A new deal is in the works for the possible sale of St. Vincent Medical Center and five other hospitals in California under a proposal announced on July 17 by the Daughters of Charity Health System (DCHS), which owns the hospitals and an affiliated medical foundation.

St. Vincent Medical Center and five other hospitals in California may be sold according to proposal announced July 17. (photo by Luis Rivas)

The announcement comes after a decision by Prime Healthcare, a previous potential buyer, to not proceed with a deal in March. California Attorney General Kamala Harris had approved the deal, but had imposed conditions, such as keeping the hospitals open for 10 years, and maintaining the same care as provided by the DCHS.

Harris will again have to approve any deal with the potential buyer, BlueMountain Capital Management, an international investment firm. It is unclear what will be different this time in terms of conditions required by Harris. Kristin Ford, a spokeswoman for the California Attorney General’s office, confirmed in a statement that a review could take more than three months.

“Our office will review this transaction, as required by law, to ensure continuous access to care for the communities currently served by these hospitals,” the statement read. “Each transaction is independently evaluated on its own merits and so there’s a new 105 day process for this transaction (with public comment period and hearings, as well as a health impact report).”

Representatives of BlueMountain and DCHS also declined to specifically comment on the situation, and deferred to statements and a press release. According to the release, BlueMountain was selected to “recapitalize its operations,” and is “contributing over $250 million of capital and is sponsoring Integrity Healthcare to manage and operate the six California hospitals and medical foundation, thus assuring the communities served by the hospitals a continuance of care.”

If the agreement is approved, the DCHS board will transfer control of the hospitals to an independent board of directors, which will oversee hospital operations. Integrity Healthcare, an entity owned by BlueMountain and formed to oversee the hospital group, will manage the hospitals. BlueMountain will provide new investment in the operations and facilities, according to the release. The hospitals would remain as nonprofits. The deal includes an option for BlueMountain to purchase the health system after three years.

In addition to St. Vincent Medical Center, which is located at 3rd and Alvarado streets, the deal would include St. Francis Medical Center in Lynwood, O’Connor Hospital in San Jose, Saint Louise Regional Hospital in Gilroy, Seton Medical Center in Daly City, Seton Coastside in Moss Beach, and the statewide DCHS Medical Foundation. According to the release, the deal would give the hospitals access to $250 million in new capital to enable DCHS to repay outstanding obligations, provide operational liquidity and invest in physical plant improvements and operations. All pension and retirement plans that are church plans — which are retirement plans offered by religious institutions and affiliated organizations such as DCHS that are not federally guaranteed under the Employee Retirement Income Security Act of 1974 (ERISA) — would become subject to ERISA’s standards and requirements. The deal would maintain assumption of current collective bargaining agreements with the hospital unions and philanthropic foundations.

The Service Employees International Union-United Healthcare Workers West (SEIU-UHW) had opposed the sale of the hospitals to Prime Healthcare, and instead supported a bid by another investment firm, Blue Wolf Capital. The union issued a statement attributed to SEIU-UHW president Dave Regan stating that union officials will be monitoring the situation.

“We had a much stronger grasp of the Blue Wolf bid and we’re confident it protected critical health services for local communities, the essence of Daughters of Charity’s mission for more than 100 years,” the statement read. “We are anxious to see the details of the BlueMountain proposal so we can understand what commitments they make to ensure the community receives the best possible healthcare.”

St. Vincent Medical Center is the oldest hospital in Los Angeles, according to DCHS, dating back to 1858 when it opened as the Los Angeles Infirmary. DCHS’s California branch was formed in 2002, and is part of the Daughters of Charity National Health System.

“In evaluating candidates to

manage the hospitals, our priority was to seek the strongest bidder who could provide the greatest long-term financial stability while honoring the obligations to our associates, physicians, retirees and other constituents,” DCHS president and CEO Robert Issai said in a statement. “The transaction represents an extremely attractive opportunity for DCHS, allowing it to continue its operations and mission as a non-profit system with the support and backing of strong and well-qualified partner organizations. We are ­extremely excited by [the] announcement.”

BlueMountain, a private investment firm managing $21 billion in assets, also provided a statement.

“BlueMountain is honored to have been selected by the DCHS board. We are excited to provide substantial expertise and financial capital to DCHS, positioning the

hospitals to meet the evolving health care needs of the region. We look forward to working with the DCHS family of physicians, employees and all stakeholders to strengthen the hospitals for the betterment of these communities.”