The owner of Seton Medical Center in Daly City declared bankruptcy in 2018 and has so far struggled to reach a deal for the facility’s purchase. (Ida Mojadad/S.F. Examiner)

San Mateo County supervisors approve $20 million to stop closure of Daly City hospital

Bankrupt owners continuing talks with potential buyer after nearly closing Seton Medical Center

San Mateo County officials approved $20 million in bridge funding Tuesday to stop the near-closure of Seton Medical Center in Daly City as the owners stall on accepting a bid.

The county’s Board of Supervisors held an emergency meeting Tuesday afternoon — its third in a week dedicated to Seton — to identify how much financial assistance it could provide to help close a deal. Verity, the safety net hospital’s owner, declared bankruptcy on its then-six hospitals in August 2018 and told hospital officials last week it would close Seton and Seton Coastside in Moss Beach this week after a long-negotiated deal fell through.

The notice sent county officials scrambling to prevent the loss of a key medical facility, particularly for the aging and MediCal and Medicaid-dependent population in northern San Mateo County and southern San Francisco. About 27,000 people, 14 percent of whom come from San Francisco, rely on Seton’s emergency treatments.

“If we do nothing, there’s a high probability that this hospital will close,” Supervisor David Canepa told skeptical supervisors. “I would just ask as a courtesy that you find it within yourself to make sure folks in north San Mateo County aren’t left behind.”

The funding was approved in a 4-1 vote, with the last vote coming from Supervisor Carole Groom, despite some reluctance on her part due to the hospital’s poor financial history. She noted that San Mateo County Health already has a $57 million projected structural deficit.

“What I’m not willing to do is give $20 million to someone who we don’t know who it is,” Groom said before the vote. “I wish we had concrete proposals in front of us.”

San Mateo County will designate the $20 million for the yet-to-be-determined buyer to use either for operating funds or seismic retrofitting. The funds, $5 million paid annually for four years, come with the condition that the new owner’s business plan and financials are “satisfactory,” and that Seton continues as a full-service hospital.

Verity sought $15 million from the county over three months to account for operating losses. Bidder Apollo Medical Holdings sought up to $25 million for seismic retrofitting while Strategic Global Management, an affiliate of KPC Group, sought $20 million from the county toward the estimated $70 million left in seismic retrofitting costs.

KPC CEO Peter Baranoff added that the gap funding wasn’t needed for his company’s bid and that they would also build eight acres of affordable housing on the 32-acre site.

Sam Maizel, an attorney representing Verity in bankruptcy proceedings, said the owner and Apollo are close to a deal but that it needs the gap funding to make it through the 90 days needed for the Attorney General to set sale conditions as mandated for nonprofit hospitals.

Signs of a looming crisis arrived in October when Verity disputed sale conditions set by the California Attorney General, which included keeping Seton open for at least six more years. SGM then missed the bankruptcy court deadline in December to close year-long $610 million sale proceedings over a dispute with Verity. It stands to lose at least a $30 million non-refundable deposit and remains an interested buyer along with Apollo, which made a bid in February.

Verity suddenly shuttered St. Vincent Medical Center in Los Angeles in January and went into “Plan B” mode, causing panic among Seton staff left in the dark. California requires a 90-day notice to close emergency rooms.

“They don’t tell us anything,” said Helen Raquipiso, a nurse at Seton and Daly City resident of 15 years whose family relies on the facility, of the owner during a rally in February. “It’s hard to go to another hospital. It will be detrimental to our community if we lose this hospital.”

Seton has 357 total beds, including 83 skilled nursing beds, and Seton Coastside has 116 skilled nursing beds. While other hospitals would have capacity for acute care, elderly patients in psychiatric beds and those who need intensive care from skilled nursing facilities — particularly MediCal patients — would likely be placed outside the Bay Area. Ambulances would be placed in the Seton parking lot to direct patients to an open hospital, according to a contingency plan discussed last Wednesday.

Verity appears to have paused plans to close the hospital and entered extensive negotiations with Apollo, Canepa said. A bankruptcy judge may also not be inclined to close a hospital, which could lead to a medical desert in the area, amid growing cases of novel coronavirus in the bordering counties of San Francisco and Santa Clara.

“Who would have thought that COVID-19 or coronavirus, as horrific as it is, may be saving this hospital from closing?” said Canepa, who represents Daly City. “They need those beds. The ball continues to move forward.”

Half of the $20 million must be approved by the Health Plan of San Mateo, which is expected to vote on the funding Wednesday.

imojadad@sfexaminer.com

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