Concerns swell around all sides of DCHS deal

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Saint Louise Regional Hospital

Well before Daughters of Charity Health System executives announced the sale of all six of its hospitals, including Gilroy’s Saint Louise Regional Hospital, to for-profit Prime Healthcare Oct. 10, DCHS officials threatened that without the right buyer, the hospitals would shut down. As opposition to the sale mounts, mainly from labor groups and politicians, during a state-mandated review by the Attorney General’s Office, their tune hasn’t changed.
President and CEO of the DCHS Santa Clara County Market, James Dover, painted a dire fiscal picture for the Daughters of Charity at a Nov. 14 meeting of the Gilroy Chamber of Commerce. Dover emphasized that Prime, the largest for-profit hospital operator in California, has the financial wherewithal to right the ship and a track record of buying Catholic hospitals in the red.
Prime’s offer was the “only viable option” for the DCHS, Dover said, adding that they were the only bidder to assume $300 million in pension liabilities, uphold existing collective bargaining agreements with labor groups and pledge to keep all hospitals operating for five years.
The hospitals won’t have a future unless the Attorney General approves the sale, Dover said.
Concerned about potentially losing the local hospital, the Gilroy Chamber of Commerce Board of Directors voted Tuesday to support the pending purchase and they’ll be urging the Santa Clara County Board of Supervisors and Attorney General to get behind it.
“The transfer of control to Prime Healthcare is in the best public interest,” Chamber President and CEO Mark Turner said in a press release. “This is because of the assurances this sale provides for DCHS employees, doctors and the community who depend on these historic hospitals and excellent physicians for access to health care services.”
As the third largest employer in Gilroy, Saint Louise is pivotal to the local economy and provides essential care to South County residents, Turner said.
The Chamber’s decision to support the purchase comes at a critical time, too. Four of five of the County Board of Supervisors have gone on record opposing the sale, Dover noted, after the county submitted an unsuccessful bid for Saint Louise and O’Connor Hospital in San Jose. Supervisor Mike Wasserman has said the county is worried that Prime, as a for-profit organization, may have ulterior motives moving forward.
“We as a county have been communicating our concerns to the Attorney General,” Wasserman said. “The No. 1 thing is maintaining the health-care services in Santa Clara County. You’ve got a for-profit organization—it’s not much of a reach to assume that they might take steps as far as profitability goes.”
Labor unions and some DCHS employees have also gone on record with concerns that the sale is not in the best interests of the public.
Upon learning of the sale to Prime, representatives of the largest service employee union in the country announced they’d fight to stop the sale. The Service Employees International Union’s Oakland-based United Healthcare Workers West argued in a press release, “Prime puts profits over patients and doesn’t share Daughters’ mission of serving the poor.” The union has 3,700 members at DCHS facilities and three Prime-owned hospitals in California.
The California Nurses Association, on the other hand, worked out a one-year agreement with Prime. The United Nurses Association of California joined the SEIU in opposition, and the labor groups have recently called into question Prime’s track record. In a recent press release, SEIU pointed out four examples between 2007 and 2014 in which Prime “misled communities” by saying one thing, but doing another.
“In 2007, Prime bought Centinela Hospital in Inglewood, announcing in a press release that it would ‘maintain all currently offered service.’ Within seven months, it had eliminated the hospital’s maternity and psychiatric care units,” a Nov. 10 SEIU release states.
But both sides of the issue are pointing fingers and they’ve accused the other of misleading the public with misinformation and speculation.
“SEIU and UNAC (the United Nurses Association of California) are waging a corporate campaign against Prime in order to win leverage at the bargaining table,” a DCHS handout distributed at the Nov. 14 meeting reads. “(Their) self-interested opposition to the sale could result in delays or denials of AG approval, which would lead to the loss of jobs and potential closing of some of our hospitals.”
Dover said relations with labor groups would have worsened if any bidder other than Prime were chosen, pointing out they were the only bidder to honor existing employment and retiree contracts. How the bidder would treat pension plans and collective bargaining agreements were the top two criteria when analyzing a potential buyer, he said.
“The county of Santa Clara would not have assumed any of the collective bargaining agreements. That would have created nuclear war with our unions,” Dover added. “They would not have assumed our pensions and that would have meant the pensions for many pensioners would have been destroyed, and the county could not have bought the entire system.”
Another bidder, Blue Wolf Capital Partners LLC, would not have assumed a bargaining agreement with the nurses union and declined to put any money down on the transaction, Dover said.
“We’d be just like Kaiser (if we sold to them) and have all of our nurses out on the street,” he said. “I think it was great the way the county of Santa Clara and the Blue Wolfs of the world did submit bids, but at this point we now have to move forward to secure the transaction.”
Moving forward, Prime has committed $150 million in capital improvements at DCHS facilities and Dover said that shows a level of investment in seeing this through.
“They’re not in it to buy the hospitals and turn around and not be successful,” he added.

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