announcement highlighted the financial challenges facing the six hospitals but especially that of the Daly City facility, which Supervisor David Canepa said lost some $30 million last year. In addition to the two Seton facilities, Verity Health’s hospitals include O’Connor Hospital in San Jose and St. Louise Regional Hospital in Gilroy, as well as St. Francis Medical Center in Lynwood and St. Vincent Medical Center in Los Angeles.

In addition to an emergency room serving some 28,000 patients a year, Seton Medical Center offers more than 350 licensed beds and serves some 1.5 million residents in San Francisco and San Mateo counties with a range of medical, surgical and emergency services, according to a Daly City staff report. As the only hospital in Daly City, Seton Medical Center is critical to the health care needs of the city’s residents, said Mayor Juslyn Manalo.

By passing a resolution supporting the facility’s land use and zoning for continued hospital use Monday, Sept. 24, the City Council aimed to send a clear message to the community that the facility’s land is zoned for hospital use and that officials have no desire to change its current hospital zoning.

“It was definitely disappointing to hear that Verity was filing for bankruptcy,” she said. “The action that we took as a City Council was really around the services, we wanted to make sure that the services were intact.”

On the heels of the council’s action was county supervisors’ unanimous approval Tuesday, Sept. 25, of a resolution in support of the terms of agreement laid out by then-attorney general Kamala Harris in late 2015 when BlueMountain Capital struck a deal with the hospitals’ former operator Daughters of Charity. Aimed at ensuring the safety-net hospitals continue offering services until 2025, the transaction was considered by some to be the largest and most complex nonprofit hospital transaction in California’s history.

The resolution authored by Canepa and co-sponsored by Supervisor Don Horsley follows talks the two have participated in since the system’s July announcement alongside leaders of the San Mateo County Health System and the Health Plan of San Mateo, an independent, quasi-government agency which functions as a health maintenance organization and offers a comprehensive network of health care providers.

Regional issue

Canepa, who represents north county’s District 5 on the Board of Supervisors, has been focused on ensuring the attorney general’s mandate that Seton Medical Center remain a full-service acute care hospital with emergency services for 10 years is upheld regardless of bankruptcy proceedings. Canepa argued if the hospital were to close, the issue would spread far beyond the northern portion of the county as those relying on the hospitals services seek care at other hospitals in the region.

“If the hospital closes, it doesn’t just become a north San Mateo County issue,” he said. “When Seton closes, those hospitals throughout the county, they’re going to be stressed.”

In an effort to find a buyer for the Daly City facility, Canepa said his office has reached out to several private and nonprofit health systems and organizations including Stanford Health Care, Tenet Healthcare, Sutter Health and the Chan Zuckerberg Initiative. Having contributed some $25 million for patient care and set aside $15 million toward a seismic upgrade project at the Seton Medical Center, county officials have already dedicated some $40 million to the facilities since they were acquired by Verity Health, noted Canepa, who added if the right operator steps forward, maybe the county can revisit what it can do.

Canepa has previously expressed disappointment with Patrick Soon-Shiong, a surgeon, professor, scientist, entrepreneur, businessman and philanthropist who purchased the Los Angeles Times this year and stepped in as a majority stake owner in Integrity Healthcare, Verity Health’s management company, in 2017. Though Soon-Shiong’s involvement in the venture gave many renewed hope in the hospitals’ futures, doubts have surfaced as to whether he will be able to fulfill his responsibilities he committed to when he became a majority stake owner in the hospitals, said Canepa.

“It’s time that we find an ethical buyer,” he said.

Considerable losses

Because the Daly City facility is facing a seismic upgrade estimated to cost some $250 million and has been logging considerable losses for years, Horsley was not convinced a buyer could be found for Seton Medical Center. Horsley said he has heard officials in Santa Clara County may be interested in purchasing the two facilities there that Verity Health owns to make way for expanded county-operated health care services and other groups have shown interest in the Southern California facilities.

“I’m doubtful that there could be any kind of a viable plan for that facility,” he said.

He added Seton Coastside, a 116-bed skilled nursing facility, may be more likely to attract a buyer because it doesn’t require seismic retrofitting and it offers skilled nursing beds, an increasingly rare resource in the county.

Though he acknowledged Seton Medical Center’s role in providing health care for the Daly City community, Horsley said the county would have no interest in purchasing the facility, especially in the face of an impending deficit officials are predicting for the two-year County Health budget starting in the 2019-20 fiscal year. Estimated to range from $24.7 million to $48.8 million over the two-year period, the deficit has prompted review of potential reductions in County Health services, which include operation of the San Mateo Medical Center, providing in-home support services for older adults and people with disabilities as well as a range of mental health services.

With shrinking federal support for the health care the county offers to low-income, uninsured and publicly-insured patients, Horsley said the effects of the effort to dismantle the Affordable Care Act are expected to be widespread as more and more people become uninsured or underinsured. He acknowledged a potential closure of the Daly City hospital would end up costing the county as patients seek health care elsewhere, but noted it wouldn’t come close to the expenses the county could take on if it purchased the facility.

Because some health care services are being moved from hospitals to community clinics, Horsley wondered if clinics in Daly City or South San Francisco could be expanded to offer some of the services provided at Seton Medical Center, while patients could seek emergency room services at the Kaiser Permanente’s South San Francisco Medical Center, Mills-Peninsula Medical Center in Burlingame or other hospitals in San Mateo or San Francisco counties.

“The way in which health care works today … it’s not worth its usefulness,” he said, of Seton Medical Center. “Nobody can find a way of closing that red ink.”

anna@smdailyjournal.com

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