Visalia Medical Clinic decides to terminate its partnership with the public hospital district two years before it was set to expire or be renewed and instead partner with competitor Adventist Health
VISALIA – The Valley’s largest multi-specialty clinic and one of the area’s largest hospitals are ending a partnership once touted as “the future of medicine” in Tulare County in favor of a new deal with one of the nation’s largest hospital networks.
Kaweah Health CEO Gary Herbst said Visalia Medical Clinic (VMC) is ending its exclusive partnership with the public hospital district by June 30, 2023. The two entities created the Kaweah Health Medical Group (KHMG) in 2015, a medical foundation employing both Kaweah Health and VMC staff. All physicians, advanced practice providers, and therapists working at VMC are directly employed by VMC while all staff members would revert to Kaweah Health employees.
“I am deeply disappointed in VMC’s unilateral decision to end its relationship with us,” Herbst said during a town hall meeting with KHMG staff in early December. “While I expected that changes would need to be made to the Professional Services Agreement between VMC and KHMG, I fully intended to work towards a renewal of the Agreement on June 30, 2025.”
In an email to a local resident, Herbst said he first learned of VMC’s dissatisfaction with the partnership from foundation CEO Paul Schofield nearly a year ago. He said VMC held a company retreat in January 2022 where they discussed the idea of exploring a new partnership with a different entity. Nothing formally happened until June 30, 2022 when Herbst received a hand-delivered letter from VMC President Dr. Angela Pap informing Kaweah Health it would be exploring possible partnerships with other entities. Then, on Sept. 8, 2022, Dr. Bruce Hall, one of the physicians who owns VMC, notified Herbst the clinic’s board had unanimously voted to end its relationship with Kaweah Health in June 2023, two years before the professional services agreement was set to expire or be renewed in 2025.
“To this day, I have never been told what Kaweah did or failed to do that triggered VMC’s decision to end our relationship,” Herbst said.
Sometime before December, Herbst said VMC planned to remain an independent, physician-owned medical group and confirmed it was entering into an professional services agreement with Adventist Health, which competes with Kaweah Health for local staff and resources. In response to questions from local media, Herbst said Adventist Health intends to purchase all of VMC’s assets currently owned by Kaweah Health and hopes to retain as many of its existing providers as possible. During the first seven years of the contract, Herbst said Kaweah Health has invested more than $80 million in VMC to acquire and renovate assets, to provide funding support to recruit and retain physicians, staff and other providers, and to fund its operations. Herbst also said Adventist made promises Kaweah could not, such as a new medical office building, dedicated ambulatory surgery center, and promises of equal or higher compensation to providers and staff.
“I don’t believe their decision to look for a new partner was due to Kaweah’s financial challenges but again, a reason has never been given,” Herbst said. “Adventist Health does have greater financial resources than Kaweah Health and perhaps VMC believes that they will be able to make greater financial investments in them than we have made.”
Both Adventist Health and VMC said they were unable to comment as of press time.
Concerns for the Future
Herbst said he is concerned with how Adventist will get a return on that type of investment. He said the most likely scenario is that VMC patients will be sent to Adventist Health facilities in Hanford, Tulare, Reedley or Selma. Furthermore, Herbst said some insurance companies may consider VMC patients out-of-network, because the insurance contracts would fall under the Adventist Health medical foundation, which would not be a Visalia-based entity. That could lead to higher out-of-pocket costs for VMC patients. It is also unlikely VMC doctors will have the same level of access to Kaweah Health’s facilities.
“While VMC leadership is telling its physicians and KHMG employees that they will continue using Kaweah Health facilities as they do today, that is simply not the case,” Herbst stated in an email to a concerned resident shared with The Sun-Gazette. Herbst clarified his statement in an interview with local media that, “Our greatest concern is that patients of VMC/Adventist Health will now be directed to Adventist Health facilities in Hanford, Tulare, Selma, Reedley or other Adventist Health locations for most or all of their non-emergent hospital care.”
Longtime councilman and city planner Greg Collins said five of his doctors are with VMC and said he is concerned with being told to travel out of town for hospital procedures that could be done a few blocks from his house.
“In the beginning this may sound like a good situation but could go sideways down the road,” Collins said. “For better or worse we need to support Kaweah Health.”
Adventist may have access to more resources, but Collins said he isn’t excited about losing the ability to be heard by a publicly elected representative, such as the ones that sit on Kaweah Health’s board of directors. Adventist is a non-profit hospital and part of a nationwide network based somewhere other than the Valley. It does have a community board but they are appointed by the hospital, not elected by the residents. He likened it to when city’s privatize their refuse departments.
“You got a complaint? Call corporate headquarters … wherever they are,” Collins said. “I don’t think this is going to turn out well.”
When partnership was signed in 2015 to form what was then called Kaweah Delta Medical Group, it was praised by both organizations as a way to recruit high quality doctors to the area and to provide those doctors with modern equipment and privileges at the area’s largest hospital. As recently as 2021, KHMG Medical Director Dr. Bruce Hall told Kaweah Health’s Vital Signs publication the partnership helped VMC grow because of Kaweah Health’s reputation as “a top-notch organization, with great quality and patient care.”
In the same Nov. 15, 2021 article, Dr. Ben Brennan, a family medicine physician at KHMG, said VMC and Kaweah Health were united in their common goal “To provide the best healthcare for the people in the community.” He went on to state: “We’re creating the best health care you can get in one place. That’s the future of medicine.”
Herbst admits the reality of the partnership had its struggles. In his town hall with KHMG employees, Herbst acknowledged the relationship with VMC and the operation of the medical foundation has been rocky from the start. He said any new partnership goes through four phases of evolution: “Forming, Storming, Norming and Performing.” Forming is like the honeymoon stage of the relationship, where there is still hope to accomplish all that the organization set out to do. Storming is when groups within the organization share their frustrations and identify shortcomings. Norming is when the groups recalibrate expectations and begin resolving issues. And finally norming, when the organization settles the remaining differences and begins accomplishing the new, agreed upon goals.
“I don’t know if we ever got to the performing stage but we spent a lot of time in the storming stage but it was starting to feel like we were passing into the norming stage,” Herbst said.
Kaweah Health is now preparing for a future without VMC. Herbst said clinics on Ben Maddox in Visalia and Cherry Street in Tulare will remain with Kaweah Health and convert back to the hospital district’s ownership on April 1, 2023 even though the contract will not end until June 30, 2023. All of the other assets owned by the KHMG foundation, such as furnishings, equipment, records and staff contracts, will be inventoried and then appraised by a mutually-acceptable appraiser. VMC or Adventist will have the exclusive right to purchase all of the assets and must pay that by the termination date. If the partnership with Adventist falls through, Herbst said VMC will retain exclusive rights to purchase all of the assets.
“Over the coming months, there will be a tremendous amount of work to do to help VMC transition to either a new partnership or to a return to independence,” Herbst said. “Our leadership and staff will work with VMC and AH to make this transition as smooth as possible.”
All of the foundation employees, except for VMC physicians and other providers, are employees of Kaweah Health and we hope that many of them will want to stay as Kaweah Health employees and will meet with us to explore other job opportunities within our organization. Kaweah Health currently has more than 400 job openings that we are working to fill. Herbst said Kaweah Health will continue to work with and support VMC physicians who decide they don’t want to work with Advnetist. Herbst said Kaweah will find a home for them in Kaweah Health and help them stay local.
“At Kaweah Health, we believe in local health care and we will always support local physicians who provide excellent care and keep care local, regardless of who they work for,” Herbst said.
Instead, Kaweah Health will focus on developing and delivering care through other partnerships with physician-based clinics, such as Key Medical Group and Sequoia Integrated Health, and its own Kaweah Health Cardiology Clinic, the Kaweah Health Specialty Clinic and rural health clinics in Exeter, Dinuba, Lindsay and Woodlake.