State Attorney General Kamala Harris is about to make a decision that could have a profound impact on the availability of emergency health care in six California communities.
It is a choice between two imperfect options. One would very likely result in the closure of six nonprofit hospitals. The other would be to allow those six hospitals, operated by the Daughters of Charity Health System of Los Altos Hills, to shift into the hands of a for-profit company known for rescuing failing hospitals through aggressive cost-cutting.
The preferred path is clear: the one that assures the hospitals will remain open and continue their mission of serving the poor.
The attorney general must decide by Feb. 20 whether to approve the sale of the Daughters of Charity hospitals to Prime Healthcare Services of Ontario (San Bernardino County). Harris could block the sale of nonprofit hospitals to a for-profit operator if she determined it would not be “in the public interest.”
Four of the Daughters’ hospitals are in Northern California: San Jose’s O’Connor Hospital, St. Louise Regional Hospital in Gilroy, Seton Medical Center in Daly City and Seton Coastside in Moss Beach. The other two are in Southern California.
Daughters of Charity has run into serious financial trouble precisely because its deep commitment to providing a safety net to low-income and indigent patients has been devastating to its bottom line. Robert Issai, the Daughters’ CEO, said the system would go bankrupt “in a matter of weeks” if the deal were to fall through.
“There’s no time for a reset button,” Issai said during an editorial board meeting last week.
Prime, which specializes in taking over financially distressed hospitals, emphasizes that it has never closed one of the 29 it has purchased. It has promised to assume about $350 million in the Daughters’ pension liability, pay off more than $400 million in the nonprofit’s tax-exempt bonds, invest $150 million in upgrades and retain most of the hospitals’ 7,600 jobs.
The California Nurses Association, one of the state’s more aggressive unions, has given its blessing to the sale. It looked at the Daughters of Charity books and determined that its fiscal situation was as dire as claimed. The nurses’ union also wanted to know that the new owner would keep the hospitals open, preserve patient care, protect earned pensions and honor existing labor contracts.
“The only bidder that met all criteria was Prime,” said Don Nielsen of the CNA.
However, the deal also has a very powerful adversary in the 150,000-member SEIU-United Healthcare Workers West, which represents some Prime workers but has been frustrated in its attempt to organize workers at all of the company-owned hospitals. It has mounted a campaign to stop the deal, and has rallied the support of an array of Democratic elected officials who are sympathetic to labor.
“We think they’re just a bad actor,” David Miller, research director for the SEIU affiliate, said of Prime. SEIU contends that Prime’s business model is dependent on slashing important but less-profitable services, such as maternity care, and using questionable admissions and billing practices that have come under federal investigation. The union also warned that a Prime takeover of the Daughters system would unravel the safety net for the affected communities.
Dr. Prem Reddy, Prime’s CEO, countered that “we’ve learned how to turn around a bankrupt hospital” without jeopardizing patient care. It does so by both finding efficiencies, including significant cuts in middle management, and using its scale to negotiate favorable contracts with health plans.
The nurses’ union acknowledges that Prime can be an aggressive counterpart at the bargaining table. But the company adheres to its agreements, the CNA insisted. The union also said the percentage of Medicare and Medicaid patients has not dropped after Prime takeovers of other hospitals.
Reddy accused SEIU of trying to use the leverage of this sale in its “corporate campaign” to force Prime Healthcare into a “neutrality agreement” that would effectively assure that all its workers would be represented by SEIU.
The compelling public interest here is to keep the hospitals open, and to preserve the jobs and pensions of the dedicated workers at Daughters of Charity. The attorney general should approve the sale.
To read the original article on the San Francisco Chronicle, click here.