UCSF Health and CommonSpirit Health’s Dignity Health have reached an accord with California Attorney General Rob Bonta over the terms of a $100 million, two-hospital transaction in San Fancisco.
Under its terms, UCSF Health has agreed to maintain the 259-bed Saint Francis Memorial Hospital and 240-bed St. Mary’s Medical Center's services and staffing for at least the next decade, as well as their participation in Medicare and Medicaid.
Further, UCSF said it will invest at least $430 million into the hospitals over the same period—$350 million or more into deferred maintenance and physical infrastructure improvements, and at least $80 million in their electronic medical record systems. The deal also outlines annual minimums for charity care and community benefit spending for each hospital, set to increase by 2.4% per year.
“San Franciscans deserve access to high-quality, affordable healthcare services, and today, we are ensuring they can continue to rely on both Saint Francis Memorial and St. Mary’s Medical Center for those services,” Bonta said in a statement. “As the People’s Attorney, I take my responsibility to protect access to medical services in California seriously, and I am grateful to The Regents, UCSF Health, and Dignity Health for working cooperatively and in good faith with my office to put the health of San Franciscans first."
To address the potential for reduced competition following the transaction, Bonta also had UCSF Health agree to a seven-year period in which the hospitals maintain contracts with the city and county, not impose any conditional contracts with physicians or other staff and negotiate all of the hospitals' payer contracts separately from UCSF as a whole.
"Today’s settlement agreement will also protect competition in the healthcare market," Bonta said. "At every turn, DOJ will fight for healthcare access, affordability, and equity for all Californians.”
The hospitals are among San Francisco's oldest and, under the acquisition deal signed by the health systems earlier this year (see below), will shed their religious affiliations. UCSF Health said it has no plans to shed staff during a transition that is expected to take multiple years.
The parties were initially hoping to close their deal by the end of the first quarter.
Feb. 6
UCSF Health's $100M deal to acquire 2 CommonSpirit hospitals targets spring close
UCSF Health has locked in a deal with CommonSpirit Health’s Dignity Health to acquire two of the city’s oldest hospitals and their associated outpatient clinics, the academic system announced Monday.
The organizations have now signed a definitive agreement handing over ownership of Saint Francis Memorial Hospital and St. Mary’s Medical Center. The deal, reportedly valued at $100 million, was first announced last summer and is aiming to close before the end of March.
“St. Mary’s and Saint Francis have a proud history of providing comprehensive health care in San Francisco,” Suresh Gunasekaran, president and CEO of UCSF Health, said in the announcement. “This is an opportunity to honor that legacy, expanding access and enhancing care for our neighbors while reinforcing UCSF Health’s deep commitment to our hometown.”
UCSF Health, the medical arm of the University of California, San Francisco, plans to rebrand the hospitals as UCSF Health Saint Francis Hospital and UCSF Health St. Mary’s Hospital. The hospitals will no longer have any religious affiliations or ethical religious direction nor their related restrictions on reproductive services or other types of care.
The system also said it will maintain both hospitals’ existing services to “keep patients connected with their care providers and maintain vital services … at a time when communities are losing healthcare options.” It also plans to expand “key services” including cardiology and surgery within the first year of ownership while working to strengthen hospital medicine programs and both hospitals’ emergency departments.
Alongside commitments to retain all employees, UCSF Health outlined a plan to allow the hospitals to retain their open medical staff. The latter is a contract to the faculty-based structure elsewhere within UCSF Health’s hospitals, but “ensuring local doctors can continue to practice at each location preserves critical, longstanding patient-provider relationships and supports San Francisco’s diverse medical community,” the system wrote in its announcement.
“We’re investing in the people, programs and infrastructure of Saint Francis and St. Mary’s, and ultimately, improving the health of San Francisco,” Shelby Decosta, president of the UCSF Health affiliates network, who will be given executive oversight of the hospitals, said. “We have identified immediate opportunities to support our new colleagues with upgraded technology and equipment, and to strengthen services that the community relies on these hospitals to provide.”
More broadly, UCSF Health said it sees the deal as a chance to relieve the demand for beds across its other facilities, which can then focus more on patients with complex health conditions. It’s also “a meaningful shift” toward a more community-based approach to care.
Though UCSF Health is promising no interruptions for patients, integrating the two hospitals is expected to be a multiyear process. UCSF Health noted that the two hospitals have “limited integration with one another.” The hospitals and UCSF Health as a whole also have "different systems and processes for IT, electronic medical records, scheduling, payroll and communications,” the system said.
The sell-off would come as CommonSpirit continues to wrangle financial challenges across its 145 hospitals and 2,200 care sites. After logging more than a billion in operating losses during its past two fiscal years, the Catholic healthcare giant reported a $441 million operating loss and a $738 million net loss during its most recently closed quarter.