Hoag Hospital is taking legal action to
dissolve its relationship with the Providence St. Joseph Health system and regain local control.
Hoag, known formally as Hoag Memorial Hospital Presbyterian, filed suit
Friday in Orange County Superior Court to get out of an eight-year partnership
that it says has long not been as fruitful as it had hoped.
Hoag joined forces with the Orange County-based St. Joseph Health System
in 2012 to form a regional healthcare delivery system and created the
Covenant Health Network, with a seven-member board, to integrate the two
nonprofit partners. At the time, St. Joseph had 14 hospitals, five in
Southern California.
In 2016, St. Joseph merged with Providence. The Catholic Providence St.
Joseph Health, based in Seattle, has 51 hospitals in six western states.
Hoag Hospital President and Chief Executive Robert Braithwaite said Tuesday that Providence’s scale is more regional to national,
while Hoag seeks to be intensely local.
He called it a “paradox of scale,” where going bigger diluted
and constrained local control. The benefits of syncing with a larger network,
such as financial, staffing or branding boosts, were never what drew Hoag
to join with St. Joseph, but rather a broader but still local “population
health management” model, Braithwaite said — a “bold
vision” that never got its footing, he said.
According to the complaint, officials were frustrated by a lack of progress
toward the population health model even before the Providence merger,
but Hoag took the acquisition as a renewed opportunity.
“Those efforts fared no better than Hoag’s prior efforts,”
the complaint states.
In 2017, the Covenant Health Network executive staff was formally abandoned.
Then, this year, “Providence executives declared to Hoag’s
board that population health was no longer relevant,” the complaint reads.
“As time has progressed, moreover, there have been increasing efforts
by Providence to homogenize the system and to move focus away from a community-based
governance/engagement model, eliminating Orange County as a region and
concentrating much of the decision-making in national corporate management,”
the complaint says. “These efforts stand in direct contradiction
to [the affiliation and] Hoag’s mission.”
Erik G. Wexler, chief executive for the Covenant Health Network and Providence
St. Joseph Health in Southern California, said in a statement that Providence
is disappointed by the “misguided and potentially costly legal actions
by the Hoag leaders.” Hoag’s reasons for severing ties are
“unclear,” especially as healthcare systems are fighting the
coronavirus pandemic.
“Our relationship has been strong since 2012. The Hoag leaders’
so-called ‘realignment’ plan would negatively impact patient
care [and] diminish resources and medical expertise available to Orange
County,” Wexler stated. “In fact, this move could undo nearly
a decade’s worth of enhanced access to high quality, dependable,
affordable and compassionate care to the communities we serve, especially
to our most vulnerable members.”
Hoag Hospital opened atop a bluff in West Newport in 1952, the product
of a Presbyterian minister, several church members, and a doctor, and
the largesse of the Hoag family, whose patriarchs amassed a fortune as
early investors in the J.C. Penney Co. department store chain and eventually
moved to Newport Beach. The Hoag Family Foundation and the Assn. of Presbyterian
Members of Hoag, known collectively as the founders, have been extensively
involved in hospital affairs ever since.
“My grandmother, Grace Hoag, and my father, George Hoag II, had a
vision, in collaboration with local Presbyterian leaders, for creating
outstanding local healthcare in Orange County,” said Melinda Hoag
Smith, president and chief executive of the George Hoag Family Foundation,
in a statement. “Our family has carried that legacy of meeting the
needs of this amazing community over the last 70 years. It is time to
ensure we continue that work as Orange County grows and residents’
healthcare needs continue to evolve. Full independence is the best path
toward a sustainable and thriving Hoag.”
In addition to the 434-bed flagship campus in Newport, Hoag has an 84-bed
hospital in Irvine, 13 urgent care centers and nine health centers around
Orange County along with a well-honed local identity.
The continuing coronavirus pandemic underscored Hoag’s desire for
independence and agility, Braithwaite said.
“I think the pandemic actually highlighted for Hoag and for the board
and certainly for our physicians and nurses the need for very timely decision-making
and unique decision-making,” he said.
Last year, the Hoag hospital board attempted unsuccessfully to realign
its relationship with Providence by breaking apart formally but maintaining
a voluntary collaboration.
Braithwaite said he sees the value in collaboration, noting a relationship
Hoag has with the pediatricians at Children’s Hospital of Orange
County. But neither Hoag nor CHOC cedes control, he said.
The Roman Catholic Providence and the Presbyterian Hoag also have “some
fundamental and growing differences in values. Those differences directly
impact the care of patients within the two systems,” the complaint adds.
Hoag’s fiduciary board, executive leadership team, physician leadership
and founders agreed to keep pressing for independence. The litigation
is a “last resort” to keep Hoag from being a “captive
affiliate,” the complaint says, although Braithwaite said he wants
a split to be as amicable as possible. The hospital says patients will
not be impacted.
Braithwaite acknowledged that the pandemic’s impacts on the courts
will extend the case’s time frame, which could go as long as two
years, he estimated.
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