Pressure Ratchets Up on Pending Sale of Six Safety-Net Hospitals to Prime

Public pressure increased on the pending sale of six safety-net hospitals run by not-for-profit Daughters of Charity Health System to for-profit Prime Healthcare when a number of elected officials in California joined the appeal to reject the sale.

The sale is pending approval by the state attorney general’s office, which has until Feb. 11 to approve or void the deal.

California’s Service Employees International Union has been leading the charge against the sale to Prime, and said the recent addition of 10 California legislators brings the total to 37 legislators who oppose the sale. Prime’s bid to purchase the hospitals was accepted last month by Daughters of Charity officials.

The six facilities for sale are:

  • O’Connor Hospital in San Jose;
  • Saint Louise Regional Hospital in Gilroy;
  • Seton Hospital in Daly City;
  • Seton Coastside in Moss Beach; and
  • St. Vincent Medical Center and St. Francis Medical Center in Los Angeles County.

For Sen. Richard Pan (D-Sacramento), a pediatrician, the health care and access issues involved in the sale are troubling.

“In many of these areas, these are critical facilities for people there — so if they’re eliminating services, that would be denying service to that area,” Pan said.

Prime Healthcare was being investigated by the federal Department of Justice and the state Department of Public Health for possible Medicare “upcoding” fraud for alleged high reporting of rates of septicemia and kwashiorkor, a form of severe malnutrition usually found in poor countries in the midst of a famine but allegedly reported in relatively high numbers at Prime facilities in the northern counties of California.

“There are some significant concerns,” Pan said. “The rates of kwashiorkor, that was quite astonishing.”

According to Edward Barrera, director of corporate communications for Prime Healthcare, investigations over three years still haven’t resulted in payment of any fines or penalties by Prime.

Barrera said Prime’s 29 hospitals in nine states — including 15 hospitals in California — are all acute care facilities, many of them safety-net hospitals.

“Five [of those California] hospitals qualify as Medi-Cal disproportionate share hospitals, meaning they provide care to disproportionately higher volumes of Medi-Cal patients than other facilities,” Barrera said. “We care for more senior citizens than any other California health system, with over 55% of our patients age 65 or older.”

He said Prime intends to improve the hospitals.

“Prime is committed to spending at least $150 million in capital improvements at the [six] hospitals over the next three years,” Barrera said.

That includes maintaining charity care policies, funding pastoral care and assuming existing union contracts and pensions, he said.

This level of scrutiny is not new, Barrera said. Prime Healthcare underwent similar processes in other states. “In New Jersey, for example, Prime responded with thousands of records to requests by the state Department of Health and state attorney general,” Barrera said. “They approved that acquisition. … In eight states, no application has been rejected after being reviewed.”

Pan said he’s confident the California attorney general will do the right thing, to make sure access and quality of care remain intact at the six hospitals.

“The issue is, there have been concerns about some of the past behavior of Prime Healthcare,” Pan said. “The attorney general has to ensure there are safeguards in place, and that they can and will be enforced.”

Cutting services is not an option, he said.

“You have a not-for-profit going to for-profit. You have to make sure the services stay the same,” Pan said. “If you have a facility that doesn’t provide the same services, that’s like not having a facility at all.”

Barrera said he couldn’t agree more.

“Prime Healthcare is looking forward to a fair review by the attorney general,” Barrera said. “We know if that is done, Prime Healthcare will be approved and can save these hospitals, jobs and provide the healthcare these residents and communities need.”

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