Prime Healthcare

By Stuart Pfeifer and Javier Panzar
February 20, 2015

California Atty. Gen. Kamala D. Harris on Friday approved the hotly debated sale of a chain of six struggling Catholic hospitals — including two in Los Angeles County — but imposed strict conditions on how they will be managed.

The requirements left the future of the Daughters of Charity Health System hospitals in doubt — at least for several days.

Prime Healthcare Services Inc. of Ontario said it would need days to review Harris’ ruling before deciding whether to proceed with the purchase, which includes St. Francis Medical Center in Lynwood and St. Vincent Medical Center near downtown Los Angeles.

Harris said she would require Prime Healthcare to keep all of the hospitals open for 10 years — including four of them as acute-care hospitals — and insisted they provide the same level of charity care to indigent patients as Daughters of Charity had.

“We will do a careful analysis and hope to reach a decision within a week,” said Dr. Kavitha Reddy Bhatia, vice president of clinical transformation for Prime Healthcare. She is the daughter of the company’s founder, Dr. Prem Reddy. “We very much remain committed to the future success of these hospitals.”

The closely watched sale has been a hot-button issue across California for months, with more than 7,600 jobs and vital healthcare services to a number of lower-income communities hanging in the balance. It brought together unlikely allies in the nonprofit Catholic chain that has specialized in healthcare for the poor, and Reddy, an Ontario-based turnaround expert and cost-cutter who has built a fast-growing chain of 30 hospitals.

In October, Prime Healthcare agreed to pay about $843 million in cash and assumed debt to acquire the six hospitals. A key part of the agreement was Prime Healthcare’s promise to assume $300 million of liability for the pensions of 17,000 current and former Daughters of Charity employees.

The proposed sale quickly drew strong opponents and supporters. Some unions and elected officials had lobbied Harris to block the sale, saying Prime Healthcare was more concerned with profits than treating the sick and poor. Those who backed the sale noted Prime Healthcare’s history of saving troubled hospitals and said the company was the best option to save the struggling Catholic hospitals.

Workers at St. Vincent Medical Center near downtown Los Angeles cheered the approval.

“I hope that Prime carries on the tradition of helping the poor,” said Don Baisa, who works as a shuttle driver at St. Vincent. “Lots of people need this place. It is in the heart of L.A.”

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