Hoag Memorial Hospital Presbyterian and St. Joseph Health jumped a key hurdle last week in their bid to create a new company to operate an integrated regional healthcare network.
The plan won the conditional approval of the California attorney general’s office, which set new benchmarks on the amount of charity care and other pro bono work that Hoag would be required to provide for six years after the network’s establishment.
The state sets such requirements as a matter of course for hospitals. The adjustment to conditions for Hoag comes because it is the institution that initiated the application seeking state approval for the formation of the network.
Charity care is defined as costs incurred through caring for people who don’t have the ability to pay. It is different than bad debt, which occurs when a patient has the ability to pay for care but is unwilling to do so.
Hoag must provide $9.3 million worth of charity care annually, a figure based on its average in recent years. The hospital spent $5.4 million on charity care in the year ended Sept. 30, 2011, the most recent data available.
“Community Benefit”
Hoag also will be required to provide “community benefit services” valued at $9.5 million annually for six years as a condition of state approval.
Community benefit services include programs and care for particular segments of patients, such as seniors, children, the poor or others.
The benchmark for future community benefit services was based on an average of recent years, including $8.7 million most recently.
The hospitals said in a statement that they were pleased with the decision by Attorney General Kamala Harris. They declined further comment “until all processes are completed.”
Medi-Cal
Providing care for lower-income patients will continue through Hoag’s participation in Medi-Cal; contracts with Orange-based CalOptima as a managed-care provider of the publicly subsidized service; and programs for patients such as “dual eligibles”—a term for those who are covered by both the federal Medicare program and MediCal, which is funded jointly by the federal and state governments.
Hoag also 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 is a $4 billion hospital operator that owns St. Joseph Hospital-Orange, St. Jude Medical Center in Fullerton, and Mission Hospital, which has campuses in Mission Viejo and Laguna Beach.
Hoag is a $1 billion health system with hospitals in Newport Beach and Irvine.
The pair said last August that they would work together through the network in a bid to better coordinate healthcare services across Orange County. The deal calls for the network to be run by a nonprofit corporation with its own board.
Richard Afable, who is currently Hoag’s chief executive, is set to be chief executive of the network once it is operational. No board members have been identified.
Hoag and St. Joseph officials have said each participant will retain its existing identify and faith affiliation.
Catholic Directives
St. Joseph is a Catholic system while Hoag is affiliated with the Presbyterian Church.
The state approval comes with a condition that would take effect if St. Joseph Health’s “statement of common values” were applied to the network and made applicable to Hoag as a participant in the venture.
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 the St. Joseph’s statement of common values is applied.
Other conditions call for the proposed network—which has the working title of Covenant Health Network Inc.—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.
Included are actions that the network will take to coordinate with the Orange County Health Care Agency, CalOptima and other governmental entities, along with things such as improving the health status of poor and other groups considered to be vulnerable, and work to improve infrastructure gaps.
The letter also says that the attorney general’s office approval would be required to sell or transfer control of Hoag to another entity for five years after the closing date of the agreement.
Executives of Hoag and St. Joseph have said that there are no plans to sell any of the hospitals operated by either entity.
