Controversial Sale of 6 Nonprofit Hospitals Up for Discussion

The state attorney general's office will host public meetings this week on the contentious sale of six nonprofit hospitals—including two in Silicon Valley—to a multi-state, for-profit chain.

The hospital chain, which is run by Los Altos-based Daughters of Charity Health System and includes San Jose's O'Connor Hospital and St. Louise Regional Medical Center in Gilroy, announced early last year that it planned to sell because of massive financial losses. By October, the nonprofit announced a prospective buyer: Prime Healthcare Services, a for-profit Southern California company.

In the proposed deal, Prime has agreed to take on $350 million in pension debt and pay off $400 million in tax-exempt bonds and other liabilities. The company has also agreed to keep those six hospitals open for at least five years, keep most of their 7,600 jobs and spend at least $150 million in upgrades.

Supporters of the sale, including the California Nurses Association, say it's needed to keep the hospitals up and running. Detractors, including several Bay Area lawmakers and the SEIU-United Healthcare Workers West, worry about Prime Healthcare's reputation for cutting staff and services.

“The approval is not a slam-dunk, but the sale to Prime Healthcare is vital, as it’s a choice between Prime Healthcare, reduce services and/or bankruptcy," said Matt Mahood, CEO of the San Jose Silicon Valley Chamber of Commerce, which endorses the sale, saying it would be an economic boon for the region. "Among offers turned down by the Daughters of Charity were provisions that the hospital declare bankruptcy, and this would be harmful for hospital employees, physicians, and local vendors and suppliers.”

Prime Healthcare is currently the target of a federal investigation after allegations that it used inappropriate billing practices to glean higher fees. The company has also been suspected of boosting profits by moving Medicare patients from emergency rooms to hospital beds.

In October, County Executive Jeff Smith criticized the deal, saying it could over-burden Valley Medical Center because most uninsured patients in South County and San Jose would end up at the public hospital.

By law, California Attorney General Kamala Harris has to give final approval of the sale. A decision is expected by next month. The public hearing about O'Connor Hospital takes place 10am Wednesday at the facility's office building, 2101 Forest Ave., in San Jose. A meeting about St. Louise Regional Hospital takes place 10am Thursday at Gilroy City Hall, 7351 Rosanna St., in Gilroy. Click here for more information about those hearings and how to sign up for public comment.

The sale would affect O'Connor, St. Louise Regional, St. Vincent Medical Center (Los Angeles), St. Francis Medical Center (Lynwood), Seton Medical Center (Daly City), Seton Coastside (Moss Beach) and the statewide Daughters of Charity Health Services Medical Foundation. Prime runs 29 hospitals in nine states. In the past two years the company has bought four other Catholic hospitals.

Jennifer Wadsworth is a staff writer for San Jose Inside and Metro Newspaper. Email tips to [email protected] or follow her on Twitter at @jennwadsworth.

One Comment

  1. > In October, County Executive Jeff Smith criticized the deal, saying it could over-burden Valley Medical Center because most uninsured patients in South County and San Jose would end up at the public hospital.

    Not to worry, Jeff. Obama solved the problem of uninsured patients with Obamacare.

    So, do your job and run your government hospital and stop pushing patients you don’t want onto the poor, bankrupt Daughters of Charity.

    By the way, Jeff, how does your salary and benefits compare with those of the head administrator at the DOC hospital?