GILROY—Following the largest review of its kind, California Attorney General Kamala Harris approved the $843 million purchase of six medical facilities including, two in South County, from a Roman Catholic health system nearing financial ruin, but not without rigorous, 10-year conditions.
The conditions in the Feb. 20 decision have raised fears that proposed buyer Prime Healthcare will back out of the deal and leave the Daughters of Charity Health System facing bankruptcy and put South County’s medical delivery system in at risk.
A Prime spokesman said Tuesday that the firm hopes to decide in a week.
“I’d be shocked if they accept the conditions,” said Frank Angelino, vice-chair of Saint Louise Regional Hospital’s Foundation Board.
The deal includes Saint Louise Regional Hospital in Gilroy, De Paul Medical Center in Morgan Hill, O’Connor Hospital in San Joe and four others.
For at least 10 years, four facilities must operate as acute care hospitals with emergency services and charity care, according to non-negotiable conditions.
The state’s decision came after five months of review and fierce debate about the facilities’ futures.
Prime founder Dr. Prem Reddy Feb. 20 called the decade-long conditions “unprecedented.”
On Tuesday, Prime Director of Government Relations, Fred Ortega said in a statement that buyer and seller “…remain committed to determining the best course for these hospitals and the communities they serve so that they may become financially secure and continue to provide the best in healthcare. We hope to reach a decision within one week.”
While some South County leaders were relieved Harris did not reject the sale, the optimism was tempered by the conditions.
“I’m afraid (Prime) might pass and there really is no better buyer out there,” Angelino said.
Gilroy Mayor Don Gage, however, appeared to discount concerns the hospital will close. “If Prime doesn’t want it, the county will try to pick it up so I’m not really worried,” said the former Santa Clara County Supervisor.
Mike Wasserman, who represents South County on the board of supervisors and wanted DCHS facilities sold to the county, has been unavailable for comment since the announcement.
In a statement, the county said Harris’ decision “jeopardizes the health of the county’s neediest” residents.
DCHS Chief Executive Officer Robert Issai expressed pleasure with the Harris approval and said his team is studying the 78-page decision. No deadline for a Prime response was given.
In its announcement, Harris’ office called the proposed sale “…the largest transaction ever reviewed by” a state attorney general.
The ruling came after 44 collective hours of public hearings held up and down the state, including one in Gilroy, and review of more than 14,000 comments submitted to her office.
In addition to the county, opposition to the sale also came from the Service Employees International Union—United Healthcare Workers West. The union Feb. 20 called the decision’s “tough” conditions “a victory for protecting community health needs.”
Here are some of the key conditions set down by the attorney general:
• For 10 years, Prime must operate St. Francis, O’Connor, Saint Louise and Seton Medical Center (in Daly City) as acute care hospitals and offer emergency services.
• For 10 years, Prime must be certified to participate in the Medi-Cal and Medicare programs and maintain Medi-Cal managed care contracts.
• Invest $150 million in capital improvements over the next 3 years.
• Provide charity care and community benefits at historical levels.
• Assume and guarantee all pension obligations.
• No restriction on providing reproductive health care services.
• Revise its policies, tools, procedures, guidelines and training materials for its debt collection practices to ensure it does not violate state and federal collection laws.
• No discrimination against lesbian, gay, bisexual or transgender individuals.
• Submit to the Attorney General annual compliance reports.
