Prime Healthcare has completed the purchase of a Los Angeles-area hospital from bankrupt Verity Health after successfully dodging some of the conditions sought by the state's top watchdog.
Parties wrangled over fate of St. Francis Medical Center, a 384-bed hospital in Lynwood, Calif., for months before Judge Ernest Robles gave final approval this week. California's attorney general tried to impose higher charity-care obligations and other requirements, but Robles ultimately approved the sale "free and clear" of those conditions, noting in his order that "time is of the essence."
Prime is committing more than $350 million to buy and turn around the struggling facility. St. Francis operates one of the busiest emergency departments and Level II trauma centers in Los Angeles County, treating nearly 64,000 emergency patients and more than 2,000 trauma patients per year.
"Prime Healthcare is honored to continue the legacy of St. Francis Medical Center, an indispensable community partner comprised of committed doctors, nurses and staff dedicated to saving lives and serving all those in need," Dr. Sunny Bhatia, CEO of Prime's Region I, said in a statement.
Attorney General Xavier Becerra approved the sale with a number of conditions, three of which prompted a disagreement: more charity care, more community benefit spending and the continuation of a medical education agreement. The parties ultimately reached a compromise.
Becerra's office wanted Prime to spend $10.2 million on charity care at St. Francis annually for six years, a figure the parties later agreed to revise down to about $9.4 million. Becerra's office wanted Prime to spent $1.6 million per year on community benefits for six years, which Prime ultimately agreed to.
Becerra also wanted to require Prime to maintain the hospital's existing relationship with Harbor-UCLA Medical Center to host post-graduate medical education for physicians. Becerra ultimately agreed to lift that requirement.
Becerra's office argued in court filings that California law requires his office to scrutinize transfers of not-for-profit healthcare facilities to ensure the poor, elderly and disabled can continue to access care. Verity argued in filings that the attorney general's conditions would destroy the sale and potentially close the hospital.
"The opposite is true," Becerra's office said in a filing. "The attorney general approved the sale. If the sale does not go forward, it is solely because Prime is choosing not to go forward with the sale."
Verity's concern was warranted, however. California has a history of buyers backing out of hospital deals and blaming attorney general conditions. Gardens Regional Hospital & Medical Center, only about 13 miles from St. Francis, closed in 2017 after a purchase deal fell through, with the would-be buyer blaming charity care requirements set by then-Attorney General Kamala Harris.
Prime walked away from buying Verity in 2014, when it was called Daughters of Charity. Harris approved the sale, but with more than 300 conditions, including keeping the hospitals open for up to 10 years. Prime later sued both Harris and a pair of unions over the deal. Both cases were dismissed.
Robles approved the asset purchase agreement between Verity and Prime in April. For-profit Prime, which now has 46 hospitals in 14 states, has committed to investing $47 million in capital improvements, and has already begun installing new technology and an Epic electronic health record platform. Prime said it has committed to maintaining all of the hospital's essential care, including trauma.
Prime said "substantially all" of the hospital's employees have been retained, and the company reached initial three-year collective bargaining contracts with the hospital's labor unions, SEIU-United Healthcare Workers West and the United Nurses Associations of California, which represent more than 85% of the facility's employees.
Verity CEO Rich Adcock said in a statement that Prime was the most capable bidder for the hospital and the only one with the "fortitude" to support it in its time of greatest need.
"We have been impressed by the unwavering dedication and talent of the Prime team and we are confident that Prime will preserve and improve upon the St. Francis legacy for future generations of the South Los Angeles community, as it has done for hospitals and communities time and time again across the nation."