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St. John's bidding war escalates

Billionaire Patrick Soon-Shiong is among suitors for the Santa Monica hospital.

May 15, 2013|By Chad Terhune, Los Angeles Times
  • St. John’s Health Center, a storied Santa Monica hospital, is owned by the Sisters of Charity of Leavenworth Health System, a nonprofit chain based in Denver.
St. John’s Health Center, a storied Santa Monica hospital, is owned… (Bob Chamberlin, Los Angeles…)

A high-stakes bidding war has erupted for St. John's Health Center, a storied Santa Monica hospital, with a local billionaire teaming up with the Roman Catholic Archdiocese of Los Angeles on an unsolicited offer.

The latest bid, expected to be formally announced Wednesday, comes from former drug-company executive and healthcare entrepreneur Patrick Soon-Shiong, who said in a statement the bid has the support of the archdiocese. This offer is competing against at least two other bidders'.

One bidder is a group that comprises UCLA Health System and two large Catholic hospital chains. Another potential buyer is Providence Health & Services, another Catholic hospital company.

St. John's is owned by the Sisters of Charity of Leavenworth Health System, a nonprofit chain based in Denver. Officials there began soliciting offers for St. John's this year. No dollar figures have been disclosed publicly.

Whoever wins would inherit a hospital rich in history but one that is steadily losing ground in a market that increasingly favors bigger institutions. Roman Catholic nuns founded St. John's in 1942 and oversaw the rebuilding of the hospital after the 1994 Northridge earthquake. Hollywood stars Jimmy Stewart and Julie Andrews raised money for the hospital. St. John's celebrity patients have included Michael Jackson, Elizabeth Taylor and President Reagan.

This latest development in the bidding adds another chapter in a months-long drama playing out at St. John's. In November, its Denver owner abruptly fired most of the local board members and ousted the top two executives.

In a statement Tuesday, Soon-Shiong discussed the proposal and described his offer as a "community bid that would further enhance [St. John's] capabilities, bringing world class physicians and potentially historic advancements" in medical care.

Steve Valentine, president of Camden Group, a healthcare consulting firm in El Segundo, said he expects controversy.

"This could get ugly for a period of time as the plot thickens," he said. "It's a prestigious hospital with lots of Hollywood firepower behind it."

St. John's said no decision on a buyer has been made.

"We are still evaluating our options for a strong partnership to support our ministry at St. John's," said Cheston Turbyfill, spokesman for the parent company in Denver. "We're not disclosing any of the people we are talking to. We will consider any serious, strong bid that ultimately leads us to like-minded goals."

Just before the management shake-up last fall, Soon-Shiong, a major St. John's donor, and some hospital board members were working on a deal to buy St. John's. The change in management scuttled that proposed deal.

Under this latest proposal, the Chan Soon-Shiong Institute for Advanced Health, a nonprofit company, would acquire the hospital with involvement of the Archdiocese of Los Angeles. A spokeswoman for the archdiocese said the church "would be involved in ensuring that the hospital continues to follow ethical and religious directives according to Catholic teaching." The church said it would not be involved in day-to-day operations or funding of St. John's.

This partnership has the backing of major donors and some hospital physicians who have expressed frustration at their lack of involvement in the sale process thus far.

Donna Tuttle, chairwoman of the hospital's foundation and former official in the Reagan administration, confirmed that Soon-Shiong's offer had been submitted, and she endorsed it. She said she sent a letter backing the bid Tuesday to Michael Slubowski, chief executive of the parent company SCL Health System. The letter of support was also signed by Paul Natterson, president of the hospital's medical staff.

In an interview, Tuttle praised Soon-Shiong as a cutting-edge medical researcher who could take St. John's to new heights while maintaining its commitment to the community and local patients. Soon-Shiong, whose net worth tops $7 billion, is pursuing numerous ventures aimed at accelerating medical breakthroughs and putting more data at the fingertips of doctors in the field.

"I'm having a hard time intellectually understanding why you wouldn't go with his bid. How many hospitals have this offer in front of them? Is there something personal here?" Tuttle said.

Speaking publicly for the first time about the hospital's tumultuous last six months, Tuttle criticized the Denver health system for its handling of the entire situation.

"The way it has been carried out has hurt the hospital," she said. "What's been going on at St. John's has been crazy, and it didn't have to be this way."

The Times first reported in March that a bid involving UCLA and Ascension Health Alliance in St. Louis was under consideration. Dignity Health, a Catholic hospital chain based in San Francisco, has also joined the Ascension and UCLA bid, people familiar with the process said. Dignity officials couldn't be reached for comment.

Tuesday, a UCLA spokeswoman said that "it would be inappropriate for us to comment on or speculate about any proposed sale of the hospital or its future."

Ascension said previously that it doesn't comment on proposed deals. Providence, based in Renton, Wash., said that "at this time we have no comment with regard to the decision pending by the SCL Health System."

All three of these bidders have strengths and weaknesses, said Valentine, the healthcare consultant. But "Soon-Shiong has the doctor and community support and a boatload of money to support the hospital. This option cannot be ignored."

chad.terhune@latimes.com

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