Daughters of Charity Health System, a beleaguered hospital group at the center of a controversial takeover battle, is running short on cash as its operating performance continues to deteriorate.
The Los Altos, Calif.-based system has an $843 million takeover offer on the table from Prime Healthcare Services, a privately-held chain based in Ontario, Calif. However, the deal is facing immense opposition from the influential Service Employees International Union (SEIU)-United Healthcare Workers West and a number of elected officials.
California Attorney General Kamala Harris recently pushed back the deadline for completing her review of the deal to Feb. 20.
Daughters has 12.4 days of cash on hand, the six-hospital system reported in a financial statement for the six-month period ended Dec. 31—a decrease from the 36.2 days of cash it reported for the same period in 2013.
Its unrestricted cash and securities have declined 62.2% year over year and now stand at just $50.8 million. The system started moving its investments into cash and cash equivalents in January 2014, and as of September had emptied the fund where it had held the majority of its investments.
Discharges across the system decreased less than 1% year over year, and increased 1.7% when adjusted for outpatient activity. But inpatient surgeries declined 5.9% while outpatient surgeries increased just 1.7%.Visits to the emergency department increased 8.4%.
Daughters also said it saw lower payment-rate increases from insurers than it typically sees and faced a more adverse payer mix.
Those factors contributed to its $35.2 million operating loss on $749.9 million in revenue for the six-month period compared with a $57.1 million operating surplus on $774.5 million in revenue in the prior-year period.
The system warned in November that there is doubt that it will be able to continue operating without going bankrupt in the foreseeable future.
The Prime deal includes $394 million in cash and $449 million for the assumption of Daughters' debt. But the chain has come under controversy for issues such as its billing practices and interactions with unions—even as the company defends its record and points to a number of quality awards its hospitals have collected over the years.
Prime earlier this week reached a deal with Kaiser Foundation Health Plan to end a seven-year legal dispute that centered on breach of contract and unfair competition, among other charges.
Follow Beth Kutscher on Twitter: @MHbkutscher
