Labor unions this week protested a bid from a private, for-profit health care chain to purchase a struggling not-for-profit hospital system serving many low-income patients. They called on state lawmakers to halt an acquisition they believe will slash worker benefits and leave thousands of low-income patients without a safety net.
Prime Healthcare Services is looking to buy the six-hospital Daughters of Charity Health System, according to a report in the San Jose Mercury News. Daughters of Charity — with four hospitals in the Bay Area and two in Los Angeles County — has been struggling financially for years and the company announced in January its intent to sell. Representatives from SEIU-United Healthcare Workers West and the California Nurses Association have voiced strong opposition to Prime as a potential bidder.
Prime, headquartered in San Bernardino County, wouldn’t confirm a bid with Daughters of Charity, but spokesperson Edward Barrera said the company is always looking for opportunities both in and outside of California. Formed in 2001, Prime operates 27 acute care hospitals, many of which were either in financial distress or bankruptcy before being acquired. Since 2005, Prime has invested approximately $788 million in facility renovation, equipment purchase and general capital improvements in its facilities, according to company literature.
“It’s important to note that since Prime Healthcare was founded in 2001, it has never closed a hospital and it has never put one in bankruptcy,” Barrerra said. “It has no intention of doing that for any future acquisition. In fact, just the opposite is true.”
Prime is the subject of two federal investigations first reported by California Watch and subsequently confirmed by Prime last year. One investigation deals with allegations of overbilling Medicare by admitting an abnormally high number of patients with expensive, difficult-to-treat diseases. The other deals with allegations of violating patient confidentiality laws. Barrera said the investigations are ongoing.
Unions are concerned that Prime’s transformation of the Daughters of Charity system into a for-profit enterprise would limit emergency services, overbill patients, reduce staffing or cut back on employees’ retirement packages as means of saving money.
Union members attending a California Labor Federation convention adopted a resolution asking state lawmakers to halt any sales of hospitals to Prime until the federal investigations are completed.
SEIU-UHW and CNA have been staging demonstrations at some of the hospitals for the past two weeks. 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 two hospitals in Los Angeles County — St. Vincent Medical Center and St. Francis Medical Center.
Of the more than 782,000 patients served in the Daughters of Charity system, 46% are Medicare patients, 31 % are Medi-Cal, and 21% are covered by private insurance, according to company officials. About 2% are considered charity cases, they said.
Elizabeth Nikels, vice president of marketing and communications for the Daughters of Charity, said the organization hopes to complete a sale by the end of the year, but declined to name any potential bidders.
“After absorbing millions of dollars a year providing care to those in need, soaring expenses, a drop in patient volumes, a steady increase in labor costs and declining Medi-Cal reimbursements have combined to put our network of hospitals in a difficult financial position,” Nikels said in an email.
About 7,500 employees at the Daughters of Charity system — roughly 70% of all employees — are union members, Nikels said. She said she hopes any new operator would preserve existing pensions, wages and benefits.
Dave Regan, president of SEIU-UHW, which represents nearly 2,700 Daughters of Charity employees, said Prime’s business practices are significantly different than those of the Daughters of Charity. “They have a diametrically different business model. It will be a large setback for safety net systems,” Regan said.
SEIU is negotiating collective bargaining agreements with Prime at three other hospitals in California.
“We have a long history with Prime, and they have a business model that is the polar opposite of a charity-model mission system,” Regan said.
Representatives from the California Nurses Association and National Nurses United issued statements expressing concern that the nature of the not-for-profit hospitals could change under new ownership.
During an event Monday at Seton Medical Center in Daly City, CNA officials implored local authorities and state Attorney General Kamala Harris to stop bids from companies they consider to be a threat to the system’s mission.
“The California Nurses Association has consistently said that any potential buyer of Seton Medical Center must make a pledge to the broader community that counts on this hospital to keep it open as a full service acute care hospital, maintain all existing patient care services, and respect the staff at Seton, including preserving current nursing and other employee patient care and economic standards,” said Charles Idelson, communications director for CNA/NNU, in an email. “The community deserves no less.”
Barrera noted that Prime has a number of working relationships with unions including Communications Workers of America and International Union of Operating Engineers, and said that Prime is always willing to work collaboratively to support what is best for the entire health care community.
“It’s a result of more than a decade of experience acquiring hospitals, analyzing their financial and operational weaknesses and modifying a successful business model, transforming facilities into thriving community assets providing quality health care and employment,” Barrera said.KFF Health News is a national newsroom that produces in-depth journalism about health issues and is one of the core operating programs at KFF—an independent source of health policy research, polling, and journalism. Learn more about KFF.
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