Roseville, Calif.-based Adventist Health plans to renegotiate or potentially terminate its lease with Mendocino Coast Health Care District to provide care at its hospital in Fort Bragg, Calif., The Mendocino Beacon reported Oct. 10.
Public concern about the hospital's future has been growing, and it was a key topic at the healthcare district's candidate forum on Oct. 2, according to the report.
MCHCD initially sought a hospital operator when financial troubles threatened care delivery at the hospital, and Adventist was the only one to submit a proposal. A 30-year lease agreement was signed on July 1, 2020.
The agreement allows either party to negotiate the lease under certain conditions.
Renegotiation is "the best path forward" to evaluate the relationship under the lease, Eric Stevens, president of Adventist Health Northern California Network, said in a Sept. 30 letter to MCHCD.
Adventist has activated "a 60-day period" to evaluate the relationship and set "an agreed upon termination date in the event we are unable to restructure our relationship," according to Mr. Stevens.
Adventist elected to renegotiate the terms of the lease because the hospital has reported less than 5% EBITDA for the previous 12-month period, according to the report. A healthy EBITDA margin is typically between 10% and 25%.
On Oct. 1, MCHCD Board Chair Paul Garza signed and returned the letter, with the healthcare district expected to explore all options to maintain access to care in the community.
"The Mendocino Coast Healthcare District welcomes the opportunity to strengthen our partnership with Adventist Health. We recognize that this is an appropriate time in our five-year relationship to reevaluate the terms of our partnership," Mr. Garza said in the letter.
The 60-day period is set to end on Nov. 29.
If no agreement is reached within the 60-day window, Adventist could terminate the lease and transfer of business operations agreement, effective June 30, 2025. Should termination occur, both parties would negotiate the transfer of hospital assets back to the district.
Both organizations remain committed to providing high-quality care in the area and committed to keep the community informed about the progress of the new agreement.