State Attorney General OKs Sale of 6 Non-Profit Bay Area, SoCal Hospitals

By Bay City News Service:

California Attorney General Kamala Harris Friday conditionally approved a plan by the Daughters of Charity Health System to sell six non-profit acute care hospitals in the Bay Area and Southern California, a move opposed by a health care workers’ union and Santa Clara County officials.

Harris’ decision, however, included a long list of detailed conditions that buyer Prime Healthcare must fulfill, such as continuing to offer emergency and acute care at four of the hospitals for 10 years, guaranteeing the pensions of 17,000 workers and retirees and continuing to provide charity care for a decade.

Harris also said that Prime had to make good on its promise to spend $150 million on capital improvements at the six hospitals over three years. Robert Issai, president of the Daughters of Charity system, said the conditions Harris put on the sale came out to more than 40 printed pages that charity officials will have to review over the weekend.

“I’m very happy with the approval, but we really need to take time to read the conditions,” Issai said.

The medical facilities owned by the Paris-based non-profit Daughters of Charity in the pending transaction include the 125-year-old O’Connor Hospital in San Jose, Saint Louise Regional Hospital in Gilroy, Seton Medical Center in Daly City, Seton Coastside in Moss Beach, St. Francis Medical Center in Lynwood and the 150-year-old St. Vincent Medical Center in Los Angeles.

The Daughters of Charity last year accepted a $843 million buyout bid from Ontario-based Prime, operator of 23 for-profit acute care facilities in California and other eight other states and six non-profit hospitals through its Prime Healthcare Foundation.

The charity’s board endorsed Prime’s offer for its not-for-profit hospitals, which provide low-cost or free health care for the needy, but are losing $10 million a month, charity officials said.

The SEIU-United Health Care Workers West, a union representing 2,600 medical workers in the charity’s six hospitals, objected, saying that Prime might order layoffs, service cuts and other cost reductions and jeopardize the access of indigents and others to low-cost health services.

In a statement released after Harris’ announcement, SEIU-UHW president Dave Regan praised the attorney general’s conditions on the sale to Prime, such as keeping all six hospitals open, maintaining charity care for at least 10 years and holding onto labor and delivery, cancer treatment and orthopedics that the union claims Prime intended to cut.

“If Prime lives up to both the letter and spirit of the conditions placed on this sale, community healthcare and services for low-income families will be protected, but given our history with Prime, that’s a big if,” Regan stated.

In a separate statement, officials in Santa Clara County, which failed to convince the Daughters of Charity to sell O’Connor and Saint Louise Regional Hospital, criticized Harris’ decision despite her many conditions.

“The County of Santa Clara is disappointed with the Attorney General’s decision,” read the statement. “Regardless of the conditions placed upon Prime Healthcare, the county believes that the decision jeopardizes the health of the county’s neediest and most vulnerable residents by reducing their access to critical medical services, and by placing undue hardship on the county’s existing healthcare facilities and services to the poor and disadvantaged.”

“In order to protect its residents and serve the public interest, the County of Santa Clara will immediately take steps to determine whether to acquire one or more medical facilities in the county, including the possible use of the eminent domain process,” officials stated.

The Daughters of Charity, in a statement posted on its website, stated that “Prime has tremendous experience in reviving struggling hospitals and we are both committed to a transaction that positions the hospitals to continue to deliver high quality care to the communities they serve.”

SEIU-UHW had urged the charity’s board to reject Prime’s bid in favor of an offer from Blue Wolf Capital, a New York private equity firm, saying that the firm planned to supply $300 million in capital improvements.

But charity officials said Blue Wolf’s offer was not a real bid but an annual management contract, where its executives would run the hospitals for $24 million a year.

The equity firm did not guarantee to take over employee pension liabilities, while Prime did, officials said. Prime’s bid for the hospitals included $394 million in cash and assuming $449 million in the charity’s debts.

The charity also said that Santa Clara County’s offer to buy O’Connor and Saint Louise did not include assuming the pension liabilities and would have made the charity file for bankruptcy prior to the sale, neither of which Prime had required.

Officials with the California Nurses Association said they were among those who supported the sale.

“While we haven’t reviewed the entire document, based on the provisions cited in the Attorney General’s statement, we would hope that Prime will comply with these conditions which will keep the hospitals open just as nurses, nuns, patients and community residents have rallied to achieve,” CNA executive director RoseAnn DeMoro said in a statement.

(Image via Shutterstock)

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