Little fanfare at hearing for S.J. hospital deal
Speakers urge state regulators to expedite decision on proposal
SAN JOSE — Nine months after supporters and protesters clashed outside public hearings held to discuss the proposed sale of the Daughters of Charity Health System to a controversial Southern California firm, the mood on Thursday at O’Connor Hospital couldn’t have been more different.
In their first chance to comment on a New York City-based hedge fund’s interest in salvaging the struggling Catholic hospital system, a few dozen O’Connor employees, local residents and others calmly addressed the pros and cons of the transaction to state regulators for two hours.
As about 100 attendees looked on, speaker after speaker emphasized to representatives from the California Attorney General’s Of-
fice that the deal must preserve Daughters’ vital health services to the community, particularly the poor, for as long as possible.
And many, weary of the months-long process and battle linked to chain’s last suitor, Prime Healthcare Services, just urged regulators to make a decision already over BlueMountain Capital Management’s proposed investment in the Los Altos Hills-based Daughters.
“The hour is getting late, and we’re reaching the point where we need a decision, and we need some stability,” said Dr. Hugh Walsh, a general surgeon at O’Connor Hospital since 1982. He called BlueMountain’s offer “a breath of fresh air” that includes money to keep the hospital open and “make it work.”
Under the terms of the deal, BlueMountain would invest $250 million into the Catholic hospital chain, with an option to purchase it after three years. The chain would then morph into a for-profit company.
Daughters says it will transfer control of the six hospitals to an independent board of directors that will oversee a health care company that BlueMountain has created to manage the chain. BlueMountain also says it will honor union contracts and that about 17,000 current and former hospital employees will see their pension benefits remain the same.
BlueMountain also says it will honor union contracts and that about 17,000 current and former hospital employees will see their pension benefits remain the same.
“I want to impress upon the attorney general that we need something to be done, to improve and get on with our lives and with what we are supposed to do … taking care of our patients,” Walsh said.
The hedge fund’s new health care management company, Integrity Healthcare, is headed by two veteran hospital experts who would run the six Daughters hospitals.
They include O’Connor Hospital in San Jose, Saint Louise Regional Medical Center in Gilroy, Seton Medical Center in Daly City, Seton Coastside in Moss Beach, and two hospitals in Los Angeles.
Before the January meeting to discuss Prime Healthcare’s $843 million bid, hundreds of raucous supporters and opponents of the deal gathered outside O’Connor, chanting slogans and shaking signs at each other.
While nurses overwhelmingly favored the deal, hospital workers who belonged to the Service Employees International Union fought hard to derail it. Its members accused Prime of a history of gutting services for low-income patients and slashing workers’ pay and benefits.
Attorney General Kamala Harris, who must approve sales of all nonprofit hospitals in California, has until Nov. 19 to make a decision. Her office is not only hosting public meetings this week at all of the hospitals — a hearing at Saint Louise followed the O’Connor meeting Thursday — but also is reviewing a state consulting firm’s recommendations about the transaction.
The firm is advising Harris that BlueMountain keep all four of the Bay hospitals open for at least 10 years as general acute care hospitals. The firm recommended other decade-long timelines as well. These and other conditions ultimately led Prime to abandon its bid in March.
But if BlueMountain appears to be a savior to some, several speakers affiliated with Santa Clara County or its ties to labor unions remain distrustful of the investment company.
“New York hedge funds typically don’t have the most charitable and community-minded outcomes in mind when they make business decisions,” said Chris Wilder, chief executive officer of the Valley Medical Center Founda- tion, which helps raise funds for the county hospital.
So on Thursday, Wilder, among others, urged Harris’ representatives to increase the 10year conditions to 15 years. “That makes more sense,” Wilder said.
The far-flung nature of the deal also worries Serena Alvarez, executive director of the Institute for Non-Violence, a San Josebased group that helps impoverished Latino families, several members of whom attended the meeting with her.
“This is a valley of extreme poverty and extreme wealth,” said Alvarez, who noted that the state consulting firm’s report failed to detail the huge wage gap and the grueling poverty for many Latino families who depend on charity care at both O’Connor and Saint Louise.
That is why the deal, she said, must include “the necessary and critical protection for the community,” and it’s unclear to her, she said, “which side of the coin BlueMountain is on.”
Mark Meyers, one of the team of experts from Southern California whom BlueMountain hired to manage the hospitals, said “it’s understandable that people would be cynical about a deal” that is difficult to understand.
But, he added, BlueMountain’s success in this case relies on the hospitals become financially healthy.
“We’re highly incentivized to make the system successful,” Meyers said, “so they get a return on their investment.”