Hoag Memorial Hospital Presbyterian has filed suit to dissolve its partnership with Providence St. Joseph Health, officials said Monday.
Hoag merged with St. Joseph Health in 2012 to expand its healthcare networks after the Affordable Care Act was approved.
“This was a mission-driven decision to expand and transform local healthcare, not a financial decision,” the lawsuit, which was filed on Friday in Orange County Superior Court, reads.
“Finances were never a factor. Rather, Hoag believed that population health could be best achieved with regional scale.”
There were some issues at the time as the Roman Catholic nonprofit hospital negotiated a restriction on abortions.
“While Hoag’s affiliation with a Catholic system caused Hoag to lose some level of independence and imposed certain restrictions, in particular around women’s services, Hoag thought it made sense to accept certain tradeoff if it would be able to transform the delivery of care with a population health model and more broadly serve the Orange County community,” the lawsuit reads.
A settlement with the state Attorney General’s Office was reached in June 2013 in which Hoag made abortion services available from other providers.
Hoag alleged in the lawsuit that the partnership failed to achieve its goal.
“The agreed-upon objective of 1 million covered lives in 5 years was abandoned…” the lawsuit alleges.
There was “significant frustration with the lack of progress around population health management,” the lawsuit alleges.
This year, “Providence executives declared to Hoag’s board that population health was no longer relevant,” according to the lawsuit.
“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 lawsuit alleges.
That was in “direct contradiction” to the point of the partnership, the lawsuit alleges.
“Hoag must be able to keep local resources and decision making in Orange County to address all the health needs of community members for years to come,” said Robert T. Braithwaite, Hoag’s president and CEO.
“The current structure of our relationship with Providence, we believe, is not in the best interest of our patients, the community, our physicians and team members. While Hoag has consistently emphasized our desire to collaborate with Providence on specific initiatives going forward, we made no progress on realigning the relationship after almost a year of attempted negotiations.
“As a result, Hoag’s Founders took legal action, we had hoped to avoid, to dissolve the affiliation, which all parties have agreed did not fulfill the measure of its creation.”
An effort a year ago to renegotiate the terms of the partnership failed, the lawsuit alleges. In October, Providence officials “went to the bond market with a major financing,” but did not disclose Hoag’s “intent to disaffiliate, even though Hoag advised Providence in writing that it should be transparent to the market,” the lawsuit alleges.
“Once Providence secured the financing, Providence thereafter resisted further efforts by Hoag to negotiate an amicable separation,” the lawsuit alleges.
Providence “now disingenuously asserts that Hoag must remain in the affiliation because the bond markets are relying on Hoag’s assets (which are exclusively owned by Hoag and the communities it serves) as belonging to Providence,” the lawsuit alleges.
The lawsuit also claims that Hoag’s Presbyterian “beliefs, values and policies have been compromised due to restrictions within the larger Catholic system.”
“Under the existing affiliation, Hoag’s mission and legacy are at risk of being diluted within a large national hospital system,” Braithwaite said.
“We must be able to maintain Hoag’s unique character and role as Orange County’s most trusted health care network, as well as keep local control of community assets.”
Providence officials released a statement from its CEO Erik G. Wexler arguing that the partnership has created a “premier health care network with top doctors and nurses, innovative and cutting-edge treatments, while managing costs for better value benefiting our patients.”
Wexler added, “Now, at a time when all hospitals and health systems are battling the COVID-19 pandemic, the Hoag leaders took legal action to sever its relationship with Providence for reasons that remain unclear.”
Wexler believes the “realignment plan” pitched by Hoag would “negatively impact patient care, diminish resources and medical expertise available to Orange County.”
Wexler said the partnership has “made significant progress” in fulfilling the impetus for the merger.
Wexler claimed that Hoag’s managed care patients have access to more than 2,000 health care providers, it developed the BeWell Orange County partnership that focuses on mental health and substance abuse in the county, and made it possible for Hoag to participate in experimental use of Remdesivir in clinical trials for it use to combat COVID-19.
“We are disappointed that they filed this complaint and we believe it is without merit,” Wexler said.
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