Newly formed Covenant Health Network has named its board of directors and plans to set up shop in Irvine with St. Joseph Health, which has shifted its headquarters from Orange.
St. Joseph Health and Newport Beach-based Hoag Memorial Hospital Presbyterian said last week that both healthcare providers have approved final plans to establish a regional healthcare network. The state attorney general’s office signed off on the proposal about a month ago.
The network will be operated by Covenant, a newly created company.
Joseph Wilkins, a former board chair at St. Joseph Hospital-Orange, will hold the same position for Covenant. Wilkins is an executive with New Jersey-based medical laboratory Quest Diagnostics Inc.’s operations in Orange County, and previously worked for medical diagnostic device maker Beckman Coulter Inc. in Brea. He’s one of four Covenant directors appointed by St. Joseph Health.
The other St. Joseph appointees are Loren Shook, chief executive of San Juan Capistrano-based Silverado Senior Living Inc.; Dr. Mike Sugarman, president of St. Joseph Heritage Healthcare, a medical group affiliated with St. Joseph Health; and Lisa Perrine, chief executive of Cibola Systems Corp. in Orange and current chair of the St. Joseph-Orange board.
Covenant directors appointed by Hoag are Steve Jones, president of Snyder Langston Construction and previous chair of Hoag’s board; Rick Norling, a former chief executive of Charlotte, N.C.-based hospital supply group Premier Inc., who has also served on Hoag’s board; and Dr. James Caillouette, surgeon in chief at the Hoag Orthopedic Institute in Irvine.
“Clearly, the individuals who we have asked to provide governance and leadership of Covenant Health are those who have an understanding of the transformational nature of healthcare and healthcare delivery,” said Richard Afable, who has gone from chief executive at Hoag to the same position at Covenant.
Board members will be able to “take a leading role in the creation of the transformational activities that will embody what Covenant is all about,” Afable said.
St. Joseph Health and Hoag looked for board members with backgrounds that allow them to make “unique contributions,” said Deborah Proctor, St. Joseph Health’s chief executive.
She pointed to Hoag appointee Jones as an example, saying that he “really understands the vision of population health management.”
Population health management is a strategy for treating a group of patients with chronic conditions by managing their healthcare services “explicitly in a way that tends to their specific needs,” Proctor said in an earlier Business Journal interview.
The approach is intended to bring lower healthcare costs without a reduction in quality by giving providers timely information in a bid to eliminate unneeded visits, treatments and procedures.
She also noted Wilkins’ knowledge of the strategy that St. Joseph Health had been planning to “creating a community network of care” prior to the formation of Covenant, as well as Shook’s experience in long-term and mental health care at Silverado.
The deal to form Covenant brings together the two largest hospital operators in Orange County in terms of revenue. St. Joseph sees nearly $1.5 billion in annual net patient revenue from its OC hospitals. Hoag has more than $750 million.
Both are major employers here: St. Joseph accounts for about 11,700 local jobs, and Hoag adds another 4,800 or so. Only Walt Disney Co. and University of California, Irvine, employ more workers here.
Covenant will encompass all of St. Joseph’s local hospitals, including St. Joseph-Orange, St. Jude Medical Center in Fullerton, and Mission Hospital, which has campuses in Mission Viejo and Laguna Beach. It will also encompass urgent care and outpatient facilities in OC and the High Desert, as well as medical groups.
Hoag operates Hoag Memorial Hospital Presbyterian in Newport Beach and Hoag Hospital Irvine.
Decisions by Covenant’s board in certain areas—such as future changes in executive leadership at Hoag—will require a super-majority vote. The minimum for a super-majority would be two of the three Hoag-connected directors along with three of the four appointed by St. Joseph.
“Obviously, with St. Joseph Health being the larger partner of the two, it was appropriate that they would also have the greater number of board members,” Afable said in an earlier Business Journal interview. California regulations required that one of the two participants appoints a majority of directors.
Afable has been succeeded by Robert Braithwaite as chief executive of Hoag. Braithwaite’s promotion from chief operating officer was announced at the same time as the two hospital operators said they had approved final plans for Covenant.
Afable also will serve as executive vice president of St. Joseph Health’s Southern California region.
Proctor will remain chief executive of St. Joseph Health, which has hospitals in Northern California and Texas in addition to its Southern California operations.
Covenant is expected to go slow in building its infrastructure, including a management team.
“Our immediate plan is to draw from leadership at St. Joseph Health and from Hoag, and so I do not envision in the short term creating a management team, but rather drawing from the existing talent,” Afable said.
Hoag and St. Joseph Health announced plans to create Covenant last August. The hospital operators have said they want to work together for several reasons, including a need to deliver services neither could do alone.
Executives on both sides of the Covenant deal have emphasized that St. Joseph, a Catholic hospital system, and Hoag, which is affiliated with the Presbyterian Church, will retain their individual identities and faith affiliations.
The approval from the state came with conditions that Hoag must continue to provide a full range of women’s health services—with the exception of direct abortions—for 10 years after the affiliation agreement’s closing date as a condition of approval. The attorney general also set the formation of a women’s health committee to oversee and approve the budget for Hoag’s Women’s Health Institute as a condition of its approval. Such a committee was included in the proposed affiliation.
St. Joseph Health has said its facilities will continue to comply with directives of the United States Conference of Catholic Bishops as part of the regional organization.
The Roman Catholic Church generally opposes abortion and contraception.
The attorney general’s office said that Hoag “shall take steps to insure that alternative providers are available and accessible to all women, especially low-income women, for direct abortions” in the hospital’s service area if St. Joseph’s statement of common values is applied to all of Covenant’s operations.
Other conditions call for Covenant to submit a detailed report to the attorney general’s office no later than seven months after the conclusion of each fiscal year on the specific steps it is taking as it integrates services. That requirement would remain in place for six years.
