Bankruptcy Roller Coaster Continues for Major Daly City Hospital

Seton Medical Center is officially in “Plan B” mode to stay afloat after a long-anticipated deal fizzled.

Daly City’s safety net hospital heads back to the drawing board during an extended bankruptcy proceeding with limited operating funds left, leaving its staff and patients in a state of uncertainty.

Verity Health System, which owns Seton Medical Center in Daly City and Seton Coastside in Moss Beach, declared bankruptcy in August 2018 and set off another round of anxiety for staff and patients of the embattled hospital. Roughly 27,000 people in southern San Francisco and northern San Mateo County rely on its emergency services and about 80 percent of those are MediCal and Medicare patients. 

Seton Medical Center is the largest employer in Daly City, according to the city. 

In the past month, a nearly year-long sale deal all but collapsed and Verity closed St. Vincent Medical Center, one of its two other hospitals in Los Angeles. Verity is officially in “Plan B” mode — details are sealed in bankruptcy court — with $80 million to keep its hospitals running for an estimated matter of months. This is Seton’s second financial crisis since 2015.

“This issue is like a bowling ball on marbles,” says San Mateo County Supervisor David Canepa, who represents Daly City. “It changes minute by minute, hour by hour.”

Verity initially saved the two Seton facilities from financially-strapped Daughters of Charity in 2015 and agreed to conditions set by then-Attorney General Kamala Harris to keep it running for at least 10 years. After declaring bankruptcy itself in August 2018, Verity spent much of 2019 trying to reach a deal with buyer Strategic Global Management, an affiliate of KPC Group.

Through the takeover process, Seton nurses and staff felt their job stability slip through and began leaving. Longtime staff remain uncertain there’s a viable future at the hospital. 

“I see a lot of very valuable, experienced nurses and specialists who are doubting,” says Suad Husary, a respiratory care practitioner at Seton for the past 23 years. “Everybody’s looking for a new job but at the same time we’re still hopeful and we don’t want to leave. It’s another family for us.”

A bankruptcy judge approved a $610 million sale for four of Verity’s then-six hospitals in April but Verity declared new sale conditions, like having to operate for at least six more years, “unenforceable” in October. SGM missed a Dec. 5 court deadline to close the deal but disputes the circumstances around it and stands by its interest in Verity, even after the closure of St. Vincent in early January. It also stands to lose a $30 million non-refundable deposit paid to Verity, according to court documents.

“SGM remains interested in resolving its differences with Verity and closing the purchase transaction,” said an SGM spokesperson in January. “However, Verity has refused to meet with SGM.  While SGM is hopeful Verity will reconsider its position, SGM will vigorously defend itself from Verity’s claims and at the appropriate time, bring its own claims against Verity for its wrongful conduct.”

Though other companies may be interested enough to make an offer soon, like Apollo Medical Holdings, stakeholders aren’t hailing them as saviors just yet. Canepa is “more concerned than ever” that a deal won’t happen and that Verity or another buyer would turn the 32-acre site into lucrative housing or another tech campus. But even if a formal offer from a hospital operator like Apollo comes through, it’s unclear how committed they would be as employers and to Seton’s level of care. 

“[Staff] have been through a roller coaster ride,” says John Avalos, an organizer with the National Union of Healthcare Workers who’s running for his former San Francisco District 11 Supervisor seat again. “There have been bouts of optimism, despair, repeating themselves over and over again. We don’t know what the new employer’s tactics are going to be — there’s a lot we want to preserve in our salaries, in our working conditions.” 

Verity CEO Rich Adcock said the closing of St. Vincent came after “exhausting every option” to keep it open and that it doesn’t impact other hospitals. But it shook Seton staff like Husary who felt like their hospital could be next. 

“What we want now is certainty and we want to remain open as an acute care facility that serves the community,” Husary says, adding that communication should be more transparent. “It’s very scary, actually. More time goes by, we get more frustrated by what’s going on.”

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