Daughters of Charity CEO Robert Issai joined Prime CEO Dr. Prem Reddy to announce the deal during a news conference at O'Connor Hospital, San Jose, on Friday.
Prime's not-for-profit charitable arm, the Prime Healthcare Foundation, will be an owner in the hospital group. The Ontario, Calif.-based chain pledged to spend at least $150 million on capital improvements at the hospitals over the next three years, keep the hospitals open in each of their communities, maintain current charity-care policies and assume existing union contracts. Prime also said it has respected the “historical and cultural identity” of the four Catholic hospitals it already owns.
Daughters of Charity said it had received 133 expressions of interest and narrowed the final field to four organizations. All but one offered to purchase the entire system. Prime's offer was superior to all others, the system said.
The SEIU, which is involved in a labor dispute with Prime, said it planned to air television ads in Sacramento and San Francisco urging Harris to block the takeover. The union points to ongoing civil and criminal investigations into whether Prime overbilled Medicare. It also accused Prime of “ignoring community needs, eliminating health services and laying off caregivers in its quest to maximize profits.”
Prime has denied the allegations and said the charges amount to little more than a “smear campaign.” The company filed suit against the SEIU chapter in August under the Racketeer Influenced and Corrupt Organizations Act.
There is some precedent to encourage the critics counting on Harris to block the deal. In 2011, she concluded that the sale of Victor Valley Community Hospital, Victorville, to Prime would not be in the public interest.
Prime more than any other chain has made a business model out of turning around failing hospitals. But it has come under scrutiny for its tactics.
Daughters of Charity earlier this year saw its credit rating from Standard & Poor's downgraded six notches to B-. Its 2013 annual report books a net loss of $74.5 million on more than $1.3 billion in revenue. The loss follows a $59.5 million loss on revenue on nearly $1.3 billion in revenue in fiscal 2012.
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