GILROY—Weeks after Prime Healthcare abandoned an $843 million deal for Saint Louise Regional Hospital in Gilroy and four other Daughters of Charity facilities in California, the Roman Catholic order’s CEO is optimistic a viable bidder will be found to stave off bankruptcy.
More than 20 bids to buy the financially strapped system, according to Robert Issai, DCHS’s chief executive.
He is “pleasantly surprised” at the amount of interest, he said.
Prime, DCHS’s anointed buyer from the first round of bids, pulled out of the deal, citing “tough and unprecedented conditions” imposed on the purchase by California Attorney General Kamala Harris, whose office has final say in such purchses.
Issai said DCHS wants a buyer with the same financial wherewithal as the Ontario-based Prime, in order to turn their hospitals around.
Prime’s founder Dr. Prem Reddy said the main reason he pulled out of the deal was a stipulation mandated by Harris to keep all acute care facilities open for 10 years, with gradually increasing services.
As for new bidders, Issai said, “We are not lowering our standards. We want good financial acumen, the ability to turn our hospitals around and preserve services. Prime had an excellent proposal and for a variety of reasons it didn’t work out but we’re hoping to find just as credible of a buyer.”
If and when a buyer is selected, the transaction will again come under review by Harris’ office—unless the buyer is a government agency.
One prospective buyer is the County of Santa Clara, which initially submitted a bid to buy Saint Louise and O’Connor Hospital in San Jose but was passed over. District 1 Supervisor Mike Wasserman told the Dispatch the county still wants to purchase those two facilities, which include De Paul Medical Center in Morgan Hill.
A New York-based private equity firm that originally bid to buy all DCHS facilities, Blue Wolf Capital, remains “strongly interested” in the system, a spokesperson said via email.
Issai said, whoever the buyer is, he hopes the review by Harris’ office doesn’t take five months.
Harris’ office reviewed thousands of individual comments on the proposed sale to Prime, after hours of public hearings held in Gilroy, San Jose and elsewhere in California.
One union that represents roughly 2,600 DCHS employees, the Service Employee Union—United Healthcare Workers West, vocally opposed the sale to Prime, advocating the Roman Catholic order select Blue Wolf as the buyer instead. The union’s leader said that with Prime out of the picture, “other buyers more compatible with the Daughters’ commitment to public health” can jump in to buy the facilities.
While the sale was under review, Issai voiced concern about bankruptcy is the deal was delayed or denied.
The Daughters of Charity’s cash flow has improved since then, according to Issai, following the payment of approximately $70 million from state and federal sources for the hospital system’s provider fee. Despite the cash flow injection, hospital officials are evaluating the services they offer “through the lens of financial performance,” the CEO said.
But until a buyer is secured, bankruptcy remains an option on the table, Issai said.
“Prime had an excellent proposal and for a variety of reasons it didn’t work out but we’re hoping to find just as credible of a buyer.”
-Robert Issai, CEO, Daughters of Charity Health System
