Daughters of Charity Health System faces a precarious financial position while waiting for California Attorney General Kamala Harris to decide whether to allow its sale to private-equity firm Blue Mountain Capital. The decision has been delayed until Dec. 3, the attorney general's office said last week.
The Los Altos Hills, Calif.-based system reported another net loss in the first quarter of fiscal 2016. The six-hospital group believes a sale to Blue Mountain is its best option.
The pending deal comes after Harris foiled an acquisition by Prime Healthcare Services by imposing strict conditions on the transaction. Prime, an Ontario, Calif.-based chain, ultimately walked away.
In its earnings report for the period ended Sept. 30, Daughters blamed its financial challenges on an adverse payer mix, low payment increases and patient volume declines. Patient discharges dipped 1.3% year over year, or 4% when adjusted for outpatient activity. Emergency department volume was down 1.8%, while outpatient surgeries decreased 12.2% and deliveries dropped 19.8%.
Blue Mountain Capitol has offered $100 million in exchange for the lease of Daughters' information technology assets and the option to buy the system within three to 15 years after the transaction is approved. In addition, Daughters will receive a line of credit between $150 million and $160 million, which will be used in part to pay down existing debt.
Daughters said that if the transaction doesn't close, its board will consider seeking alternative deals, closing facilities and filing for bankruptcy.
