Registered nurses from left, Jo Donahue, from Gilroy, Diane Houk, from Gilroy, Zenei Cortez, from San Francisco, and Lyndsey Podesta, from Gilroy, stand outside St. Louise Regional Hospital during a vigil to demand the Daughters of Charity Health System b
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GILROY–The Daughters of Charity Health System Board of Directors has selected BlueMountain Capital Management, a private investment company, to recapitalize its operations, including Saint Louise Regional Hospital in Gilroy, the hospital system announced July 17.

Reaction was quick from Gilroy leaders, all of whom had strongly supported the previous but failed bid for the system, which fell through in February.

“The partnership between the Daughters of Charity and Blue Mountain promises to maintain the highest level of medical care to our community. In addition, there’s potential for new money to invest in ongoing operations and facilities at the hospital. I would urge the attorney general to support the residents of South County by approving this transaction,” city councilman Roland Velasco told the Dispatch.

“The key here is that our community continues to have local, top notch hospital care. To the extent this business deal assures that, it is a win for all of us,” said councilman Perry Woodward.

Councilwoman Terri Aulman said, “I am pleased that we have a new bidder for DCHS. From what I have read the current board is pleased with the offer. I hope this one can get through the attorney general’s office! We need a stable facility in South County.”

The DCHS announced that, “Blue Mountain is contributing over $250 million of capital and is sponsoring Integrity Healthcare to manage and operate the six California hospitals and a medical foundation, thus assuring the communities served by the hospitals a continuance of care,” the statement reads.

DCHS President and CEO Robert Issai said the selection “ensures communities served by the hospitals will have uninterrupted access to high quality health care, and that the current pension benefits remain the same.”

The operation of Saint Louise Regional Hospital in Gilroy includes the De Paul Health Center in Morgan Hill.

The release goes on, “Upon the close of the transaction, all pension and retirement plans that are currently ‘church plans’ will be required by law to become plans that are subject to the Employee Retirement Income Security Act of 1974…the transaction agreement must be reviewed and approved by the California Attorney General before it is finalized.”

At the Gilroy Chamber of Commerce, which also supported the previous bid, there’s equal enthusiasm for the newly proposed deal.

“The Chamber is pleased to learn of Blue Mountain’s plans to invest in DCHS ensuring Saint Louise Regional Hospital will remain open and operational,” said Mark Turner, chamber president and CEO.

“Saint Louise provides critical medical care for the residents of South County. As the third-largest employer in Gilroy, St. Louise is also critical to the local economy, not just in the number of people it employs but in the economic multiplier effect it has on our region,” Turner said.

“The Chamber is hopeful Attorney General Harris will apply more reasonable criteria and less restrictive standards than she did with Prime HealthCare,” he added.

The release says that, “Integrity Healthcare, an entity owned by BlueMountain and formed to oversee the Hospital group, will provide key management services and day-to-day operational support, while BlueMountain will provide significant new capital investment in the operations and facilities.”

It describes BlueMountain as “a global investment firm with more than $21 billion under management.”

Issai in the statement also said, “Our priority was to seek the strongest bidder who could provide the greatest long-term financial stability while honoring the obligation to our associates, physicians, retirees and other constituents.”

The first proposed deal to sell the DCHS facilities, to Prime Healthcare, for more than $843 million, collapsed in February after the would-be buyer pulled out of when California Attorney General Kamala Harris imposed what Prime considered unreasonable, onerous conditions, such as promising to keep the hospitals open for 10 years.
Under the new proposal, BlueMountain would have the option of buying DCHS after three years.

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