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California reaches settlement in sale of 2 San Francisco hospitals

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The state’s attorney general brokered an agreement with UCSF Health on its acquisition of two hospitals from CommonSpirit Health. UCSF Health will invest $430M in capital improvements.

The California attorney general’s office has reached a settlement with UCSF Health over its purchase of two San Francisco hospitals from CommonSpirit Health.

Images: UCSF Health

California's attorney general has reached a settlement with UCSF Health over its acquisition of two hospitals in San Francisco: Saint Francis Memorial Hospital, left, and St. Mary’s Medical Center. UCSF Health is acquiring the hospitals from CommonSpirit Health.

Under the settlement, UCSF Health will commit at least $430 million in capital investments into the facilities. USCF Health will also guarantee that the system will continue to operate both facilities as acute care hospitals with the same levels of services and staffing for a minimum of 10 years, among a host of other conditions.

UCSF Health is purchasing Saint Francis Memorial Hospital and St. Mary’s Medical Center from Dignity Health, which is part of CommonSpirit. UCSF Health is paying $100 million for the two hospitals, the San Francisco Chronicle reported.

California Attorney General Rob Bonta and UCSF Health announced the settlement this week.

“San Franciscans deserve access to high-quality, affordable healthcare services, and today, we are ensuring they can continue to rely on both Saint Francis Memorial and St. Mary’s Medical Center for those services,” Bonta said in a statement.

He added, “I am grateful to The Regents, UCSF Health, and Dignity Health for working cooperatively and in good faith with my office to put the health of San Franciscans first. Today’s settlement agreement will also protect competition in the healthcare market.”

Suresh Gunasekaran, president and chief executive officer of UCSF Health, said he appreciated that the attorney general worked with the system on the settlement.

“We want to ensure that Saint Francis and St. Mary’s are places our communities can continue to rely on for excellent care. This agreement underscores our commitment to the community and our responsibility to maintain and enhance healthcare services at both hospitals,” Gunasekaran said in a statement.

UCSF Health has agreed to a number of other commitments under the settlement, including participation in Medicare and Medi-Cal, California’s Medicaid program.

In its pledge to invest $430 million into the two hospitals, the agreement spells out that UCSF Health will provide at least $350 million in deferred maintenance and facility improvements, and at least $80 million for electronic medical record systems and other technologies.

The system must provide an annual amount of charity care equal to or greater than $6.5 million at Saint Francis Memorial Hospital, and a minimum of $3.5 million each year to St. Mary’s Medical Center. UCSF Health also agrees to annual increases of 2.4% in charity care investments at both hospitals.

UCSF Health also agrees to a minimum of $1.6 million annually in community benefit spending for public health needs at Saint Francis, and at least $10.7 million annually at St. Mary’s, under the agreement. The system will also increase community benefit spending by 2.4% annually, under the settlement.

Under other terms of the settlement, UCSF Health agrees that it won’t restrict clinicians from contracting with other providers. The system also can’t base medical staff privileges or contracts on the employment status of a doctor with UCSF Health or any affiliate.

In addition, UCSF Health must negotiate all payer contracts separately from contracts for UCSF Health and “maintain an information firewall between the two negotiating items,” under the settlement. UCSF Health will also be required to have a price growth cap that limits how much the hospitals may charge payers; the cap will be in place for five years.

UCSF Health has said the purchase of the hospitals will allow for better access to care and previously pledged to retain all workers. With the acquisition, the two hospitals will be known as UCSF Health Saint Francis Hospital and UCSF Health St. Mary’s Hospital.

The University of California has been moving to acquire other hospitals.

In March, UCI Health finalized the acquisition of four hospitals from Tenet Healthcare Corp. UCI Health, the clinical enterprise of the University of California, Irvine, purchased the hospitals in a $975 million deal.

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