California Attorney General Kamala Harris has approved a plan for new management and the potential sale of six hospitals in the Daughters of Charity Health System (DCHS) – including St. Vincent Medical Center.

St. Vincent Medical Center would remain open under terms of an approval for sale and operations granted by California Attorney General Kamala Harris. (photo by Edwin Folven)

Harris’s approval imposes a condition that the hospitals remain open and continue to serve their surrounding communities. The terms are currently being considered by the prospective new operator and buyer, New York-based BlueMountain Capital Management.

A previous potential buyer, Prime Healthcare, decided not to proceed when similar conditions were imposed by Harris. If BlueMountain agrees to the terms, it will be required to manage the DCHS’s hospitals as nonprofit public benefit medical centers for three years, after which BlueMountain Capital Management can exercise an option to purchase the hospitals. Additional conditions require Blue Mountain to keep the hospitals open if the purchase is made.

Harris said it would be the largest and most complex nonprofit hospital transaction in state history. In addition to St. Vincent Medical Center, the transaction 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 and Seton Coastside hospital in Moss Beach.

“This approval includes strong conditions that will maintain the charitable purpose of the Daughters of Charity Health System, ensuring that low-income Californians will continue to have access to critical health care services including emergency, trauma, surgical and reproductive health services,” Harris said.

The attorney general’s approval also includes requirements that BlueMountain keep up the standards of care at the hospitals. The timeline for the maintaining services varies at the different hospitals in the DCHS chain. At St. Vincent, BlueMountain would be required to ensure the medical center remains open as a general acute care hospital for five years. Harris’ approval requires that St. Vincent continue providing 24-hour emergency medical services. All of the DCHS hospitals will be required to offer reproductive health care services and BlueMountain must maintain jobs for approximately 7,000 current employees in the system. BlueMountain will be required to submit an annual report to the California Office of the Attorney General to ensure compliance. The requirements were stipulated in the approval because the hospitals are generally the only source of healthcare for their surrounding communities.

BlueMountain, an international investment firm, has proposed infusing more than $250 million of capital into the DCHS system, according to a press release. The deal would enable the system to pay debts and remain operational. Approximately $100 million of the money would guarantee the option for BlueMountain to purchase the hospitals after three years. BlueMountain has proposed that a separate entity, Integrity Healthcare, would manage and operate the hospitals.

Rick Rice, a spokesman for DCHS, said in a statement that the health care provider is now awaiting BlueMountain Capital’s review and decision about whether to comply with the attorney generals’ terms.

“As expected, the attorney general’s approval is contingent upon BlueMountain’s acceptance of several complex conditions. BlueMountain is now in the process of reviewing these conditions and will make a decision as soon as possible,” Rice said. “We will stay in close contact with them. We continue to believe this transaction will close in the very near future.”

Representatives of BlueMoun-tain declined to comment on a timeline and issued a statement about the attorney general’s approval.

“BlueMountain has received the attorney general’s decision and is presently reviewing its terms,” the statement read. “We look forward to discussing its implications with all key stakeholders.”

Phuong Tran, labor representative for the California Nurses Association, said the deal sounds promising. She added that the association’s support is contingent upon the new manager and potential buyer following the terms and keeping the hospitals open. The association represents approximately 400 nurses at St. Vincent Medical Center.

“Our position has been regardless of who the owner is, the doors must remain open,” Tran added. “We want to make sure these facilities are there for the people who need them in the surrounding community.”