Hospitals, Policy

Prime poised to acquire six California Daughters of Charity hospitals for $300 million

Despite multiple protests and controversy, Southern California-based Prime Healthcare Services appears poised to acquire six […]

Despite multiple protests and controversy, Southern California-based Prime Healthcare Services appears poised to acquire six hospitals operated by financially strapped Daughters of Charity in California for $300 million.

The San Francisco Business Times reports that Daughters CEO Robert Issai said Prime’s offer, which has been protested by California’s biggest healthcare union, SEIU-UHW, would also include $450 million pledged toward capital improvements and equipment upgrades of $150 million. In addition, it would take on about $300 million in pension obligations.

Daughters said it had received multiple offers from a number of health systems. Because of pension commitments, it preferred to sell all six hospitals as a package deal versus selling individual facilities piecemeal.

“Prime Healthcare’s bid was superior to all others, and we are excited by today’s announcement,” Issai said in a statement. “Prime’s selection ensures that our communities will have access to high-quality health care for years to come, that pension plans for our employees will be funded, and investments will be made in our facilities.”

The proposed deal would required approval from California’s Attorney General. It would also require approval from the Vatican, because it’s a Catholic health system,  according to Daughter’s. The union and its allies will  pressure Kamala Harris to reject the bid.

If approved, Prime would assume all of Daughter’s assets and liabilities.

Last year, Daughters of Charity hospitals saw 172,000 emergency room visits and provided in excess of $159 million in uncompensated care and services to people living in poverty, in addition to $22 million in traditional charity care. But operating losses continued to mount at a pace of $10 million a month due to increasing labor costs, low reimbursement rates from payers and and a dwindling market share.

Mergers and acquisitions show little sign of slowing in healthcare, some of them driven by distress, like Daughter’s, while others are driven by the need to achieve scale as the hospital world grapples with massive changes spurred by the Affordable Care Act.

The deal with Prime and Daughter’s also includes Daughter’s medical foundation. The hospitals included in the deal are:  St. Vincent Medical Center in Los Angeles, St. Francis Medical Center in Lynwood, O’Connor Hospital in San Jose, Saint Louise Regional Hospital in Gilroy, Seton Medical Center in Daly City, Seton Coastside in Moss Beach, and the statewide DCHS Medical Foundation.

The union and several Bay Area politicians have loudly protested Prime as a buyer, largely because of of a 2013 whistle-blower lawsuit alleging Prime fraudulently over billed Medicare and Medicaid by some $50 million. The union also alleged that Prime would likely shutter some of the struggle hospitals and carry out layoffs, a charge Prime has vehemently rejected. It filed a lawsuit against the union claiming SEIU-UHW  is “conspiring to extort, threaten and force Prime Healthcare to enter into a ‘neutrality agreement’ that would enable SEIU to force all employees into the union regardless of choice.”

Stay tuned.

Prime is a $2.5 billion system with 29 hospitals and 4,700 beds in nine states. It has agreed to keep all six hospitals open and won’t eliminate ERs for at least five years, a requirement under California law, SFBT reported. It will also assume the existing union contracts.

 

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