Contention surrounds sale of six California Catholic hospitals

by Monica Clark


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Opponents and supporters of the pending sale of six Catholic hospitals in California to Prime Healthcare Services escalated their actions and their rhetoric this week as the February deadline nears for the state's attorney general to rule on the sale.

The Service Employees International Union-United Healthcare Workers West (SEIU-UHW), headquartered in Oakland, leads the opposition, saying that Prime has a poor record of living up to its promises when buying other hospitals and that another, more viable buyer is available. They enlisted 18 California members of the U.S. House of Representatives to sign a letter to California Attorney General Kamala Harris on Dec. 11, asking her to reject the sale because "under Prime, patient care and healthcare work rights will suffer at these hospitals."

The Daughters of Charity Health System (DCHS), which owns the six hospitals, says the sale to Prime is the only way to keep the hospitals open. Together, the four hospitals in northern California and two in southern California are running a monthly debt of $10 million, a cost DCHS says is not sustainable.

The search for a buyer was announced in February. Out of 130 health systems expressing initial interest, the DCHS board selected four finalists. Robert Issai, DCHS president and CEO, said only Prime met all the board's criteria.

According to DCHS, Prime has agreed to keep the hospitals open, to accept full responsibility for the pensions of the 17,000 union and nonunion workers and retirees, to honor all union contracts, invest $150 million in capital improvements and new equipment, and continue the charity care that has been a key mission of the hospitals.

Supporters of the sale include the California Nurses Association and National Nurses United. In a lengthy letter Dec. 3 to Harris, they wrote that to disapprove of the sale "would condemn these hospitals to bankruptcy and jeopardize the health and safety of entire communities." On Dec. 17, they held a press conference on the steps of the State Capitol, urging Harris and elected officials to support the sale.

"Those who oppose the sale are playing a dangerous game with our patients and our communities that could be steering the hospitals towards bankruptcy and closure," said Zenei Cortez, a registered nurse and co-president of the California Nurses Association. "As nurses we will do whatever we can to prevent this from happening, in order to protect public access to health care and emergency services." 

SEIU's nurses local (SEIU 121 RN), headquartered in Pasadena, has endorsed the sale to Prime. Some SEIU-UHW members are also declaring support.

Prime Healthcare, which operates 29 acute-care hospitals in nine states, submitted its purchase application as required by state law to the attorney general Oct. 29. In early January, Harris will hold public hearings in each of the communities served by one of the Daughters of Charity Hospitals. Her decision is expected in early February. The Vatican must also approve the sale.  

In a Dec. 16 statement, Issai used strong words against a "singular, personal campaign" by SEIU-UHW president Dave Regan "to block the sale of Prime." He accused Regan of continuing "to spout tired rhetoric and promote phantom buyers that don't exist."

"I don't understand how a union leader could be against preserving jobs and pensions of its own members, the very people he is paid to represent," Issai said.

Regan says Blue Wolf Capital, one of the finalists to acquire the hospitals, is a better choice to be the system's buyer.

"As flawed as Prime Healthcare is, it would not be responsible for us to oppose the transaction unless there was an immediate, viable alternative to continue operation of DCHS in a manner that better serves the public interest," said Regan in a statement released Dec. 17. "Fortunately, such an alternative exists in the form of Blue Wolf Capital."

Regan added a new contention, namely that DCHS passed over Blue Wolf Capital's bid because Prime promised an "$11.5 million windfall for DCHS executives." Issai told NCR that this allegation is a "twist of the facts." Rather, Issai said, the agreement would honor the DCHS severance contracts of the 45 employees of the Daughters' health system if they lose their jobs when Prime assumes ownership of the hospitals. Prime has its own administrative system and might not absorb the DCHS system executives and staff, Issai said. "Not a penny will be paid to me by Prime. My only goal is to find a good home for these hospitals."

Issai, in a recent letter to DCHS employees asking for their support of the sale, called Blue Wolf Capital "a union friendly private equity firm whose bid to buy DCHS was substandard and did not begin to meet our stringent criteria."

In a letter published in the San Jose Mercury News, Blue Wolf rebutted Issai, saying, "We are proud of our record and extensive health care expertise" and their team of hospital executives with "an unchallenged and unblemished record of turning around safety net hospitals."

Both DCHS and SEIU-UHW are continuing their efforts to garner supporters.

SEIU reported on Dec. 15 that California Controller and Treasurer-elect John Chiang has written to Harris to express his concern "that Prime's very low credit rating and its exposure to potential liabilities associated with existing litigation introduces a level of worrisome risk." San Francisco Mayor Ed Lee has also expressed his concern about the sale.

On Dec. 14, the San Jose Silicon Valley Chamber of Commerce Board of Directors voted unanimously to support the sale, citing the serious negative impact to patients, hospital workers and the local community if O'Connor Hospital, operated by DCHS in San Jose, closed.

More than 18,000 people have signed a DCHS/Prime-sponsored petition to Harris, seeking her approval of the sale. Additionally, in his letter to retirees, Issai asked them to sign an enclosed pro-sale postcard and mail it to Harris.

Prime Healthcare Services was established in 2001 by a cardiologist in southern California. Its motto is "Saving Hospitals, Saving Jobs and Saving Lives."

Over the years, it has acquired four Catholic hospitals and is in the process of buying several others, in addition to the six DCHS hospitals: O'Connor Hospital in San Jose, St. Francis Medical Center in Lynwood, St. Louise Regional Hospital in Gilroy, St. Vincent Medical Center in Los Angeles, Seton Medical Center in Daly City, and Seton Coastside in Moss Beach.

Issai said he expects final approvals of the sale to be reached by the end of March.

[Monica Clark is an NCR West Coast correspondent.]

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