Partner with Adventist? Negotiations begin

Adventist Health would administer Tehachapi Hospital and three rural clinics, hire and fire, connect hospital to expanded resources and re-purpose the existing facility built in 1956.

The Tehachapi Valley Healthcare District board of directors voted 5-0 on Feb. 25, 2015 to approve Adventist Health as a potential affiliate, moving the process into negotiation. Following letters of intent, due diligence by both parties and the fleshing out of a contract, the matter will be brought before the voters, as it involves more than 50 percent of the assets of the district. A simple majority would pass the measure (50 percent plus one vote).

In response to the district's Request for Proposal, Roseville-Calif.-based Adventist Health asked for a 25-year lease of the Tehachapi Critical Care Replacement Hospital and offered $25 million in cash. The sum would enable the district to complete construction of the hospital as designed, with a surplus of $2 million. Adventist Health, as part of its health delivery system that includes 19 hospitals with more than 2,700 beds and 140 clinics, would provide access to its extensive health care resources and physician recruitment program.

"The access to capital is one purpose [for affiliation] the district is trying to communicate," district CEO Eugene Suksi said. "But more important is the clinical resources it brings to bear and access to quality care locally... even if the district had to complete the hospital on its own, pursuing affiliation would be valuable."

Several people spoke in favor of the proposal and no one spoke against it at the board meeting, which was standing room only in the hospital's small Community Room in an old house on E street, with people outside crowded around the door. The board was unable to meet in its former quarters at the Golden Hills Community Services District.

Project Manager Stacey Pray of SHP Project Developers of Pasadena had warned the board that bond funds approved by healthcare district voters are due to run out by November 2015. Borrowing, board member Dr. Sam Conklin said, "Turned out to be a big problem." The board concluded that affiliation with a larger health care partner would enable the district to complete the hospital as designed by SWA Architects. Without additional funding, the ICU, obstetrics, public dining and administration wings would left as unfinished shells and phased in pending new sources of funds.

Negotiations between Adventist Health and the Tehachapi Valley Healthcare District will take 90 days, district board President Mike Nixon told Forde Files, at which time a contract should be signed and ready. The district then has 88 days to hold a special election to put the proposal to the voters. That would be August or September, just weeks before Pray, holding $5 million in reserve, would stop the project for lack of funds.

"It's close," Nixon said. "It's do or die. Either do that or have a minimal hospital...with the same [existing] services in a shiny new building."

Adventist Health, founded on the values of the Seventh-day Adventist Church, was one of two entities that responded to the district's Request for Proposal. The other, from Dignity Health, was 10 pages long to Adventist Health's 104 pages, 74 of which were financial reports. An analysis of the two proposals by Quorum Health Resources of Brentwood, Tenn., presented to the board by Vice President Deb Mohesky, compared the responses to the requirements set forth in the RFP. While both entities represent large healthcare systems – Dignity the larger one – the Adventist proposal was more specific, contained more details and said straight out it would provide cash to finish the hospital. Dignity, which is Catholic-based, said more study was needed before such an offer could be made. Quorum concluded that Adventist substantially met the district's requirements.

In regard to the Adventist proposal, Quorum advised the district to look at seven "Hi-Level Considerations:"

• Faith-based system: would any services be changed?

• Service Lines: would any of these be changed or consolidated?

• Would the name of your organization change? Is this important?

• Will severance be offered for employees (if necessary)?

• Will benefits and pension plans be altered?

• How will back office operations be handled as part of a system?

• How will the change in IT platforms impact your services (short term and long term)?

If Tehachapi partners with Adventist, it is unclear what the fate of the district board and CEO will be. The board still will be elected, district counsel Scott Nave said, and they would oversee fulfillment of the lease agreement. Adventist has proposed a 12-to-15-person hospital local governing board to provide operational oversight. The Adventist Health board would serve as the legal board of the local corporation.

The original documents are available on the Tehachapi Valley Healthcare District web site, tvhd.org. Click on Board of Directors in the menu under "About Us;" click on "Events/Meetings;" click on "Board of Directors meetings;" download the Feb. 25, 2015 "Meeting Packet." The Adventist proposal begins on page 113 (Tab 22), followed by Dignity Health and Quorum's analysis. The download will take a while. The RFP is accessible from the first page of the TVHD web site.