Harris can protect care for the poor

The question for California’s attorney general isn’t whether a New York hedge fund should have to keep acute-care facilities open for 10 years if it buys Daughters of Charity’s six hospitals. It’s whether 10 years is long enough.

California Attorney General Kamala Harris’ job is to ensure that any sale of the hospitals is in the public interest. The independent consulting firm hired by the state recommended that as a condition of approval, BlueMountain Capital Management should commit to providing vital services at most of the hospitals for at least 10 years. “At least” is the key.

The attorney general’s office held public hearings on the proposed agreement Thursday at the two South Bay hospitals owned by Daughters, San Jose’s 358-bed O’Connor and Gilroy’s 93-bed Saint Louise Regional. Hearings continue Friday at Seton Medical Center Coastside in Half Moon Bay and Seton Medical Center in Daly City.

Harris’ scrutiny is crucial. The unprecedented conditions she placed on the Prime Healthcare deal, which fell through in March, signaled that she’s serious about maintaining the mission of the Daughters system as safety net hospitals. She needs to stay the course.

The complexity of the BlueMountain deal complicates the 10-year question.

The current proposal is for the hedge fund to make a capital investment of $250 million in the system, then have the option to buy the hospitals after three years. County officials fear that BlueMountain’s ultimate interest is in re-selling the land held by the hospital chain, which is valued at anywhere from $200 million to $500 million. That leaves a high degree of uncertainty for the safety-net system.

So Harris may need to require BlueMountain to guarantee continued charity care not for 10 years from now but for a decade following BlueMountain’s actual purchase.

O’Connor and Saint Louise are essential health care providers for lowincome populations in the South Bay. As recently as 2011, O’Connor contributed $34.3 million to the community by covering unreimbursed costs of care. If BlueMountain fails to maintain this safety net commitment, Santa Clara County taxpayers will bear the burden in a very tangible way.

The county has planned to mothball 100 beds in its old main Valley Medical Center building instead of upgrading the structure to current seismic and medical standards. If O’Connor and Saint Louise stop taking patients whose care is not profitable, the county will have to spend $500 million in tax dollars to keep the VMC beds available. That can’t be accomplished quickly.

The attorney general has authority here because nonprofit hospital owners enjoy benefits of tax-free status and tax-deductible charitable gifts. When they turn for-profit and suddenly stand to make a windfall on the system, the public is due compensation — or a guarantee that community service will continue. This is now in Harris’ hands.