Ending months of contentious debate, California's attorney general last week conditionally approved Sutter Health's proposed takeover of 260-bed St. Luke's Hospital, San Francisco's last independent full-service hospital. With that final regulatory approval in place, St. Luke's affiliation with Sacramento, Calif.-based Sutter could close as early as next month.
St. Luke's, a financially troubled 130-year-old not-for-profit, would become Sutter's 30th hospital.
Attorney General Bill Lockyer, however, imposed several conditions on the affiliation. St. Luke's must maintain emergency-room services, an intensive-care unit and clinics through at least 2006. The hospital also must continue treating the same number of poor and uninsured patients for at least five years. Also, Sutter is required to provide at least $2 million annually toward charity care at St. Luke's. "At a minimum, they need to maintain the same level of charity care that is provided now," said Sandra Michioku, spokeswoman for the attorney general's office.
Not-for-profit Sutter also will be required to put $15 million into a fund to keep community clinics open if St. Luke's closes within five years. That figure drops to $3 million per year if the hospital closes after nine years.
California law requires that the attorney general review all transactions between not-for-profit hospitals to ensure that they do not reduce charitable services to the community and that the charitable assets of the not-for-profits are properly protected. Under the deal, Sutter has agreed to give St. Luke's $55 million over the next 10 years to expand and upgrade operations. It will also pay for a state-required seismic retrofitting that could cost up to $20 million.
Sutter operates six other hospitals in the Bay Area. They include 613-bed California Pacific Medical Center in San Francisco; Alta Bates Summit Medical Center, which consists of a 468-bed facility in Berkeley and a 420-bed facility in Oakland; 395-bed Mills-Peninsula Health Services in Burlingame; 165-bed Marin General Hospital in Greenbrae; and 111-bed Sutter Solano Medical Center in Vallejo
The company, though, was never at any risk of antitrust violations, said Sutter spokeswoman Tracy Murphy. With St. Luke's, it will own only two of nine hospitals in San Francisco, controlling between 26% and 30% of that market.
Sutter's board of directors will vote on the conditions at its July 12 meeting, Murphy said. St. Luke's officials have already approved the deal.
Some consumer groups have contested the affiliation, fearing that it would erode the level of care St. Luke's provides to the poor and indigent. But more than 100,000 area residents signed petitions last month urging the attorney general to approve the deal to keep the hospital open.
St. Luke's service area includes 340,000 residents in some of San Francisco's poorest neighborhoods. Sutter has given the facility $1 million a month since December 2000 to remain open.
St. Luke's board of directors, all of whom live or work in San Francisco, will continue to run the hospital.
"We want to ensure that we stay committed to providing comprehensive, community-based critical services for the next 130 years as we have over the past 130 years," said St. Luke's Chief Executive Officer Jack Fries. "Our affiliation with Sutter enables us to have the financial wherewithal to do just that."