ValleyCare Health System held its annual meeting last month and continued to move steadily forward toward an affiliation with Stanford Medical System.
The recommended board candidates were elected with a minimum of fuss—important considering the changes the health system has undergone with year with the departure of long-time CEO Marcy Feit who was replaced by Scott Gregerson in February. Gregerson, with the full support of the board, restructured the senior management with several veteran executives departing. Jobs were consolidated to save money. The hospital has run at an average deficit of $3.5 million each of the last five years so pruning the budget was critical to meet loan covenants.
Equally important was finding a partner that could provide the capital resources so ValleyCare can remain a viable system as the health care industry changes at warp speed driven by ObamaCare and the need to control costs. The hospital, which has an operating budget of about $300 million annually, has $86 million in debt and there is a constant demand to invest in expensive equipment to provide quality care.
Thus, the leaders went out to potential partners and asked for proposals. After reviewing those, Stanford was the choice. It is a bit ironic—during Feit's tenure she negotiated agreements with the Lucille Packard children's hospital (a Stanford affiliate) as well as the University of California San Francisco for both pediatric and specialized adult services as well as UC Davis for advanced cancer care.
The current environment has most hospitals that already are not part of systems looking for partners to build one. UCSF and John Muir of Walnut Creek have announced they plan to form an operating partnership for a regional medical network. Earlier, John Muir bought just about half of the privately held San Ramon Regional Medical Center and that joint venture purchased a building within walking distance of ValleyCare's Pleasanton hospital.
Of course, Palo Alto Medical Group, the Sutter system doctors' group, has medical offices on Tassajara Road in Dublin which also houses a ValleyCare Urgent Care center. The valley's affluent population with many insured families makes this an ideal market for health care providers.
And this doesn't include Kaiser which has medical office facilities in Pleasanton and Livermore as well as a new one in San Ramon, which opened earlier this year. Kaiser execs helped formulate the ObamaCare plan so that integrated system is well equipped to cope with the requirements of the law.
For other health care providers—physicians and hospitals alike—they are scrambling to adjust.
For the ValleyCare leadership, they can celebrate that the membership, which ultimately must vote on any affiliation, was happy with the current direction. When the hospital tried a merger with John Muir many years ago, that sparked an election battle for the board that eventually scuttled that plan.
