SAN JOSE — Nine months after the financially strapped Daughters of Charity Health System went on the block, its leaders announced Friday they have approved the sale of its six California hospitals to Prime Healthcare Services.
The sale price was not immediately disclosed.
While the sale would ensure that the hospitals — known for serving the poor — will continue to operate, critics charged that Prime’s checkered history shows it will turn its back on low-income patients and slash workers’ pay and benefits.
“I am gravely concerned,” said Jeff Smith, county executive for Santa Clara County, which had submitted a bid to buy San Jose’s O’Connor Hospital and Gilroy’s Saint Louise Regional Hospital. The chain also includes Seton Hospital in Daly City and Seton Coastside in Moss Beach, as well as two hospitals in Los Angeles.
“These nonprofit, religious hospitals have been dedicated to the provision of care to underserved residents in the community for 150-plus years,” Smith said. “A sale to an aggressive, profit-driven health system signals the abandonment of that mission. Historically, Prime has overcharged for health care services and has minimized its care to Medi-Cal and uninsured patients. If they take this approach in Santa Clara County, the health of the community will be put at risk.”
But Robert Issai, president and CEO of Daughters of Charity, remains confident that the deal — which must still be approved by state and federal agencies, as well as the Vatican — is the best one all around.
“Our priority was to seek the best buyer who could guide our hospitals into a successful future while honoring the obligations to our associates, retirees and other constituents,” Issai said in a statement.
Prime’s bid, he said, “was superior to all others.”
Daughters of Charity had talked to 133 interested parties, and it narrowed the list to four finalists.
The Daughters of Charity board, which on Friday approved the sale, required that the sale include all six hospitals.
The deal has been vehemently opposed by the Service Employees International Union and SEIU-United Healthcare Workers West, which staged an aggressive publicity campaign that included rallies against Prime. They have cited an investigation by the federal government against Prime resulting from allegations of overbilling Medicare by improperly diagnosing patients.
But Dr. Prem Reddy, president and CEO of Prime Healthcare Services, who was on hand to discuss the sale, said those investigations are being wrapped up and he expects they will exonerate the chain.
He also said that the review of the proposed deal by the California Attorney General’s Office will be helped by an agreement his company recently reached with the California Nurses Association to extend their contract for another year in four of the six hospitals where the CNA has members.
CNA officials said their greatest fear had been that a potential buyer would close the hospitals, but that Prime has promised them that will not happen for at least five years.
But SEIU leaders say they will continue fighting against the sale and will launch a media campaign by the end of this weekend.
“Prime’s track record speaks for itself,” said SEIU-UHW president Dave Regan. “They’re not honest, and they lack integrity. Prime is not the best choice to provide health care in these communities.”
The deal specifies that Prime will assume nearly $300 million in pension liabilities for current and retired workers. Reddy said Prime has committed to $150 million in capital improvements over the next three years. And, he said, Prime will maintain charity care policies and fund pastoral care programs and will honor existing union contracts.
