GILROY—Prime Healthcare has abandoned an $843 million deal for Saint Louise Regional Hospital and four others operated by the Daughters of Charity Health System.
Citing “onerous and unprecedented conditions” imposed on the purchase by California Attorney General Kamala Harris, Prime founder Dr. Prem Reddy said Tuesday the company had no choice but to withdraw.
Gilroy Mayor Don Gage, who had endorsed the sale to Prime along with the entire city council, lashed out at Harris Tuesday, accusing her of playing politics at the expense of health care for South County residents.
“It angers me she made the decision for political reasons because she wants to run for higher office—and not take care of the folks who are down here. They’re playing with our future,” he said.
Reddy said, “It would be impossible for Prime Healthcare, or any buyer, to make the changes needed to operate and save these hospitals,” he said, noting Harris, who announced plans to run for Barbara Boxer’s U.S. Senate seat, imposed 300 conditions on continued operation under new ownership.
“It is with a heavy heart that we came to this decision, as we had sincerely hoped for DCHS to become a part of the Prime Healthcare family and did everything possible to try to make that happen,” Reddy said. “We have great respect for the mission of the Daughters of Charity and wish the best for the communities we had hoped to serve.”
DCHS’s chief executive Robert Issai Tuesday voiced disappointment and surprise with the Prime decision not to buy DCHS, which has been loosing $150 million a year and now faces possible bankruptcy.
“I didn’t think those conditions were too much for Prime,” he said. “I think they walked away from a very good transaction.”
The Daughters of Charity will work to find another buyer for the whole system as soon as possible, Issai said.
“We are marching forward and we’re committed to our hospitals. The people deserve the best and we’re going to make sure we continue those services,” he said.
Blue Wolf Capital, the New York-based private equity firm that submitted a bid for the DCHS facilities, said Wednesday the firm remains “strongly interested” in playing a role in the deal. So is the County of Santa Clara, which submitted a failed bid to buy Saint Louise and O’Connor Hospital in San Jose.
District 1 Supervisor Mike Wasserman with the Santa Clara County Board of Supervisors said Wednesday the county remains interested in buying the two facilities.
For her part, the attorney general had nothing good to say about Prime and appeared to side with its detractors.
By walking away, the for-profit company confirmed concerns expressed during the review that “continuity of vital healthcare services is not a priority” to Prime, she said in a statement Tuesday.
As part of her conditional approval Feb. 20, Harris stipulated that Saint Louise and three other acute care hospitals remain in operation for 10 years and expand services.
After she announced the sale’s mandated, non-negotiable conditions, including offering millions of dollars in charity care to the needy, members of Saint Louise Regional Hospital’s Foundation Board said they would be shocked if Prime, touted by Reddy as the savior of failing Roman Catholic hospitals, went ahead with the purchase.
Gage Tuesday said he was not surprised by Prime’s decision.
“I didn’t think it would pencil out,” Gage said, referring to Harris’ stipulation the hospitals give away millions in free healthcare. “They are a for-profit hospital.”
Gage, a former Santa Clara County Supervisor, said the county might again offer to buy Saint Louise and O’Connor. “Maybe they’d get a better deal if the Daughters filed for bankruptcy,” he said.
“What happens next is up to the Daughters of Charity,” Wasserman added. “The county is committed to ensuring access to vital healthcare services.”
The Los Gatos resident steadfastly supported the county’s bid and refused to support or oppose Prime.
The proposed deal was the largest ever reviewed by the California Attorney General’s Office and Harris’ decision came after five months of review and fierce debate over the facilities’ future.
Prime was opposed by the Service Employees International Union—United Healthcare Workers West and a slew of California lawmakers, overwhelmingly Democrats.
The SEIU-UHW’s leader urged DCHS management to move quickly in selecting a new buyer to continue the Roman Catholic order’s mission to serve the sick and poor.
