Newport Beach extends agreement with Hoag Hospital for more development to 2040

Wednesday, December 15, 2021

(Orange County Register)

Hoag Hospital has secured an extension until 2040 of its right to build out space on the upper and lower portion of its campus in Newport Beach under a previously negotiated development agreement that gives it flexibility in what additional facilities it would add to meet future health care needs.

The City Council recently approved this fifth extension to the development agreement first reached in 1994, allowing the hospital to finish building out about 450,000 square feet of the property within certain design parameters.

In return for the agreement, the city gets fees from the hospital that it has been using to help the city’s homeless outreach programs. The hospital pays $300,000 a year for the development rights.

The council previously in 2019 extended the development agreement to 2029. Later, with the rise of the coronavirus pandemic, hospital officials asked for an extra year, pushing the end date to 2030.

For the latest 10-year extension, Hoag is on the hook for $150,000 a year, thanks to a suggestion from Councilman Kevin Muldoon.

“I view them as a pillar in the community,” said Muldoon of why he suggested the annual payment be reduced from $300,000 for that last decade. “I’d rather see their money spent on medical advancement and good, instead of having them pay the city more money to build on their own property, especially in light of our $30 million surpluses this year.”

Hospital officials have not shared plans for future construction or expansion plans with the city, said Seimone Jurjis, the city’s community development director, adding plans would likely depend on the hospital’s direction related to health care.

Sandford Smith, vice president of real estate and facilities for Hoag, said technology advancements and science drive hospital leaders as they envision what needs the hospital and the community might have in the future.

“The hospital is like a city itself,” he said. “A population of caregivers, support staff and medical care that operates 24 hours a day; that is in a very dynamic industry that sits at the cusp of art and science.”

The extension of the development agreement is critical to the hospital’s future care in the community, he said. “Should we lose our ability to build out, we lose our potential to serve the community. We change the facilities to meet the needs of the community.”

The building and changes can come from not only future needs, but also evolution in regulations, including seismic requirements.  At present, all the hospital’s facilities meet those codes, but there will be some changes required on the older buildings by 2030.

“We’ve done planning to see how we can optimize space on the campus,” Smith said. “Over time, we’ll reposition certain parts of our platform due to regulations. As buildings age, they have to be modernized and we have to reposition certain elements on the campus.”

Smith said it’s conceivable by 2040 that all of the hospital’s buildable space might be used up. Still, he believes the progress of science, technology and medicine will require the hospital to keep evolving physically.

“In the mid-1950s,when Hoag was built, nobody conceived of robotic surgery or 3-D imaging of the brain,” he said. “The development agreement is a lever that allows us to have facilities responsive to meet the dynamic needs of healthcare.”

“Driverless cars are not so far in the distance,” he added. “If the concept of mobility changes, the whole concept of how we plan hospitals changes.”

While Hoag leaders plan for the future of the hospital’s campus, they also want to change in its affiliations.

They have gone to court to divorce the hospital from Providence Health, a large not-for-profit Catholic healthcare system based in Seattle with 51 hospitals across seven states.  Hoag had joined with St. Joseph Health in 2013, which was then acquired by Providence in 2016.

In May 2020, Hoag filed the lawsuit in Orange County Superior Court, saying it wanted to dissolve its affiliation to better focus on its mission of serving its local community and keeping resources in Orange County.

Hoag officials said they believed the “current structure” of the relationship with Providence was “not in the best interest of our patients, our physicians and team members.”

Officials from Providence said at the time Hoag’s timing couldn’t have been worse given the pandemic and the split could harm local patients. “Our relationship has been strong since 2012. The Hoag leaders’ so-called ‘realignment’ plan would negatively impact patient care, diminish resources and medical expertise available to Orange County.”

There have been a few court hearings on the lawsuit and the two sides were engaged in settlement talks. Providence appeared willing to step away for an undisclosed amount of money that Hoag considered unwarranted.

According to court records, a tentative jury trial date has been set for April 11.

Officials with both organizations declined to comment or provide updates on the lawsuit.

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