Petaluma hospital deal off after state denial
The state attorney general last week nixed a deal that would have created a new Northern California health care company, further complicating the long term future of Petaluma Valley Hospital.
Attorney General Xavier Becerra denied the request of St. Joseph Health and Adventist Health to form a new company, ST Network, to run their Northern California properties. St. Joseph currently operates Petaluma Valley on an interim lease with the Petaluma Health Care District, the owner.
The district signed a letter of intent to work with the new combined company on a long term hospital lease agreement, but the Attorney General's action means that process is now dead, said Ramona Faith, CEO of the district.
“This means we need to go back and look at our options,” she said. “Obviously it's going to lengthen the process even more.”
In a letter explaining the decision, Becerra said that “the proposed transaction is not in the public interest, including but not limited to, having the potential for increased health costs and concerns over access and availability of health care services.”
Faith said the district would reengage with St. Joseph on a potential lease agreement, but challenges could still remain. St. Joseph, which has operated the hospital on a 20-year lease, was the front runner to renew the lease when it expired in 2017.
But a deal fell apart over financial terms, a non-compete clause and the Catholic healthcare provider's unwillingness to continue providing women's reproductive health services. Faith said the proposed joint operating company was a solution to keeping women's reproductive health services at the hospital.
“The main sticking point is women's health,” she said. “The rest can be negotiated. If St. Joseph can't continue providing women's health services, that could be a problem for them. It's an important service to the community.”
Christian Hill, director of communications for St. Joseph's Northern California region, did not have information on how the attorney general's decision would affect the Petaluma Valley Hospital lease. He referred questions to a company statement.
“Our proposed venture would have combined our services across clinics and facilities in Humboldt, Mendocino, Sonoma, Lake, Napa and Solano counties to lower the cost of healthcare and improve quality and access to care,” the statement said. “Both Adventist Health and St. Joseph Health are very disappointed in the outcome of this decision. Our intent has always been to better serve our communities, increase access to services, and create a stronger safety net for families in Northern California.”
According to the letter of intent, the new joint company would have paid the district $800,000 per year to lease the hospital for 30 years. The company would have been required to invest $3.5 million in the hospital that has maintenance issues and had to close some rooms this summer due to a mold outbreak.
Faith said she would like to meet with St. Joseph this month and restart the negotiation process.
“We need to see if St. Joseph can operate the hospital long term,” she said. “If not, we need to look at other options.”
The district has explored other options in the past. When the first deal with St. Joseph fell unraveled, the district issued a request for proposals and received interest from three health care companies.
The district settled on Paladin Healthcare, a Southern California company that owns several hospitals. That deal ended when Paladin was not willing to invest in an expensive electronic medical records system.
Faith said St. Joseph will continue to operate the hospital in the interim.
“Our priority continues to be for the long term operation of Petaluma Valley Hospital,” she said.
Any lease deal would need to be approved by Petaluma Health Care District voters.
(Contact Matt Brown at email@example.com.)
Editor's note: This story has been revised to correct the spelling of the first name of St. Joseph spokesman Christian Hill.