Harris OKs Sale of 6 Troubled Hospitals to Cost-Cutting Prime Healthcare—with Conditions

Monday, February 23, 2015

In a gauge of the deteriorating condition of health care nationally, California Attorney General Kamala Harris reluctantly approved the sale of six hospitals by the financially hemorrhaging Daughters of Charity Health System (DCHS) to the controversial and, in some circles, notorious Prime Healthcare Services.

Prime Healthcare immediately registered its objections to the conditions put on the sale by Harris and said it had to think over the deal struck last October. That agreement had far fewer conditions, and key ones expired in five years.

Harris responded to concerns of the Service International Employees Union (SEIU)/United Healthcare Workers West, pleas at public meetings and 14,000 written comments that Prime had a history of eviscerating services for low-income patients while whacking employees’ pay and benefits. The Ontario, California-based chain has 15 hospitals in the state and 32 nationwide.

Key conditions requiring compliance for 10 years, not five, included the operation of St. Francis Medical Center, Saint Louise Regional Hospital, O’Connor Hospital and Seton Medical Center as acute care hospitals that offer emergency services, and Seton Coastside as a skilled nursing facility with emergency services.  

Harris wants Prime to be “certified to participate in Medicare and Medi-Cal programs and have or maintain Medi-Cal managed care contracts” at all six facilities, which also includes St. Vincent Medical Center. St. Vincent and St. Francis are in Los Angeles County and the other four are in the Bay Area.

Prime would also have to invest $150 million in capital improvements over the next three years, assume all pension obligations and guarantee no restrictions on the availability of reproductive health care services.

Prime said in a statement, “The conditions imposed on this sale by the Attorney General are extensive and many are unprecedented, including maintaining four hospitals as acute care hospitals and a fifth as a skilled nursing facility for a minimum of ten years. Prime Healthcare, with DCHS, will need to evaluate the viability and future stability of the DCHS hospitals under these conditions.”

Skeptics abound that the conditions are enough to maintain current levels of healthcare at the six facilities. A government news release from Santa Clara County, where two are located, opined:

“Regardless of the conditions placed upon Prime Healthcare, the County believes that the decision jeopardizes the health of the County’s neediest and most vulnerable residents. . . .  Prime has a history of eliminating vital community services and was found in contempt on 14 of 15 counts yesterday by a Superior Court in San Bernardino for needlessly admitting emergency room patients into Prime’s Chino Valley Medical Center. The conditions imposed are unlikely to protect these vulnerable residents in the long run.”

SEIU-UHW President Dave Regan told the San Jose Mercury News, “If Prime lives up to both the letter and spirit of the conditions placed on this sale, community health care and services for low-income families will be protected, but given our history with Prime, that's a big if.”

In 2007, the Los Angeles Times profiled Dr. Prem Reddy, who was flying around the Southland in his five-seat Eurocopter EC120, busily putting together his healthcare empire. Daniel Costello wrote:

“When Reddy's company, Prime Healthcare Services Inc., takes over a hospital, it typically cancels insurance contracts, allowing the hospital to collect steeply higher reimbursements. It has suspended services—such as chemotherapy treatments, mental health care and birthing centers—that patients need but aren't lucrative.”

The California Nurses Association strongly supported the deal, and more than 120 nurses from the hospitals involved held a rally last week at the Attorney General’s office in Sacramento. The nurses have cited concerns that without Prime, their pension benefits would be endangered and community services would be reduced.

Those concerns are not without merit. Observers of the scene consider the hospitals headed for Chapter 11 bankruptcy if no suitor for them is found.

–Ken Broder


To Learn More:

California Attorney General Kamala Harris Approves Sale of Six Hospitals (by Tracy Seipel, San Jose Mercury News)

Attorney General Approves Daughters of Charity Sale, with Tough Conditions Attached (by Chris Rauber, San Francisco Business Times)

Harris Okays Disputed Hospital Chain Sale (by Samantha Gallegos, Capitol Weekly)

AG Harris Approves Sale of Catholic Hospitals to Prime—with Conditions (by Stuart Pfeifer, Los Angeles Times)

Union Foe Prime Healthcare Wants to Buy Six More California Hospitals (by Ken Broder, AllGov California)

Leave a comment