LOS ANGELES (CNS) — Prime Healthcare Services, a California-based hospital management company, backed out of a proposed $843 million deal to buy six not-for-profit Daughters of Charity Health System hospitals in the state because it said it found the terms of the sale “burdensome and restrictive.”

Two of the hospitals are in the Archdiocese of Los Angeles: St. Vincent Medical Center in Los Angeles and St. Francis Medical Center in Lynwood.

In a Feb. 20 ruling, state Attorney General Kamala Harris had approved the sale while imposing specific conditions, primarily that Prime Healthcare operate five of the hospitals for at least 10 years.

Additional provisions included maintaining current insurance contracts — including participation in Medi-Cal, the state’s Medicaid program, and Medicare; investing at least $150 million in capital improvements; and honoring all pension obligations for the system’s 17,000 current and retired employees.

California state law requires the attorney general’s office to provide final approval over the sale of not-for-profit hospitals to for-profit companies.

Prime Healthcare, which wanted to make only a five-year commitment, abandoned the acquisition deal March 10 because it deemed the sale stipulations “so burdensome and restrictive that it would be impossible for Prime Healthcare — or any buyer — to make the changes needed to operate and save these hospitals,” Dr. Prem Reddy, founder and chairman of Prime Healthcare, said in a statement.

The Daughters of Charity Health System, which specializes in providing health care to the poor, has been losing $10 million a month. In 2013, its board decided that selling the hospitals was the best way to avoid filing for bankruptcy.

Robert Issai, president and CEO of the Catholic health care system, acknowledged that the Daughters of Charity had “hoped for a different outcome with Prime,” but noted that the hospital chain remains “committed to finding the best solution for our patients, communities we serve, physicians, employees, retirees and creditors.”

“In true Daughters of Charity spirit, we remain adaptable and committed to our high standard of criteria that will lead us to a new buyer that will carry on our rich legacy,” said Issai in a statement, adding that they are currently considering various options “while we continue to serve our patients and communities.”

“We already have a high level of interest from potential buyers,” he stated. “Our financial situation has improved due to income from the hospital provider fee and that makes DCHS more attractive.”

The other four Daughters of Charity hospitals involved in the sale negotiations include O’Connor Hospital in San Jose, St. Louise Regional Hospital in Gilroy, Seton Medical Center in Daly City and Seton Coastside in Moss Beach.

Prime Healthcare, founded in 2001, operates 29 acute care hospitals in nine states and has more than 30,000 employees.


Torres is a staff writer at The Tidings, newspaper of the Archdiocese of Los Angeles.