Pleasanton Weekly

Column - April 25, 2014

Merger likely to keep ValleyCare afloat

V

alleyCare Health System will likely merge with a larger hospital group in the near future to provide long-term financial stability and secure its position as Pleasanton's community hospital. ValleyCare was established in 1961 and has grown from a small hospital in Livermore into a comprehensive health system with medical facilities in Livermore and Dublin, as well as Pleasanton.

Since its beginning, ValleyCare has remained not-for-profit, which means any earnings have gone right back into the health system in new programs, services, equipment and facilities. But its ability to continue delivering high-quality health care is threatened by fierce and growing competition for patients and services from larger groups, increasing medical care costs and a whopping $86 million in outstanding debt.

In the last five years, ValleyCare has lost an average of $3.5 million a year, although Scott Gregerson, ValleyCare's new chief executive officer, is determined to stop the losses next year.

In remarks to the Rotary Club of Pleasanton last week, Gregerson, described as one of the best "change" managers in the industry, said that his predecessor Marcy Feit -- ValleyCare's longtime CEO and a change manager herself, when she took over the failing hospital system two decades ago -- was being paid $2 million a year plus perks when she abruptly resigned last February with the blessing of ValleyCare's board of directors. Two of her top executives also were earning more than $1 million.

They're gone and, as part of his first actions, Gregerson also laid off a number of other employees he said weren't needed. Further belt-tightening is continuing while he's on the prowl looking for a financially strong and larger health care partner.

Gregerson said Johns Hopkins Medical Center in Baltimore came to the rescue of Sibley Memorial Hospital in northwest Washington, D.C., which was in a similar financial situation, and Sibley today has retained its identity with more medical services now available in the community it serves.

He also showed a graphic entitled, "A crowded dance floor," listing ValleyCare's formidable competitors, including Kaiser Permanente, Sutter Health's Eden Medical Center in Castro Valley, Washington Hospital in Fremont, John Muir in Walnut Creek and San Ramon Valley Medical Center, which has just announced an alliance with John Muir to build a 9,000-square-foot outpatient clinic in Pleasanton.

"The future for ValleyCare is going to be within a partnership with a major hospital group," Gregerson said. "Right now, I don't see anybody riding a white horse over the hill to rescue us, but I know that ValleyCare won't be able to go it alone."

Already, ValleyCare has developed strategic affiliations with UC San Francisco Medical Center and its Benioff Children's Hospital, UC Davis Medical Center's Cancer Care Network and Stanford University's medical center. All three of those medical centers have expressed an interest in expanding into the Tri-Valley.

First, Gregerson said, he has to "right the ship" at ValleyCare to restore an adequate revenue stream and then leverage that improvement to find a managing/operating/financial partner to join ValleyCare in continuing to serve the community.

"We have a great hospital and we are going to come out of our financial problems and be in far better shape," he said. "We've been in an unsustainable trajectory. We have to face the brutal reality of where we are."

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