Court Overrules Providence's Objections to Hoag's Affiliation Lawsuit

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In a statement, Hoag stated that it welcomes the decision issued Tuesday.

A judge in California overruled Providence St. Joseph's demurrer to the complaint by the Association of Presbyterian Members of Hoag to dissolve Hoag Memorial Hospital Presbyterian's affiliation with the Renton, Washington-based health system.

The ruling, issued Tuesday afternoon by David A. Hoffer, a judge of the Superior Court of Orange County in California, stated that the court was unable to conclude that Hoag's complaint must be dismissed for lack of standing. A demurrer hearing was held Monday to see if there was sufficient evidence to move forward with Hoag's affiliation lawsuit.

“The issue may be developed further by the parties moving forward. For purposes of pleading, the demurrer is overruled,” Hoffer wrote.

Providence St. Joseph is ordered to answer within 10 days and a status conference is scheduled for March 2, according to the ruling.

This latest legal development potentially sets the stage for a trial between Hoag, an Orange County-based nonprofit regional healthcare delivery network, and Providence St. Joseph.

Hoag, which operates two hospitals in southern California and has net assets of nearly $2.2 billion, according to the organization’s most recent 990 form, said in a statement that it welcomes the decision issued Tuesday. The statement also mentioned that Hoag and its stakeholders remain “steadfast in their efforts to regain independence from Providence.”

“The Court's decision paves the way for the complaint to proceed to trial, which is aligned with the desires of our physicians and the community,” the statement read. “Hoag’s Founders have requested an expedited trial of the dispute. The motion to expedite the trial, which is set to be heard on May 3, details the need to resolve the issues as soon as possible and is supported by the declaration of noted healthcare economist and University of Southern California Price School of Public Policy Professor, Glenn Melnick, Ph.D.”

Erik Wexler, CEO of Providence Health & Services' Southern California Region, released a statement that the overall organization will “continue to vigorously defend against the lawsuit.”

“While this lawsuit remains ongoing, we will continue to provide leading-edge, quality care in Orange County and dialogue with Hoag and their designated directors to the CHN Board of Directors,” Wexler said. “Ultimately, Providence is here to serve the greater good of the Orange County community, and will be guided in all of its decisions by its core mission and purpose of providing comprehensive, compassionate care to all who come through our doors.”

Hoag joined St. Joseph Health, a nonprofit health system based Irvine, California, in 2012. Four years later, St. Joseph merged with Providence Health, a nonprofit based in Washington, to create Providence St. Joseph, one of the nation's largest nonprofit health systems.

According to an interview Hoag CEO Robert Braithwaite gave to HealthLeaders last year, senior leaders at the organization met with executives at Providence in mid-2019 to express concerns about the effectiveness of Hoag's affiliation with the system.

“There are good people [at Providence] but it was becoming apparent to us that they have more of a national presence,” Braithwaite said. “They're one of the biggest health systems in the United States and they do have more of a regional or national lens, compared to that of Hoag, which is more concentrated on southern California, specifically Orange County.”

Providence and Hoag met again in October 2019 to discuss but failed to come to an agreement. After a few more formal attempts and conversations, including a mediated discussion, the organizations couldn't come to an agreement and Hoag filed a lawsuit to dissolve its affiliation with Providence in May 2020.

A demurrer hearing was originally scheduled for November 16 but a judge rescheduled the hearing to February 1.

Wexler told HealthLeaders in mid-November that he was “disappointed” in Hoag's efforts to dissolve the affiliation with Providence.

“Hoag is an outstanding institution and has been part of superb population health growth strategies in Orange County, along with Providence St. Joseph Health, for almost a decade,” Wexler said. “In these changing and difficult times, and with an imperative to advance healthcare, staying together is, from our point of view, a lot better for our community than potentially separating and having cannibalization and duplication of services.”

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