Dominican Hospital affected by mega-merger

Sept. 15--SANTA CRUZ -- One of the terms of a mega-merger between Dominican Hospital parent Dignity Heath and Catholic Health Initiatives is status quo operation of Dominican Hospital, its emergency services, staff and facilities for five years post-agreement.

The California attorney general is recommending a commitment for 10 years "to minimize any potential negative healthcare impact that might result."

The hospital has the only emergency room in northern Santa Cruz County, and has a 45 percent market share of the county's patients.

The state attorney general office plans a public meeting at 3 p.m. Sept. 24 at the Santa Cruz Police Department community room, 155 Center St. to gather community input.

Comments must be emailed by Sept. 27 to wendi.horowitz@doj.ca.gov.

State attorney generals are empowered to review mergers and challenge agreements that may substantially lessen competition.

Dominican Hospital, a 222-bed facility, reported $432 million in operating revenue in fiscal 2017 and employed 1,689 people.

Last year, the hospital tallied 11,000 inpatient discharges, 3,100 cardiac cath procedures, 828 births and 51,000 visits to the emergency room at 1555 Soquel Drive.

MARKET SHARE

Dominican represents a small part of a $28 billion merger that aims to unite Dignity Health, based in San Francisco with 39 hospitals and 60,000 employees in California, Arizona and Nevada, with Catholic Health Initiatives, which owns or operates 101 acute care facilities and 95,000 employees in 18 states stretching from Colorado and Washington to North Dakota and Texas.

The deal is expected to close by the end of the year.

The two organizations say they share a vision for themselves and the health care industry and serve complementary communities.

"From everything I've heard about Catholic Health Initiatives, they share the same values as Dominican Hospital in serving all populations and investing in community initiatives that support the hospital's mission," said Keisha Frost, director of United Way of Santa Cruz County, noting Dominican partners with United Way on projects such as the Community Assessment Project, Healthy Kids and community wellness. "I hope this alignment will only help expand access to care."

Catholic Health reported $15.5 billion in revenue in fiscal 2017, with an $585 million operating deficit covered by investment income producing a surplus of $128 million.

Dignity Health reported $12.9 billion in revenue in fiscal 2017, with an $67 million operating deficit covered by investment income, producing a surplus of $426 million.

Dignity plans to put 12 of its non-Catholic hospitals into a new nonprofit, Integrated Healthcare Operations, where they will not have to adhere to "ethical religious directives," which prohibit in-vitro fertilizations and elective abortions and sterilizations.

Dominican, founded in 1941 in Santa Cruz by the Adrian Dominican Sisters, is among the 19 Catholic hospitals slated to join Catholic Health Initiatives and continue to follow the religious directives.

PROFIT

Dominican reported an operating profit margin of 12.2 percent last year compared to 2.7 percent for hospitals statewide in 2016, according to the attorney general's report.

Medicare is Dominican's largest source of revenue, $191 million in 2017, followed by third-party payers,$99 million, and Medi-Cal, the state health program, $84 million.

Last year's bad debt rate was 1 percent, compared to .8 percent for hospitals statewide in 2016. Bad debt is when a patient is unwilling to pay.

Dominican's charity care and bad debt combined totaled 5.2 percent in 2013 compared to 3.9 percent statewide, but as of 2016, Dominican's ratio was 1.2 percent compared to 1.8 percent statewide.

Charity care includes emergency room visits and inpatient and outpatient care.

Dominican's charity care charges shrank from $31 million and 2,729 visits and discharges in 2013 to $8 million and 697 visits and discharges in 2017.

Community benefit services totaled $9.1 million in fiscal 2017, up from $6.7 million in fiscal 2013, including providing $2.8 million on average in services for those living in poverty.

RECOMMENDATIONS

The report said no reductions in non-executive employees were expected at Dominican, but a medical transcriptionist told the Sentinel the team of 10 was laid off in early September.

The merger agreement would continue women's health services, Medicare and MediCal commitments and county contracts for five years, charity care and community benefits program commitments for six years.

Collective bargaining agreements with the California Nurses Association, Stationary Engineers Local 39 and Service Employees International Union-United Healthcare Workers West are to remain in force.

The attorney general recommends status quo for the 20 rehab beds, 14 neonatal intensive care beds, 11 perinatal beds, 10 intensive care beds, eight pediatric beds and six coronary beds.

Another recommendation is to require for five years community benefit services of at least $7.596 million a year adjusted for inflation and annual charity care of at least $3.368 million.

The attorney general specifically calls for funding the psychiatric resource team, emergency pediatrics, the mobile health van, grants to nonprofits and the sexual assault response team for at least five years.

The report did not mention the recently renovated rehab center at 111 Madrone St. off River Street or the approved plans to tear down the old rehab center at 610 Frederick St. and replace it with a modern two-story medical complex.

Ted Burke, past president of the Dominican Hospital Foundation and member of the Sentinel editorial board, is optimistic about the change, going from "something very very good to even more excellent" with facilities "far better than most communities this size enjoy."

Sean Wherley of SEIU-United Healthcare Workers West reported that the employer has committed that contracts, jobs and services will remain intact.

"We will be monitoring this closely and holding them accountable to that commitment," he said.

DOMINICAN PROFLE

Service FY2015 FY2016 FY2017

Inpatient discharges 10,404 11,333 11,039

Cardiac cath procedures 2,454 2,852 3,107

Emergency visits 47,770 58,141 51,454

Births 839 900 828

Occupancy 60% 67% 64%

Source: OSHPD

Dominican 2017 finances

Operating revenue $432 million

Operating expenses $379 million

Other income $38 million

Net income $90 million

DOMINICAN COMMUNITY BENEFIT SERVICES 2017

Katz Cancer Resource Center: $2,035,815

Santa Cruz Women's Health Center & psychiatric care: $1,354,134

PEP classes: $1,206,293

Low-income housing subsidy, Oaks: $1,020,698

Social worker referrals for low-income patients: $1,025,276

ER psychiatric resource team: $546,985

Mobile health van: $542,809

Homeless Services Center recuperative care: $144,224

Nonprofits: $171,000

Vascular screening: $132,339

Donations, community organizations: $117,350

Community health fairs: $78,548

ER pediatrics: $70,963

Postpartum support group: $70,735

In-kind donations: $63,136

Ambulance transport: $47,511

Organic garden produce donated: $47,306

Sports events paramedics: $39,525

Nadherny-Calciano youth symposium: $34,707

County sexual assault response team: $20,000

Poisonous mushroom protocol research: $11,166

Community benefit staff & operations: $303,001

Source: Attorney General impact statement

Editor's note: This story has been updated to correct the date of the community meeting.

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