Two San Francisco hospitals to be sold

One of the nation’s largest health systems has reached a definitive agreement to sell two of its hospitals in California.

CommonSpirit Health is selling two hospitals to UCSF Health in San Francisco. Under the deal, UCSF Health will acquire Saint Francis Memorial Hospital, left, and St. Mary’s Medical Center.

CommonSpirit Health is selling two hospitals to UCSF Health in San Francisco. The organizations announced the agreement this week, after first disclosing the planned transaction last summer. The University of California’s board of regents gave their blessing for UCSF Health to pursue the deal in July 2023.

The organizations say they hope to finalize the deal by the spring of 2024. UCSF Health is paying $100 million for the two hospitals, the San Francisco Chronicle reports.

• Read more: Hospital merger activity is expected to increase in 2024

Under the deal, UCSF Health will acquire Saint Francis Memorial Hospital and St. Mary’s Medical Center from Dignity Health, which is part of CommonSpirit.

UCSF Health has pledged to retain all the employees of the two hospitals, and it has also made a commitment to maintaining all of the services provided at the two hospitals.

Once the transaction is finalized, the two hospitals will be known as UCSF Health Saint Francis Hospital and UCSF Health St. Mary’s Hospital.

“St. Mary’s and Saint Francis have a proud history of providing comprehensive health care in San Francisco,” Suresh Gunasekaran, president and chief executive officer of UCSF Health, said in a statement. “This is an opportunity to honor that legacy, expanding access and enhancing care for our neighbors while reinforcing UCSF Health’s deep commitment to our hometown.”

UCSF Health also says the two hospitals will retain their medical staff structure, allowing local doctors to practice at each location. UCSF Health says it is a deviation from the “faculty-based structure” at the system’s other hospitals, but is designed to ensure the continuation of provider-patient relationships, according to a news release.

Shelby Decosta, president of the UCSF Health Affiliates Network, will have executive oversight over the two hospitals, the system said. Decosta, who formerly worked with Dignity Health, said UCSF Health is going to invest in upgrades to strengthen patient care at both hospitals.

“We’re investing in the people, programs and infrastructure of Saint Francis and St. Mary’s, and ultimately, improving the health of San Francisco,” Decosta said in a statement. “We have identified immediate opportunities to support our new colleagues with upgraded technology and equipment, and to strengthen services that the community relies on these hospitals to provide.”

Julie Sprengel, president, CommonSpirit Health’s California region, said the sale of the hospitals to UCSF Health will expand healthcare opportunities while allowing the facilities to maintain their core identity.

“Joining UCSF Health’s network increases care options for our patients, while ensuring that the vital services offered only at Saint Francis and St. Mary’s continue,” Sprengel said in a statement.

The move reduces some expenses for CommonSpirit. Like many health systems, CommonSpirit has been struggling financially.

CommonSpirit reported an operating loss of $441 million in the first quarter of 2024; it could be reduced to a loss of $291 million, assuming an anticipated infusion of additional aid from the state of California. CommonSpirit operates 140 hospitals and more than 1,000 healthcare sites in 21 states.

The University of California appears to be expanding its presence in some of California’s biggest markets. Last week, the University of California announced it has reached an agreement to buy four hospitals from Tenet Healthcare Corp. in a $975 million deal.

If regulators approve that deal, the hospitals will become part of UCI Health, the health enterprise of the University of California-Irvine. The deal would also expand the academic health system’s presence in Orange County.

Nationwide, the number of hospital mergers and acquisitions increased in 2023. In 2023, there were 65 announced hospital mergers and acquisitions, up from 53 the year before, according to a report from Kaufman Hall. Industry analysts expect to see even more deals this year.

More academic health systems are expanding and forming partnerships with community hospitals. Anu Singh, managing director at Kaufman Hall, told Chief Healthcare Executive® in a January interview that he expects to see that trend continue in the coming months.

“I think academic medical centers that had a tighter geography are now looking at a broader geography,” Singh said.