ST JOSEPH HEALTH SYSTEM NOTICE OF PROPOSED AFFILIATION

Transcription

1 ST JOSEPH HEALTH SYSTEM NOTICE OF PROPOSED AFFILIATION On August 15, 2012, St Joseph Health System ( SJHS ) and Hoag Memorial Hospital Presbyterian ( Hoag ) announced plans for a new regional health care affiliation (the Affiliation ). On October 15, 2012, the organizations executed an Affiliation Agreement (the Affiliation Agreement ) which sets forth certain terms of the proposed Affiliation, a product of which would be a change in control of Hoag. Notice of the proposed Affiliation was filed with the Attorney General of the State of California on October 19, The proposed Affiliation has not been finalized, and is subject to significant conditions precedent, including the requirement of approval by the California Attorney General. The Affiliation Agreement The following is only a summary of certain provisions of the proposed Affiliation Agreement. A brief description of certain provisions of the Affiliation Agreement is included in this Notice. The description and summaries of documents in this Notice do not purport to be comprehensive or definitive, and reference is made to the Affiliation Agreement for the complete details of all of its terms and conditions. A copy of the written notice to the Attorney General of California, including the Affiliation Agreement, is available from the Office of the Attorney General or upon request from Hoag. Parties SJHS parties will include SJHS and four Southern California hospital affiliates, Mission Hospital Medical Center, St Jude Medical Center, St Joseph Hospital of Orange, and St. Mary Medical Center (collectively, the SJHS Southern California Hospitals ). The sole Hoag party to the Affiliation Agreement is Hoag. That notwithstanding, the Hoag Family Foundation ( HFF ) and the Association of Presbyterian Members ( APM ), as the current members of Hoag, are granted continued authority pursuant to the bylaws of Hoag and of Covenant Health Network ( CHN ), an entity formed by Hoag to serve as the corporation responsible for effectuating the Affiliation and the integration of the Hoag and SJHS Southern California Hospitals to better meet the health care needs of the communities (see Vision and Mission Objectives below). The SJHS Southern California Hospitals and CHN are parties to the Affiliation Agreement, along with Hoag and SJHS. Vision and Mission Objectives SJHS and Hoag intend to create a regional healthcare delivery system with a common vision that will provide greater access to high-quality, dependable, affordable and compassionate care to the P.O. Box Orange, CA T: F: A Ministry founded by the Sisters of St. Joseph of Orange

2 communities they serve and transform the way medical care is provided in their communities, especially to their most vulnerable members. Preservation of Separate Heritages and Identities The Affiliation is designed to allow Hoag and SJHS to preserve their respective Presbyterian and Catholic heritages and identities and to strengthen their mutual commitment to serve those in need for the common good of the diverse communities they serve. Faith Based Orientation Hoag will preserve its identity as a faith based organization, bound by its Presbyterian heritage and charitable mission and neither it nor CHN will be subject to the Ethical and Religious Directives for Catholic Health Care Services, as approved, issued and amended from time to time by the United States Conference of Catholic Bishops. Similarly, SJHS and SJHS Southern California Hospitals will preserve their identity as Catholic organizations, bound by the Ethical and Religious Directives. Manner of Affiliation Hoag will form CHN as a California nonprofit public benefit corporation to serve as (a) a comember (with HFF and APM) of Hoag, and (b) as a co-member (with SJHS) of the SJHS Southern California Hospitals. CHN will have certain reserved powers over Hoag and the SJHS Southern California Hospitals consistent with those typically retained by a parent company, but subject to certain powers reserved to SJHS and to HFF and APM. Among those powers will include specific rights with respect to the appointment and removal of the Board members and the chief executive officers of Hoag and of the SJHS Southern California Hospitals. None of SJHS, the SJHS Southern California Hospitals, or Hoag will have any ownership or membership interest in CHN. Role of CHN The primary purpose of CHN is to create an integrated community healthcare delivery system for the communities served by Hoag and the SJHS Southern California Hospitals (the Region ) that will foster greater access to high quality, dependable, affordable and compassionate care within the Region. CHN will seek to accomplish this by, among other things, creating specialized care, developing new innovative systems of care, advancing population health and fee-for-service systems, and fostering better care in a sustainable way for poor and vulnerable in the Region. Composition of CHN Board The CHN governing Board will consist of seven (7) members, four (4) designated by SJHS and three (3) designated by APM and HFF, acting collaboratively and not individually. SJHS shall at all times have the right to designate at least a majority of the CHN Board members. No CHN P.O. Box Orange, CA T: F: A Ministry founded by the Sisters of St. Joseph of Orange

3 Board member may serve concurrently on the SJHS Board, the Hoag Board or any SJHS Southern California Hospital Board. Appointment and Removal of Hospital Board Members The appointment and removal of Board members of each of Hoag and SJHS Southern California Hospitals shall follow the current process by which those Board members are selected, with the additional requirement that election of Board members, and final approval or removal of Board members, will be made by the CHN Board (by supermajority vote with respect to Hoag Board members, by simple majority vote with respect to the SJHS Southern California Hospital Board members.) No Cash Consideration/Merger The transaction contemplated by the Agreement does not involve the exchange of cash, assets, or similar financial consideration; the merger or consolidation of any existing legal entities; the sale, purchase or lease of part or all of any existing hospital; nor the transfer of all or substantially all of the assets of any party. Hoag Hospital Foundation The Affiliation will have no effect on any of the charitable mission, corporate purposes, name and/or operations of Hoag Hospital Foundation. Hoag Orthopedic Institute Hoag Orthopedic Institute ( HOI ), as an affiliate of Hoag, will be part of the Region, but because it is a joint ventured hospital, the parties intend for Hoag to continue to respect its commitments to its physician partners at HOI. Financial Matters The Affiliation Agreement approves existing capital plans of the parties, subject to certain conditions, and contemplates that the parties will pursue an integrated debt/credit management strategy. Among other things, the parties expect to integrate Hoag into the SJHS cash, investment and debt/credit management program. Also, subject to applicable master indenture obligations of the parties, including the Hoag Master Trust Indenture related to its Bonds, and other factors, this strategy may include formation of a single obligated group which would allow for both organizations to be jointly and severally liable for debt. No Assurance Affiliation will Occur The Affiliation Agreement contemplates completion of the Affiliation on the earlier of March 31, 2013 or the first day of the month following satisfaction of the conditions to closing. Among other things, prior approval of the California Attorney General is required. The parties can give no assurance that the Affiliation will be implemented as proposed in the Affiliation Agreement, P.O. Box Orange, CA T: F: A Ministry founded by the Sisters of St. Joseph of Orange

4 or otherwise, within what timetable, if at all. Full implementation of the goals embodied in the Affiliation would be subject to future events and agreements, the impact of which cannot be predicted at this time, but which could be material. About Hoag Hoag has represented to SJHS that it is a California nonprofit public benefit and is exempt from federal income taxation under Section 501(a) of the Internal Revenue Code of 1986, as amended, as an organization described in Section 501 (c)(3) of the Code. Hoag has certain publicly available documents and has entered into certain continuing disclosure agreements pursuant to which it is contractually obligated for the benefit of owners of certain of its outstanding obligations to file certain annual reports, notices of certain enumerated events as defined under Rule 15c2-12 promulgated under the Securities Exchange Act of 1934 ( Rule 15c2-12 ) and annual audited financial statement (the Hoag Information ) with the Municipal Securities Rulemaking Board s Electronic Municipal Market Access system ( EMMA ) at None of the Hoag Information is incorporated into this Notice by reference thereto, and SJHS makes no representation as to the accuracy or completeness of such information. HOAG HAS NOT REVIEWED THIS NOTICE AND HAS NOT MADE REPRESENTATIONS OR WARRANTIES WITH RESPECT TO THE ACCURACY OR COMPLETENESS OF THE INFORMATION CONTAINED OR INCORPORATED HERIN, INCLUDING INFORMATION WITH REGARD TO HOAG. Forward Looking Statements Certain statements included or incorporated by reference in this Notice constitute forward looking statements. Such statements are generally identifiable by the terminology used, such as plan, expect, estimate, project, budget or other similar words. THE ACHIEVEMENT OF CERTAIN RESULTS OR OTHER EXPECTATIONS CONTAINED IN SUCH FORWARD LOOKING STATEMENTS INVOLVE KNOWN AN UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS DESCRIBED TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD LOOKING STATEMENTS. Exhibit A: Press Release dated August 15, 2012 P.O. Box Orange, CA T: F: A Ministry founded by the Sisters of St. Joseph of Orange

5 EXHIBIT A

6 FOR IMMEDIATE RELEASE Contacts: Hoag: Nina Robinson St. Joseph Health: Susan Solomon HOAG AND ST. JOSEPH HEALTH ANNOUNCE HISTORIC AFFILIATION TO TRANSFORM HEALTH CARE DELIVERY Unique Health Care System Will Serve All of Orange County and the High Desert, Becoming a National Model for Effective, High Quality, and Compassionate Care. (Aug. 15, 2012, Orange County, Calif.) St. Joseph Health and Hoag Memorial Hospital Presbyterian announced plans for a new regional health care affiliation which will take bold, innovative measures to transform health care delivery, ultimately becoming a model for addressing some of the biggest challenges in American health care. The organizations intend to form an integrated regional health system including their respective Southern California hospitals, an expansive physician network, and numerous outpatient and urgent care facilities in Orange County and the High Desert. Their shared vision includes taking action to fix fragmented systems of care, greatly improve access for the underserved, and deliver on the goal of making the region among the healthiest in the country. This affiliation is a catalyst to extend our mission and make a real difference in health care delivery by assuring a system of highly connected, quality services. New access points will be developed to enhance community wellness and allow more people to benefit from the research and advanced care of a vast network of doctors, clinics, and exceptional hospitals, said Deborah Proctor, president and CEO of St. Joseph Health. We believe St. Joseph Health and Hoag have the foresight and expertise to address some of the greatest needs and accomplish the greatest good for Orange County and the High Desert. This is a critical step for the future of our communities that only can be accomplished by the brightest minds and the biggest hearts in health care. This is a historic day for medical care in Orange County, said Dr. Richard Afable, Hoag president and CEO. Together, we share over a century of collective experience and a commitment to serving the health needs of people in Southern California. Our goal in forming this affiliation is transformational. Current models of medical care are too complex, too expensive, and lack the integration needed to effectively and compassionately care for people in need. It is also unacceptable that models of care are far too often out of reach for those who are most vulnerable and in need of help. Our vision our promise is to transform Orange County into one of the healthiest communities in California and the country. Our affiliation will

7 introduce innovative care processes that will improve clinical outcomes, reduce the overall cost of care, and enhance the health care experiences of all members of our community. Specifically, the health system leaders have identified as part of their vision: Clinicians will work together to achieve better clinical outcomes, make care more efficient and improve the overall patient experience Quality focused, coordinated programs that will address care for the poor and underserved and fill gaps that have widened under present day economic realities A focus on care extending beyond the acute hospital setting, including wellness, prevention programs, long term care, and palliation of suffering Specialized health services that would otherwise require treatment outside the community Opportunities for partnerships with other health care participants, both traditional and non traditional Under the affiliation, Hoag and St. Joseph Health will retain their individual identities and faith affiliations Presbyterian and Catholic, respectively. In planning to work together, St. Joseph Health and Hoag recognized many similarities. They are both non profit, faith based health care organizations, committed to providing the highest quality, affordable, and accessible health care services in the community. Both institutions achieve this through thoughtful planning of their networks of services, fostering an environment of best practice health care, and reaching out to vulnerable populations through extensive community benefit programs. The planning process is being aided by support from the community, elected officials, faithbased organizations, physicians, and hospital employees. Their support and review continue to be instrumental in this process. The health systems entered into a letter of intent to form an affiliation. The next step is an application with the California Office of the Attorney General, which is planned for October and could require more than 100 days for a decision. Webconference: To view the press conference on this announcement, please go to:

8 About Hoag Memorial Hospital Presbyterian Hoag is an approximately $1 billion non profit, regional health care delivery network in Orange County, California, that treats nearly 30,000 inpatients and 350,000 outpatients annually. Hoag consists of two acute care hospitals, seven health centers, and five urgent care centers. Hoag Hospital Newport Beach, which has served Orange County since 1952, and Hoag Hospital Irvine, which opened in 2010, are designated Magnet hospitals by the American Nurses Credentialing Center (ANCC). Hoag offers a comprehensive blend of health care services that includes five institutes providing specialized services in the following areas: cancer, heart and vascular, neurosciences, women s health, and orthopedics through Hoag s affiliate, Hoag Orthopedic Institute. Hoag has been named one of the Best Regional Hospitals in the U.S. News & World Report Metro Edition. National Research Corporation has endorsed Hoag as Orange County s most preferred hospital for the past 16 consecutive years and, for an unprecedented 16 years, residents of Orange County have chosen Hoag as the county s best hospital in a local newspaper survey. Visit for more information. About St. Joseph Health St. Joseph Health (SJH) is a $4.4 billion not for profit integrated Catholic health care delivery system sponsored by the St. Joseph Health Ministry. SJH s comprehensive range of services includes 14 acute care hospitals, home health agencies, hospice care, outpatient services, skilled nursing facilities, community clinics and physician organizations throughout California, Texas, and New Mexico. Collectively, the 24,000 dedicated employees and 6,000 outstanding physicians deliver care to more than 137,000 inpatients and 3.6 million outpatients each year. Throughout its comprehensive regions of care, SJH strives to provide perfect care while building the healthiest communities and ensuring every encounter is sacred. These extraordinary efforts have been recognized locally and nationally, including distinctions in US News & World Report and Magnet recognition. Guided by the traditions of its founders, the Sisters of St. Joseph of Orange, SJH is committed to maintaining a continuum of care that matches the diverse needs of its communities. SJH s four Southern California hospitals include Mission Hospital (Mission Viejo and Laguna Beach); St. Mary Medical Center (Apple Valley); St Joseph Hospital (Orange) and St. Jude Medical Center (Fullerton). For more information, visit # # #