Daughters, Prime Mislead about Bankruptcy Threat of System; Strong Alternative Buyer Exists

[Dec. 17, 2014] OAKLAND, Calif. – Healthcare workers emphasized today that the bankruptcy or closure of any of the six hospitals owned by Daughters of Charity Health System is unnecessary because there is a stronger alternative buyer than the controversial Prime Healthcare.

“As flawed as Prime Healthcare is, it would not be responsible for us to oppose the transaction unless there was an immediate, viable alternative available to continue the operation of DCHS in a manner that better serves the public interest,” said Dave Regan, president of SEIU-United Healthcare Workers West, in a letter sent to California legislators who have publicly opposed the controversial transaction. “Fortunately, such an alternative exists in the form of Blue Wolf Capital.”

In fact, the Prime Healthcare bid contains a bankruptcy contingency, whereas the Blue Wolf bid disavows bankruptcy as an option.

In his letter, Regan describes how Daughters of Charity passed over a stronger bid from Blue Wolf Capital, which dedicates $300 million to capital improvements – twice as much as Prime Healthcare, preserves workers’ pensions in a way that saves the system money without reducing benefits, and doesn’t rely on junk bonds for financing.

In addition, an $11.5 million windfall for executives at Daughters of Charity is understood to be a driving force behind the hospital system choosing Prime Healthcare to buy its six facilities.

“It is outrageous that an individual who leads a safety-net, mission-driven hospital system should be paid the kind of money Mr. Issai has been paid to fail miserably, and then demand millions more as he exits the stage,” said Regan, referring to Daughters CEO Robert Issai, whose last reported compensation is more than $3 million despite the system losing $10 million each month over the past year. “It ought to be illegal for such an individual to enrich himself and his favored bidder through the mismanagement and usurpation of vital community assets.”

According to the purchase agreement between Daughters of Charity and Prime, Issai stands to reap a large portion of his last reported compensation of $3 million, and the other top executives at Daughters would receive the remainder of the $11.5 million at the time of closing.

California Attorney General Kamala Harris must approve or reject the deal before Feb. 12, 2015. Opponents of the sale include State Controller John Chiang, 18 members of the California Congressional delegation, 54 current or former state legislators, San Francisco Mayor Ed Lee, county and city elected officials, doctors, nurses, community organizations, and union members representing two million workers.

Daughters of Charity announced Oct. 10 that it chose Prime Healthcare as the lead bidder for the six-hospital, safety-net system and would negotiate with Prime exclusively. Concern lies with Prime Healthcare’s dismal record and business practices:

  • Prime admitted that it is under federal investigation for allegedly overbilling the federal government;
  • Prime paid $370,000 in federal and state fines after deliberately violating a patient’s privacy by sharing her records with journalists and 800 employees;
  • A group of doctors in San Bernardino County sued Prime Healthcare last year when the company denied them access to their own patients;
  • The company’s Desert Valley Hospital was sanctioned by the California Department of Public Health for improper care resulting in a patient’s death; and
  • Prime’s Garden Grove hospital was cited by the State of California after a patient was administered a lethal dose of a powerful sedative.

Daughters of Charity owns Seton Medical Center, Daly City; Seton Coastside, Moss Beach; O’Connor Hospital, San Jose; Saint Louise Regional Hospital, Gilroy; St. Vincent Medical Center, Los Angeles; and St. Francis Medical Center, Lynwood.


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