Written by Andy Stiny, The Californian

April 4, 2012 — Salinas Valley Memorial Hospital (SVMH) will move forward on a process that could end with a joining of forces with either Natividad Medical Center (NMC) or Hospital Corporation of America (HCA Healthcare).

On a 4-1 vote, the board of directors on Wednesday night voted to move forward to stage two of a possible affiliation with another health care organization. Nathan Olivas voted "no" after earlier asking why public meetings could not be held before going forward.

James Moloney of Cain Brothers, the medical acquisition consultant hired by the hospital, said much could be learned in the two-way fact finding during stage two that could better inform the public.

"We really don’t know what the deal is until we get into the due diligence part," said board president Jim Gattis.

Before the board’s action, Moloney announced that the third affiliation candidate, Vanguard Health Systems, had dropped out.

Vanguard, headquartered in Nashville, decided they have "more strategically valuable opportunities to pursue," said Moloney.

An intensive period of "due diligence" fact finding will now begin with the anticipated conclusion of that now pushed back a month to June, said Moloney.

The likely conclusion of stage two could be either a "definitive agreement" or "a letter of intent" to proceed, Moloney told the board.

After board member Harry Wardwell’s motion to move forward with the two affiliation possibilities, but before the vote, board member Patrick Egan said he was more comfortable with a letter of intent.

It was "highly unlikely the next step would be a definitive agreement," said attorney Gerry Hinkley, who specializes in health care for a San Francisco law firm. Hinkley offered his advice by speaker phone. The board will make decisions all along the way, he said. "Nothing can be forced on the board," said Hinkley.

Egan encouraged the community "take advantage of the opportunities" in the months ahead to ask questions, attend board meetings and the later public forums.

"I think it’s been a good process," Wardwell said, in making his motion. HCA and NMC "gives us two really good organizations to look at," he said. Wardwell noted that there have been 18 meetings concerning a possible merger since the matter first appeared on a board meeting agenda last August.

HCA is the giant in the health care industry. HCA has 163 hospitals, had 2011 revenues of $29.7 billion, and has almost 200,000 employees and 35,000 affiliated physicians.

The system has a "very liberal" charity care policy, HCA executive Bryan Rogers said last week. HCA offers quality health care, access to capital and is a strong corporate citizen that is committed to the communities it serves, said Rogers in summarizing the pluses of their proposal.

Locally HCA operates Regional Medical Center of San Jose and Good Samaritan hospital also in San Jose. Moloney and Egan took a tour of the Regional Medical Center earlier on Wednesday.

NMC chief executive officer Harry Weis has emphasized the hospital’s local connection and its "designated safety net status" which means the hospital has a key responsibility in treating the county’s indigent population.

State legislative action would be required to form a legal "public authority" if NMC and SVMH merged but the SVMH special district, with its taxing powers, would remain intact, Weis said.

Assemblyman Luis Alejo (D-Watsonville) sent a letter to the SVMH board, read at last week’s meeting, supporting the NMC proposal and more flexible timetable in the merger process.

It is early in the process, hospital spokeswoman Adrienne Laurent wrote in an email this week. "The serious research phase of this project has not yet begun the next few months are all about getting the information needed to do what is right for the people of our healthcare district."
 

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