Tulare Regional Medical Center’s (TRMC) future could be in the hands of Adventist Health, after the Tulare Local Healthcare District’s Board of Directors voted to enter into negotiations with the the nonprofit.
The board’s 4-1 decision in favor of Adventist came down to what it felt were more favorable terms — they say they’re able to reopen the hospital by October. Community Medical Centers (CMC) however, would require an extension of the hospital’s suspension along with the passage of a tower construction bond measure and a long-term lease measure before reopening services in 2019.
Both entities required a 25-year lease of the hospital’s property, and both had previously submitted management bids during the same process that ultimately saw Healthcare Conglomerate Associates (HCCA) the hospital’s former management company, take over care at Tulare Regional.
Adventist and Community were chosen by the district’s ad-hoc committee to present to the board. Dignity Health and the Kaweah Delta Heathcare District were also in the running to potentially manage TRMC, but were not chosen to present.
Senovia Gutierrez was the lone dissenting vote. She felt that Community could provide higher quality services, and more of them.
“CMC is offering right now, the possibility to have a hospital with all those services. Why not take a chance? I know that time is important, but it’s better to wait to have a good basis to open the hospital again,” she said. “CMC is offering us the opportunity to have something different. And I really would like to go to CMC because it’s the best for the community.”
Kevin Northcraft, the president of the district’s board, said that Adventist was just what the district needed — a partner ready to work to open as soon as possible and willing to work with the district.
“God works in mysterious ways. Thank God we got the chance to consider Adventist Health,” Kevin Northcraft, the president of the district’s board said, “and that they responded in such a compassionate, flexible, and confident way. Thank God they want us, too.”
Adventist’s Bid
Robert Beehler, Adventist’s Market Development, Mergers & Acquisitions Executive, presented the nonprofit’s vision of a partnership — including a long-term lease — to the board.
He said that his organization’s timeline was aggressive, but their past experience in other markets shows their experience.
“We understand that it’s a very aggressive timeline, and there’s some risk we’re building into it — risk that we’re taking, by taking an aggressive timeline like that — but the district asked for certain things to happen, including opening the hospital as quickly as possible, and we’ve taken every step we can to accomplish that,” he said. “We’ve done it in other markets, we’ve done it in other transactions. It takes a little bit of faith on our team’s perspective, but we’re committed to do everything we can to get there, and putting our money up to do so.”
The organization’s California footprint spans as far north as Willits and as far south as San Diego; in Central California, Adventist operates hospitals in Bakersfield, Tehachapi, Hanford, Selma, Reedley, Sonoma and Lodi.
Adventist intends to open up the hospital before its suspended license expires, he said, and potentially as soon as September. They would still attempt to obtain an extension as a cautionary move.
“Being cautious, we would probably want to be sure that if something goes wrong, there’s an ability to move a little bit beyond that,” Beehler said.
They would also be willing to commit to Tulare Regional remaining an acute care hospital.
The company would also provide a $10m line of credit — potentially more or less, depending on what amount was needed and how the district budgeted the funds — to fund the reopening of the hospital. The amount would be treated as an advance of rent under a long-term lease arrangement.
The district would still be responsible for ensuring the completion of the tower — or that the hospital’s buildings are otherwise seismic compliant. According to the presentation, Adventist would be able to provide support for construction oversight and design.
Adventist would prefer to see a bond for the tower, Beehler said, but it was not a hard requirement.
“I think the intention would be to get the organization open and to rebuild the trust with the community — if the community had enough confidence in the work we’re doing, we would like to see the district fund the tower with a bond,” Beehler said. “We would hold the option open of seeking other financing if it absolutely came to that.”
They estimate a $40-45m cost to complete the tower based on discussions with the inspector of record. The hospital’s former management company, Healthcare Conglomerate Associates, had previously estimated a $57m cost to finish the tower, before additional fees.
“He’s there for every board, every piece of it — the number he threw out was $40-45 million to complete it,” Beehler said. That number purely came from the inspector, he said later.
“We haven’t spent any significant amount of time in that building. Our total engagement in this process since we got the RFP — talking about super-fast timelines — has been about a month and a half,” he said. “We have not dove into the tower, we don’t know what it’s gonna cost, somebody threw out a number to us — someone asked what it was, and I repeated what the number we heard was.”
Under Adventist’s administration, the hospital would reopen with the basic services necessary, as well as an emergency department, according to Andrea Kofl, Adventist’s President of the Central Valley Network. Obstetrics could take up to a year to reopen, but could reopen sooner as well.
“We want to make sure that we have everything there that we need — the doctors and nurses there to provide safe care,” she told the board.
Kofl told the Voice that Adventist’s staff, already rooted in the surrounding areas, would look to recruit physicians to the hospital and recruit back physicians who may have been jilted under HCCA’s administration.
Adventist had been watching the situation in Tulare “from afar” after their experience in bidding four years ago, and was driven to re-bid the community after noticing the void in services.
Their experience in the Central Valley and Tulare’s populations being in common with their other areas — including agriculture and a large Hispanic population — lead them to believe that they can provide service in Tulare just as well as they do at their other Central Valley hospitals.
“We’re passionate about care and the delivery of care, and doing it in a Christ-centered way,” she said.
Community’s Bid
Aldo De La Torre, Community’s Senior VP for Network Development and Insurance Services, presented for Community Medical Centers. Scott Wells, the CEO for Santé Health, accompanied him.
Community and Sante have been in the running to work with Tulare since last year; in October 2017, Tulare officials submitted plans to transition the hospital to Community’s management to the United States Bankruptcy Court and to the California Department of Public Health.
The organization operates Central California’s largest healthcare system, De La Torre told the board, with a combined 1,117 beds at Community Regional Medical Center, Clovis Community Medical Center, Fresno Heart & Surgical Center, Community Behavioral Health Center, and Community Subacute & Transitional Care.
“We serve the needs of many in the surrounding counties. We are the only Level One trauma center from Los Angeles to Sacramento, in between,” De La Torre said. “We provide more ER care than any hospital in the state — we go back and forth with a hospital down in Los Angeles called County/USC.”
Before continuing to the rest of the presentation — including Community’s terms and a timeline — De La Torre provided a disclaimer to the public regarding his organization’s thoughts.
“It’s not that we don’t desire to open your hospital — if we could, we’d do it tomorrow. We just think there are a lot of headwinds and barriers, and we think that rushing this may cause more harm than good. What we try to do is take a long term look at this,” he said.
Community’s officials had toured the facilities with a team of 30 people over two days, he said, providing some insight into what funding would be required to restore the hospital to a place where it would pass an inspection. Their view differed from others, and the timeline provided slated the hospital’s opening for the 3rd Quarter of 2019.
Officials were confident that an extension had a good chance of being granted, based on discussions with state regulators.
“We don’t think that the inspection agencies will reopen the hospital or permit us to unless we make repairs and accomodations. We’ve allowed money for that, and that goes into our analysis. The current cash flow statements suggest that there’s $800k available for that purpose. We think it [needs] significantly more than that,” he said.
Community’s bid promised up to 24-months of no-cost C-Suite management assistance and a $6m line of credit secured by the Evolutions building and adjacent land, while Sante would work with local Federally Qualified Health Centers to reopen at least one of the hospital’s clinics by October 29, 2018. TRMC would remain an acute care hospital as well.
Even if voters approved Community’s lease of the hospital, if they also rejected a bond measure to reopen the tower, Community would likely exit any lease or management agreement.
Based on Community’s analysis, it would take $75-100m to complete the tower, though if chosen, they would have commissioned a deeper analysis. That would include customizations for the company’s way of working in the building.
“Some of the cost estimates included in Community’s number include redesign of the existing layout of the tower, because it doesn’t work for us. We fundamentally need to build a tower in a manner that will maximize the use of automization and minimize the use of labor,” Wells said. “That’s how we run the hospitals in Fresno. Under the old deal with the old management team, they didn’t really have an economic desire to reduce labor — their contract stipulated that they would get more money if they threw people at it.”
“If you wait, and Community comes in, in Tulare, you’re going to have a hospital like the four in Fresno, that I know you’ll love, you’ll be awesome, you’ll be proud of them,” Wells said. “But in order to do that, you have to accomplish certain things.”
Community officials said they would reopen with all of the hospital’s services it previously offered. De La Torre told the board that he’d like to expand services from there.
“This is a secondary market for us today. We would like to make it more of a primary market, and extend the resources we have to the residents of Tulare,” he said. “Many of you access our care today, and we find that if we can bring that locally, that would be a greater value to you.”
A Fraying Partnership
Before the final vote, Kevin Northcraft said that he and Mike Jamaica had been in talks with Community and Sante as far back as a year and a half ago. They had committed to working exclusively with the hospital group, he said, and Community had previously offered the district loans while the hospital was closed.
Before the hospital had closed, Tulare officials submitted plans to transition the hospital to Community’s management to the United States Bankruptcy Court. In January, Northcraft said he had offered to work with them on a long-term lease if the organization was able to get the hospital up and running as soon as possible.
Community’s “as soon as possible” didn’t match up with the board’s definition, though.
“I really like the Community staff, I like the facilities, I like the reputation that they have, they’re great people — and for over a year, I thought that this is our future, this is where we’re going,” he said.
The hospital group’s statement that an immediate opening was unlikely — an opinion shared by the Kaweah Delta Healthcare District — soured the relationship with them. Their rationale was solidified in a June 18 letter signed by Tim Joslin, President/CEO of Community.
“…CMC has determined that significant capital is required to replace aging equipment, finish construction projects, address seismic compliance, and complete critical safety and infection-control repairs,” Joslin wrote.
A delayed reopening — and the requirement to pass a bond before even entering into an agreement — was unacceptable to Northcraft.
“Given that history, in my mind, that proposal is just unworkable and infeasible for us to proceed,” Northcraft said.
Tulare would be a secondary hospital under the stewardship of Community or Kaweah because they would focus on their main areas, he said.
“As much as I’ve enjoyed working with Community, as much as I’ve committed for over a year exclusively to Community, I’m here to tell you that that was not a wise choice,” he said.
Xavier Avila, a board member, echoed Northcraft’s view to the Voice.
“The big factor is what they said is — they want a bond and a lease in the same vote, in the second quarter; so, we’re going to go from now, ‘til February-March. We don’t know. No certainty,” he said. “That’s not fair to this town, and it’s not fair to these people. What happens if it doesn’t pass? What do we do?”
Joslin’s letter said that Community would continue to be interested in a long-term lease or acquisition of the hospital if Tulare’s other opportunities fell through.
Avila said he’d support entering into an agreement with Community if things fell apart with Adventist, though the board would likely also reach out to Dignity Health.
“Without a doubt,” he said.
Watch the public comment section of the meeting below.