What UCSF could gain from buying two hospitals
Even as some San Francisco businesses lay off workers or leave town altogether, one mammoth local enterprise is looking to expand its presence in the city.
UCSF Health, San Francisco’s largest medical center and secondlargest employer after the city itself, hopes to get even bigger by buying a pair of money-losing hospitals — St. Mary’s Medical Center and Saint Francis Memorial — as well as a 35-bed psychiatric hospital, four medical clinics and a parking lot.
The properties are owned by Dignity Health, a Catholic hospital system that also leases clinics at the ballpark, at San Francisco International Airport and in Walnut Creek, which would be included in a deal.
On Wednesday, the University of California regents will decide whether to green-light formal negotiations, which could lead to an agreement by year’s end. The properties are assessed at $121 million to $192 million, but UCSF is offering just $100 million and said it would spend another $100 million to improve and expand them. Saint Francis Memorial now loses $32 million a year and St. Mary’s loses $22 million.
Hospital officials see the takeovers as a way to help ease the overcrowding its patients have complained about for years.
“We just have more demand than we can satisfy,” Suresh Gunasekaran, UCSF Health’s chief executive, told The Chronicle.
He said he isn’t sure yet how many more patients UCSF’s doctors could see if a deal goes through. Last year, they served about 2.5 million outpatients.
The hospital also accommodates more than 300,000 admitted patients a year — more than any other UC hospital, and more than double the number served by Kaiser San Francisco and Sutter Health’s California Pacific Medical Center campus on Van Ness Avenue combined.
Buying the two Dignity hospitals would give UCSF two more emergency rooms and 569 more beds, UCSF said.
The 166-year-old St. Mary’s serves 20,000 admitted patients per year, while Saint Francis Memorial, also more than 100 years old, serves 16,000. But most of their beds are usually empty, according to the American Hospital Directory, which said the hospitals only fill about a quarter of them. By contrast, UCSF said its beds are 94% filled.
To increase its patient capacity, UCSF affiliated in 2017 with the two hospitals and another in Redwood City owned by Dignity Health. But in 2019, UCSF abruptly ended negotiations to add a fourth in Santa Cruz after 1,500 UCSF doctors and staff protested the plan and demanded dropping all connection with Dignity Health because the Catholic-sponsored hospitals don’t perform abortions and restricted other procedures on religious grounds.
If UCSF buys the two San Francisco hospitals, their religious affiliation would end, UCSF said.
Yet Dignity Health, a California nonprofit whose parent is the nationwide Catholic hospital chain CommonSpirit Health, said UCSF’s “values” make it an attractive buyer.
At a time when hundreds of hospitals have been taken over by private equity firms blamed for a mercenary approach to health care, Dignity Health said it considers UCSF to be the “right partner to continue our legacy of caring for the underserved.”
“We are encouraged about the opportunity for our care sites to join a health system so closely aligned with our values,” Julie Sprengel, president of Dignity Health’s California division, said in a statement.
Not everyone is praising the proposed purchase.
“If UCSF can afford to buy more hospitals, surely it can afford the wage increases that are needed to attract and retain qualified employees,” said Liz Perlman, executive director of UC’s largest labor union, the American Federation of State, County & Municipal Employees, Local 3299, which represents staff members across the public university system.
Although the union isn’t in contract negotiations, it’s been trying to get UC to provide midterm raises to help workers who have been hit hard by surging inflation.
Gunasekaran, UCSF’s chief executive, declined to respond to the criticism. But if a deal is made, he said, UCSF is committed to “substantially maintaining the workforce” at St. Mary’s and Saint Francis Memorial. UCSF already has 30,000 employees, compared with the city’s 37,000.
In San Francisco, the UCSF medical center has three campuses: Mission Bay; Mount Zion at 1600 Divisadero St.; and Parnassus Heights, where a new $4.3 billion hospital is expected to replace the aging, seismically unsound facility by 2030. UCSF is also affiliated with San Francisco General Hospital and the VA Medical Center, as well as Gladstone Institutes, a biomedical research nonprofit, and the UCSF medical school. The 61-acre Mount Sutro Open Space Reserve, which includes public trails and campus housing, is also a UCSF property.
Outside the city, UCSF has had a physician-training center in Fresno since 1975, and more recently cofounded the Canopy Health network with John Muir Health and groups of Bay Area doctors. It’s also affiliated with UCSF Benioff Children’s Hospital Oakland. And since 2018, UCSF has partnered with Sonoma Valley Hospital, Berkeley Outpatient Center, John Muir Health and MarinHealth to expand its reach. And with the Washington Hospital Healthcare System, UCSF bought land and a building in Fremont and developed medical services there.
Nearly one in 10 patients in San Francisco, Alameda, Contra Costa and San Mateo counties is a UCSF customer, the University of California reports. The percentage dips to about 3% in the Bay Area’s five other counties, but UCSF’s strategic plan calls for continued expansion.
As the health care provider moves to absorb St. Mary’s and Saint Francis Memorial, Gunasekaran said he’s not worried about antitrust issues because of “vibrant competition” from other medical centers, including Kaiser and Sutter Health. Nevertheless, he said, “we’re going to follow all of the antitrust review processes.”
The proposal the regents will consider includes four St. Mary’s addresses: its main hospital at 450 Stanyan St., a psychiatric hospital at 2200 Hayes St., and medical office buildings at 1 Shrader St. and 2250 Hayes St. Records show its endowment — essentially an investment fund — at about $10 million. UCSF’s, by contrast, is more than $4 billion.
The Saint Francis Memorial proposal also has four addresses: the hospital at 900 Hyde St., medical offices at 909 Hyde St. and 1199 Bush St., and a parking lot at 1234 Pine St. The hospital’s endowment is at about $53 million.