Daugh­ters strug­gles as AG weighs takeover de­ci­sion

Modern Healthcare - - REGIONAL NEWS - —Beth Kutscher

Daugh­ters of Char­ity Health Sys­tem faces a pre­car­i­ous fi­nan­cial po­si­tion while wait­ing for Cal­i­for­nia At­tor­ney Gen­eral Ka­mala Har­ris to de­cide whether to al­low its sale to pri­vate-eq­uity firm Blue Moun­tain Cap­i­tal. The de­ci­sion has been de­layed un­til Dec. 3, the at­tor­ney gen­eral’s of­fice said last week.

The Los Al­tos Hills, Calif.-based sys­tem re­ported an­other net loss in the first quar­ter of fis­cal 2016. The six-hos­pi­tal group be­lieves a sale to Blue Moun­tain is its best op­tion.

The pend­ing deal comes af­ter Har­ris foiled an ac­qui­si­tion by Prime Health­care Ser­vices by im­pos­ing strict con­di­tions on the trans­ac­tion. Prime, an On­tario, Calif.-based chain, ul­ti­mately walked away.

In its earn­ings re­port for the pe­riod ended Sept. 30, Daugh­ters blamed its fi­nan­cial chal­lenges on an ad­verse payer mix, low pay­ment in­creases and pa­tient vol­ume de­clines. Pa­tient dis­charges dipped 1.3% year over year, or 4% when ad­justed for out­pa­tient ac­tiv­ity. Emer­gency depart­ment vol­ume was down 1.8%, while out­pa­tient surg­eries de­creased 12.2% and de­liv­er­ies dropped 19.8%.

Blue Moun­tain Capi­tol has of­fered $100 mil­lion in ex­change for the lease of Daugh­ters’ in­for­ma­tion tech­nol­ogy as­sets and the op­tion to buy the sys­tem within three to 15 years af­ter the trans­ac­tion is ap­proved. In ad­di­tion, Daugh­ters will re­ceive a line of credit be­tween $150 mil­lion and $160 mil­lion, which will be used in part to pay down ex­ist­ing debt.

Daugh­ters said that if the trans­ac­tion doesn’t close, its board will con­sider seek­ing al­ter­na­tive deals, clos­ing fa­cil­i­ties and fil­ing for bank­ruptcy.

Daugh­ters of Char­ity’s Se­ton Med­i­cal

Cen­ter in Daly City, Calif.

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