Hoag seeks to sever ties with Providence health care system

Hoag Hospital is taking legal action to dissolve its relationship with the Providence St. Joseph Health system and regain local control.

Hoag, known formally as Hoag Memorial Hospital Presbyterian, filed suit Friday in Orange County Superior Court to get out of an eight-year partnership that it says has long not been as fruitful as it had hoped.

Hoag joined forces with the Orange County-based St. Joseph Health System in 2012 to form a regional healthcare delivery system and created the Covenant Health Network, with a seven-member board, to integrate the two nonprofit partners. At the time, St. Joseph had 14 hospitals, five in Southern California.

In 2016, St. Joseph merged with Providence. The Catholic Providence St. Joseph Health, based in Seattle, has 51 hospitals in six western states.

Hoag Hospital President and Chief Executive Robert Braithwaite said Tuesday that Providence’s scale is more regional to national, while Hoag seeks to be intensely local.

He called it a “paradox of scale,” where going bigger diluted and constrained local control. The benefits of syncing with a larger network, such as financial, staffing or branding boosts, were never what drew Hoag to join with St. Joseph, but rather a broader but still local “population health management” model, Braithwaite said — a “bold vision” that never got its footing, he said.

According to the complaint, officials were frustrated by a lack of progress toward the population health model even before the Providence merger, but Hoag took the acquisition as a renewed opportunity.

“Those efforts fared no better than Hoag’s prior efforts,” the complaint states.

In 2017, the Covenant Health Network executive staff was formally abandoned. Then, this year, “Providence executives declared to Hoag’s board that population health was no longer relevant,” the complaint reads.

“As time has progressed, moreover, there have been increasing efforts by Providence to homogenize the system and to move focus away from a community-based governance/engagement model, eliminating Orange County as a region and concentrating much of the decision-making in national corporate management,” the complaint says. “These efforts stand in direct contradiction to [the affiliation and] Hoag’s mission.”

Erik G. Wexler, chief executive for the Covenant Health Network and Providence St. Joseph Health in Southern California, said in a statement that Providence is disappointed by the “misguided and potentially costly legal actions by the Hoag leaders.” Hoag’s reasons for severing ties are “unclear,” especially as healthcare systems are fighting the coronavirus pandemic.

“Our relationship has been strong since 2012. The Hoag leaders’ so-called ‘realignment’ plan would negatively impact patient care [and] diminish resources and medical expertise available to Orange County,” Wexler stated. “In fact, this move could undo nearly a decade’s worth of enhanced access to high quality, dependable, affordable and compassionate care to the communities we serve, especially to our most vulnerable members.”

Hoag Hospital opened atop a bluff in West Newport in 1952, the product of a Presbyterian minister, several church members, and a doctor, and the largesse of the Hoag family, whose patriarchs amassed a fortune as early investors in the J.C. Penney Co. department store chain and eventually moved to Newport Beach. The Hoag Family Foundation and the Assn. of Presbyterian Members of Hoag, known collectively as the founders, have been extensively involved in hospital affairs ever since.

“My grandmother, Grace Hoag, and my father, George Hoag II, had a vision, in collaboration with local Presbyterian leaders, for creating outstanding local healthcare in Orange County,” said Melinda Hoag Smith, president and chief executive of the George Hoag Family Foundation, in a statement. “Our family has carried that legacy of meeting the needs of this amazing community over the last 70 years. It is time to ensure we continue that work as Orange County grows and residents’ healthcare needs continue to evolve. Full independence is the best path toward a sustainable and thriving Hoag.”

In addition to the 434-bed flagship campus in Newport, Hoag has an 84-bed hospital in Irvine, 13 urgent care centers and nine health centers around Orange County along with a well-honed local identity.

The continuing coronavirus pandemic underscored Hoag’s desire for independence and agility, Braithwaite said.

“I think the pandemic actually highlighted for Hoag and for the board and certainly for our physicians and nurses the need for very timely decision-making and unique decision-making,” he said.

Last year, the Hoag hospital board attempted unsuccessfully to realign its relationship with Providence by breaking apart formally but maintaining a voluntary collaboration.

Braithwaite said he sees the value in collaboration, noting a relationship Hoag has with the pediatricians at Children’s Hospital of Orange County. But neither Hoag nor CHOC cedes control, he said.

The Roman Catholic Providence and the Presbyterian Hoag also have “some fundamental and growing differences in values. Those differences directly impact the care of patients within the two systems,” the complaint adds.

Hoag’s fiduciary board, executive leadership team, physician leadership and founders agreed to keep pressing for independence. The litigation is a “last resort” to keep Hoag from being a “captive affiliate,” the complaint says, although Braithwaite said he wants a split to be as amicable as possible. The hospital says patients will not be impacted.

Braithwaite acknowledged that the pandemic’s impacts on the courts will extend the case’s time frame, which could go as long as two years, he estimated.

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