Major Hospital on S.F. Border Threatened by Bankruptcy

Daly City nurses enlist San Francisco politicians to save a major hospital that largely serves low-income patients from the whims of a Los Angeles billionaire.

Should Daly City’s hospital shutter at the hands of a hedge fund, nurses’ unions warn, it could create a regional health-care crisis that could drastically affect low-income patients and seniors.

Ever since Verity Health System filed for Chapter 11 bankruptcy on Aug. 31, nurses at one of its six California hospitals, Seton Medical Center, have been anxious about the facility’s uncertain fate. San Franciscans have reason to be anxious, too: According to Verity, they make up about 14 percent of the patients who seek emergency care at the Daly City hospital. Overall, roughly 27,000 people in both San Francisco and northern San Mateo County each year would spill into other medical centers, such as Zuckerberg San Francisco General Hospital.

About 80 percent of Seton patients obtain care through Medicaid and Medi-Cal, making it a safety-net hospital for seniors and low-income people.

“For them to have to wait for service is deadly,” says Debra Amour, a Seton nurse who’s worked in the facility for nearly 25 years. “As an ICU nurse, I know that.”

Similarly concerned nurses packed a United Irish Cultural Center room on the evening of Oct. 10. The town hall included a fair amount of political posturing — and attracted a curious pint-holding few from the adjacent bar. State Sen. Scott Wiener and Assemblymember Phil Ting made up the San Francisco contingent on a panel discussion about the hospital’s future, joined by Daly City Mayor Juslyn Manalo, San Mateo County Supervisor David Canepa, and hospital officials. Even Gordon Mar wandered in as an audience member to remind Sunset voters he’s running for District 4 supervisor. 

“We cannot allow the only hospital in north San Mateo County to be shut down,” Ting told the crowd. “Period.”

Aside from promising that they’ll make sure Seton stays open, elected officials joined in the sharp criticism of the billionaire behind Verity: the Los Angeles Times’ new owner, Dr. Patrick Soon-Shiong, who stakeholders believe is the cause of the hospital’s demise. In July 2017, Soon-Shiong became a majority owner of Integrity Healthcare, a company formed by New York hedge fund BlueMountain Capital, which took over management of the indebted hospital chain in 2015. 

Then-California Attorney General Kamala Harris set 10-year conditions for the acquisition, requiring Seton to operate as a general acute-care hospital with 24-hour emergency services that participates in Medi-Cal and Medicaid. The new owners promised to set aside $180 million over five years for health facility improvements and to keep up with costly seismic compliance requirements until 2030 — something to which San Mateo County has already contributed $40 million.

But just a few months after Soon-Shiong’s high-profile, $500-million purchase of the L.A. Times from Tronc, Verity filed for bankruptcy and Seton’s security went out the window. The 2015 conditions are pending enforcement from Attorney General Xavier Becerra, whose office has submitted filings to the U.S. Bankruptcy Court in Los Angeles.

Soon-Shiong “had come into our community to act like a savior and realized he’s just a mere mortal,” Canepa tells SF Weekly. “He disappointed everyone by walking away from his commitment. He is the one who should be held accountable for this.”

For its part, Verity feels that filing for Chapter 11 bankruptcy was a strategic decision chosen from among few options. CEO Rich Adcock cited more than $1 billion in legacy bond debt and unfunded pensions, an inability to renegotiate contracts, and the seismic retrofitting and other capital investments when he announced the filing.

“Despite many efforts over the last decade to create opportunities for success, we can no longer swim against the tide of our operating reality,” Adcock said in a statement in August. “We are confident that today is a first critical step toward putting each facility on better footing for the future.”

If Seton ultimately closes its doors, it won’t happen overnight. Verity secured $185 million to keep the hospital running at full speed while it restructures and seeks buyers. Canepa’s office began supervising that process and reached out to other hospitals, quickly finding at least a few potential buyers.

Unfortunately for developers looking at the 32-acre site as an opportunity to build lucrative housing, the City Council of Daly City passed a resolution on Sept. 24 to ensure the site will continue to be zoned for hospital use. The San Mateo County Board of Supervisors passed a similar resolution, adding that it should be maintained under conditions set by the Attorney General in 2015.

Also at stake are about 1,000 jobs. The National Union of Healthcare Workers (NUHW) represents about half of Seton’s medical staff, while 29 percent belong to the California Nurses Association (CNA). But nurses are most concerned with finding a buyer to keep Seton open and patients served — and not just any new owner.

“We’re a safety-net hospital system, and we need a buyer who knows how to run a safety-net hospital system,” Amour says. “Hedge funds don’t know how to do this.”

After the town hall, Amour reported feeling “quite optimistic” that stakeholders will keep Seton’s doors open and fully operational. Most action by elected officials has occurred behind closed doors in the weeks since, but will now involve government agencies who have a vested interest in keeping Seton running.

On Friday, officials from the San Francisco Department of Health, San Francisco Health Plan, NUHW, CNA, Ting’s office, the San Mateo Labor Council, Health Plan of San Mateo, the San Francisco Labor Council, and the San Mateo County Health System will all convene for a working group to discuss the hospital’s future. Though some at the town hall called for the county to take over the hospital completely and keep health care away from the whims of big businesses, Canepa says they are looking at public-private partnership options.

“We know it’s not only a San Mateo County problem, it’s a San Francisco problem,” Canepa says. “People are beginning to realize there’s a lot of value in keeping Seton open.”

Ida Mojadad is a staff writer at SF Weekly. |  @idamoj

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