In early 2013, Hoag Memorial Hospital Presbyterian in Orange County, California, joined with St. Joseph Well being, a neighborhood Catholic hospital chain, amid enthusiastic guarantees that their affiliation would broaden entry to care and enhance the well being of residents throughout the group.
Eight years later, Hoag says this imaginative and prescient of reaching “inhabitants well being” is useless, and it desires out. It’s embroiled in a authorized battle for independence from Providence, a Catholic well being system with 51 hospitals throughout seven states, which absorbed St. Joseph in 2016, bringing Hoag together with it.
Editors observe: This story was produced by KHN (Kaiser Well being Information), a nationwide newsroom that gives in-depth protection of well being points and that is likely one of the three main working applications at KFF (Kaiser Household Basis). KHN is the writer of California Healthline, an editorially impartial service of the California Health Care Foundation.
In a lawsuit filed in Orange County Superior Courtroom final Might, Hoag argues that remaining a “captive affiliate” of the nation’s 10th-largest well being system, headquartered almost 1,200 miles away in Washington state, constrains its means to satisfy the wants of the native inhabitants.
Hoag docs say that Windfall’s drive to standardize therapy choices throughout its chain — largely by means of a shared Epic digital information system — typically conflicts with their very own judgment of greatest medical practices. And so they recoil towards restrictions on reproductive care they are saying Windfall illegally imposes on them by means of its adherence to the Catholic health directives established by the US Convention of Catholic Bishops.
“Their massive widespread system could be very completely different than the laser focus Hoag has on caring for its group,” mentioned Hoag CEO Robert Braithwaite. “When Hoag wanted pace and agility, we obtained insufficient responses or insurance policies that had been simply mistaken for us. We discovered ourselves annoyed with an enormous well being system that had a generic strategy to well being care.”
Windfall insists it desires to stick with Hoag, a monetary powerhouse — whilst the 2 sides interact in secret settlement talks that might finish the wedding.
“We imagine we’re higher collectively,” mentioned Erik Wexler, president of Windfall South, which incorporates the group’s operations in California, Texas and New Mexico. “One of the simplest ways to try this is to collaborate,” He cited joint investments in Hoag Orthopedic Institute and in Be Well OC, a form of psychological well being collaborative, as fruits of the affiliation.
“If we’re separate,” Wexler added, “there’s a likelihood we could start to cannibalize one another and drive the price of care up.”
Analysis over the previous a number of years, nonetheless, has proven that it’s the consolidation of hospitals into fewer and bigger teams, with larger bargaining clout, that tends to raise medical prices — typically with little improvement within the high quality of care.
“Mergers are a self-centered pursuit of stability by hospitals and hospital methods that hope to get so large that they’ll survive the anarchy of U.S. well being care,” mentioned Alan Sager, a professor at Boston College’s College of Public Well being.
Wexler argued that value will increase linked to consolidation are much less of a fear in Orange County, geographically small however densely populated with 3.2 million residents and 28 acute care hospitals. Given the proximity of so many hospitals, Wexler mentioned, counterproductive duplication of medical companies is extra of a priority.
Not like many local people hospitals that search bigger companions to outlive, Hoag, one in every of Orange County’s premier medical establishments, is financially sturdy and completely in a position to stand by itself. It has the benefit of working in one in every of Orange County’s most prosperous areas, with two acute care hospitals and an orthopedic specialty hospital in Newport Seashore and Irvine. It’s the beneficiary of quite a few rich donors, together with bond market billionaire Bill Gross and thriller novelist Dean Koontz.
In 2020, Hoag’s web belongings, basically its web value, stood at about $3.3 billion — almost 20% of the overall for all Windfall-affiliated amenities, though Hoag has solely three of the group’s 51 hospitals. Hoag generated working revenue of $38 million final 12 months, whereas Windfall posted a $306 million operating loss.
However Windfall is hardly a monetary weakling. It’s sitting on a mountain of unrestricted money and investments worth $15.3 billion as of Dec. 31. And regardless of its hefty reserves, it obtained $1.1 billion in coronavirus aid grants final 12 months below the federal CARES Act, and millions more from the Federal Emergency Administration Company.
Windfall doesn’t personal Hoag, since no cash modified fingers and their belongings weren’t commingled. However Windfall is ready to maintain Hoag from strolling away as a result of it has a majority on the governing physique that was set as much as oversee the unique affiliation with St. Joseph.
Hoag executives additionally specific frustration at what they describe as efforts by Windfall to intrude with their monetary, labor and provide choices.
Windfall, in flip, worries that “if Hoag disaffiliates with Windfall, it has the potential to influence our credit standing,” Wexler mentioned.
Regardless of its insistence on the worth of the affiliation, Windfall officers are mentioned to be keen to finish the affiliation in trade for fee of an undisclosed quantity that Hoag considers unwarranted. Wexler and Hoag executives declined to touch upon their discussions. A trial begin date has not been set, however on April 26 the courtroom will hear a movement from Hoag to expedite it.
Whereas its monetary fortitude distinguishes it from many different group hospitals tied to bigger companions, Hoag’s expertise with Windfall is hardly unusual amid widespread consolidation within the hospital trade and the rising affect of Catholic well being care within the U.S.
“The larger your mother or father group turns into, the smaller your voice is inside the system, and that’s a part of what Hoag has been complaining about,” mentioned Lois Uttley, director of the ladies’s well being program at Neighborhood Catalyst, a Boston-based affected person advocacy group that screens hospital mergers.
“Compounding the issue is the truth that the system on this case is Catholic-run, as a result of then, along with having an out-of-town system headquarters calling the photographs, you additionally need to take care of governance from Catholic bishops,” Uttley mentioned. “So you’ve got two bosses, in a way.”
Hoag will not be the one hospital searching for to flee this dynamic. Final 12 months, for instance, Virginia Mason Memorial hospital in Yakima, Washington, mentioned it could separate from its mother or father, Seattle-based Virginia Mason Well being System, to keep away from a pending merger with CHI Franciscan, a part of the Catholic hospital large CommonSpirit Well being.
Mergers and acquisitions have led to the rising dominance of mega hospital chains in U.S. well being care over the previous a number of years. From 2013 to 2018, the income of the ten largest well being methods grew 82%, in contrast with 45% for all different hospital teams, in line with a current study by Deloitte, the consulting and auditing agency.
Researchers count on the pattern to accelerate as massive well being methods swallow smaller amenities economically weakened by the pandemic, and a rising pattern towards outpatient care reduces demand for hospital beds.
Four of the 10 largest U.S. hospital methods are Catholic, together with Chicago-based CommonSpirit Well being, St. Louis-based Ascension, Livonia, Michigan-based Trinity Well being and Windfall. A study by Community Catalyst discovered that 1 in 6 acute care hospital beds are in Catholic amenities, and that 52 hospitals working below Catholic restrictions had been the only acute care amenities of their areas final 12 months, up from 30 in 2013.
“We have to make this a nationwide dialog,” mentioned Dr. Jeffrey Illeck, a Hoag OB-GYN.
He was amongst a bunch of Hoag OB-GYNs who signed a letter to then-California Lawyer Common Xavier Becerra in October, alleging that Windfall regularly declined to authorize contraceptive therapies, reminiscent of intrauterine gadgets and tubal ligations — in breach of the situations imposed by Becerra’s predecessor, Kamala Harris, when she approved the original affiliation with St. Joseph in 2013.
Wexler mentioned he’s assured the lawyer common’s probe will present “readability that Windfall has executed nothing mistaken.”
A very bitter disagreement between the 2 sides issues a rupture final 12 months inside St. Joseph Heritage Healthcare, a doctor group belonging to Windfall that included each St. Joseph and Hoag docs. In November, the group notified 1000’s of sufferers that their Hoag specialists had been not a part of the community and that they wanted to decide on new docs.
Wexler mentioned that was the inevitable results of a choice by the Hoag physicians to barter separate HMO contracts, an assertion Braithwaite contested. The transfer disrupted affected person care simply because the winter covid surge was gaining momentum, he mentioned.
Maybe the most important frustration for many Hoag directors and physicians is Windfall’s need to standardize care throughout all 51 hospitals by means of their shared Epic digital information system.
Hoag docs say Windfall controls the contents of the Epic system and that the care protocols in it, typically pushed by price issues, regularly collide with their very own medical choices. Any modifications should be debated amongst all of the hospitals within the system and adopted by consensus — a laborious enterprise.
Dr. Richard Haskell, a heart specialist at Hoag, recalled a dispute over intravenous Tylenol, which Hoag’s orthopedists want as a result of they are saying it really works nicely and furthered a concerted effort to scale back opioid dependancy. Windfall took IV Tylenol off its checklist of accepted medicine, and the Hoag orthopedists “had been very upset,” Haskell mentioned.
They ultimately obtained it again on that checklist, however with the situation that they may order it just one dose at a time. That meant nurses needed to name the physician each 4 hours for a brand new order. “Medical doctors in all probability felt, ‘Screw it, I don’t wish to get woken up each 4 hours,’ so that they in all probability simply gave them narcotics,’” Haskell mentioned.
He mentioned that earlier than agreeing to undertake Windfall’s Epic system, Hoag had obtained written assurances it may make modifications that included its most well-liked therapy selections for varied situations. But it surely rapidly grew to become clear that was not going to occur, he mentioned.
“We couldn’t make any modifications in any respect, so we had been caught with their system,” Haskell mentioned. “I don’t wish to be in a system slowed down by forms that requires 51 hospitals to vote on it.”
Wexler mentioned Hoag understood precisely what it had signed up for. “They knew full nicely that there can be a collaborative strategy throughout all of Windfall, together with Hoag, to make choices on what standardizations would occur throughout your entire system,” he mentioned. “It’s not simple if one hospital desires to create its personal particular pathway.”
Regardless of Hoag’s issues about lesser requirements of care, Braithwaite couldn’t cite an instance of an antagonistic end result that had resulted from it. And Hoag’s sturdy status appears untarnished, as mirrored within the excessive rankings and awards it continues to garner — and tout on its web site.
Nonetheless, the affiliation’s days appear numbered. Hoag is not on the Windfall web site or in its advertising and marketing supplies, and in lots of instances — such because the St. Joseph Heritage schism — the 2 teams are already going their separate methods.
“They’re definitely performing like we’re opponents, and I assume meaning they know the disaffiliation is imminent,” Braithwaite mentioned.
Wexler, whereas reiterating that Windfall desires to take care of the present association, was nonetheless in a position to think about a unique end result: “What we might do post-affiliation,” he mentioned, “is to proceed to search for alternatives to collaborate.”