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Salinas Valley Memorial Hospital Rejects Natividad Proposal, Will Remain Stand-Alone

After a months-long search for a prospective partner, the Salinas Valley Memorial Healthcare system's going to go it alone.

The SVMH board of directors voted 4-0 Thursday to reject the only partnership proposal on the table, from public safety-net Natividad Medical Center.

Citing a recent quality of care report that put SVMH's care at the top of list in the state and Natividad's lower, board member Pat Egan said, "People do not wish to see the quality of care at this facility eroded."

The board voted after presentations by interim CFO Robert Svorak and consultant Jim Moloney of Cain Brothers, the firm that managed the affiliation process. The vote came without discussion from the public or the board, in contrast to the process up until this point which has included significant debate by the public and local elected officials.

Cain Brothers had approached 57 potential partners, six of which submitted proposals for a merger or acquisition. Of those, only two advanced to the second round of more rigorous analysis, and private hospital giant Hospital Corporation of America pulled out unexpectedly last month. That left Natividad as the only prospective partner.

"We believe by combining our health care efforts, we could have reduced or eliminated duplication of services in the community and been able to provide services that are cost effective in the evolving health care market," said Natividad CEO Harry Weis in a statement.

SVMH's steering committee voted unanimously against the merger proposal, largely because it would've required a $38 million reduction in operating costs.

"To achieve such a reduction would either mean draconian layoffs at this facility, or trying to find some way to break our labor agreements. If we break our labor agreements, we will lose the trust of our employees," Egan said.

Natividad's position has been that by combining the two hospitals and centralizing certain functions, such as administration, costs would go down over the long term. "By not joining together we believe our community will be forced back into a competitive health care environment which in the long run could negatively impact both hospitals," Weis said.