Prime Healthcare Services is reportedly in acquisition talks with Daughters of Charity Health System, a nonprofit operator of six California safety-net hospitals that have struggled to remain solvent in recent years.
Prime, a private, for-profit system based in Southern California, said it cannot comment on matters of acquisition, but several Bay Area media outlets have reported the potential deal, while a union representing thousands of workers for Daughters has protested Prime as a potential buyer. The San Jose Mercury News reported that Santa Clara County, where two of the hospitals are located, has submitted a bid for two of the facilities, but Daughters is looking to sell all six facilities at once.
Early this year, Daughters of Charity said it was putting itself up for sale after five of its hospitals hemorrhaged $62 million in the last half of 2013. That came shortly after a failed merger attempt with Ascension Health, allegedly over Daughter’s dwindling market share in the competitive San Francisco Bay Area hospital landscape that includes Kaiser Permanente and Sutter Health, among others. Daughter’s operates four Bay Area hospitals and two in Southern California.
It’s a theme felt throughout the industry, as a wave of consolidation and closures continues throughout the country. Public and nonprofit safety-net hospitals in particular have struggled with reduced Medicare reimbursements and a disproportionate share of Medicaid and Medicare patients, which reimburse at far lower rates than commercial insurance.
While tight lipped regarding Daughters, Prime spokesman Edward Barrera issued a statement saying it is “always looking both in and outside of California for partners.” Daughters of Charity spokeswoman Elizabeth Nikels similarly said she could not comment on any pending sale of the system.
The health system operates 27 hospitals across seven states. Since 2005, Prime says it has invested approximately $788 million into renovation, equipment purchase and general capital improvements across its hospitals.
That’s apparently not enough to allay the concerns of California’s biggest healthcare union, SEIU-UHW, which recently took to protesting Prime and any potential Daughter’s deal because of a 2013 whistle-blower lawsuit alleging Prime fraudulently over billed Medicare and Medicaid by some $50 million.
