California AG Approves Transfer of 6 Nonprofit Daughters of Charity Hospitals - NBC Bay Area
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California AG Approves Transfer of 6 Nonprofit Daughters of Charity Hospitals

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    California AG Approves Transfer of 6 Nonprofit Daughters of Charity Hospitals
    NBC Bay Area
    File image of Saint Louise Regional Hospital in Gilroy.

    California's attorney general has conditionally approved the transfer of a financially troubled chain of nonprofit hospitals to a for-profit entity.

    The terms outlined by Attorney General Kamala Harris on Thursday require the six hospitals of the Daughters of Charity Health System operate as nonprofit health centers for at least three years.

    After that, BlueMountain Capital Management can exercise an option to purchase the hospitals and turn them into for-profit centers. The agreement calls for BlueMountain to pay $100 million for the right to buy.

    The six hospitals, all in California, generally serve low-income patients in the San Francisco Bay and Los Angeles areas. The Bay Area hospitals are O'Connor Hospital in San Jose, Saint Louise Regional Hospital in Gilroy and Seton Medical Center in Daly City.

    There has been much angst that new owners might close the hospitals or fail to continue the system's charitable work.

    Earlier this year, Harris approved the sale of the hospitals to Prime Healthcare Services Inc. But Prime backed out, saying conditions imposed by Harris were too onerous.

    This new proposal calls for an overall 15-year agreement, with requirements. For example, the hospitals must continue to provide charitable and essential care. And the hospitals must provide the same types and levels of services to Medi-Cal patients for at least 10 years.

    A major health care consumer organization applauded the proposed terms.

    BlueMountain spokesman Douglas Hesney said it is reviewing the terms. Rick Rice, a spokesman for Daughters of Charity, said, "We are optimistic the transaction will close shortly."

    By law, the attorney general's office must approve the purchase of nonprofit hospitals by for-profit companies.

    The other hospitals are Seton Coastside in Moss Beach, Saint Francis Medical Center in Lynwood and Saint Vincent Medical Center in Los Angeles.

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