DCHS sale back to attorney general for review

A second bid for the failing Daughters of Charity Healthcare System, which includes Gilroy’s Saint Louise Regional Hospital and Morgan Hill’s De Paul Medical Center, will once again be placed under the microscope of the state attorney general’s office in the coming months.
Announced late last week by DCHS officials, the hospital system was sold to the private investment group Blue Mountain Capital Management—which is sponsoring Integrity Healthcare to manage and operate the system’s six California hospitals.
However, just like in the case of Prime Healthcare, which backed out of its $843 million acquisition after reviewing Attorney General Kamala Harris’ stringent conditions in March, Blue Mountain Capital Management must wait for the state’s approval and agree to any attached requirements for future operations.
“Our office will review this transaction, as required by law, to ensure continuous access to care for the communities currently served by these hospitals,” said Kristin Ford, Press Secretary for the California Department of Justice. “Each transaction is independently evaluated on its own merits and so there’s a new 105 day process for this transaction with public comment period and hearings.”
The first of such public hearings has not yet been scheduled.
DCHS President/CEO Robert Issai, who was confident when Prime Healthcare submitted its bid in October 2014, said the new 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.”
DCHS includes SLRH, the De Paul medical office complex and urgent care facility, O’Connor Hospital in San Jose and four others.
According to DCHS officials, Blue Mountain plans to contribute more than $250 million of capital investment into the hospital system; and Integrity Healthcare, which was formed to oversee the hospital group, will provide key management services and daily operational support.
Santa Clara County Supervisor Mike Wasserman said he wants to learn more specifics about the purchase by Blue Mountain and then hear what the attorney general’s office determines in its review.
“At the end of the day, I’m hoping services continue for South County residents,” Wasserman said. “That’s what the county was trying to do.”
Wasserman explained that the county again put in a bid to purchase SLRH, as well as O’Connor Hospital, when the bidding process was reopened after Prime’s rejection of Harris’ demands. But “we wanted to buy the two and they chose somebody for the six. That’s Daughters of Charity’s choice,” Wasserman said.
In February, Harris approved the DCHS sale to Prime Healthcare but with conditions that eventually derailed the sale that was announced in October. Prime officials did not feel the hospital chain could become profitable with all of the attached conditions, which included operating four of the DCHS facilities (SLRH among them) as acute care hospitals with emergency services and charity care for the next 10 years, as well as continuing the Medi-Cal and Medicare programs for a decade.
The attorney general is given an initial 60-day review window on transactions and, in cases of multi-facility sales, Harris can opt for an additional 45-day extension. The Charitable Trusts Division, which focuses on nonprofits and charities, including the purchase or transfer of ownership, conducts the review process. In the last four years, the division has conducted 20 to 30 such reviews.
“I’m looking forward to hearing all the details and specifics, and how that relates to SLRH and services to South County residents,” Wasserman said.