Prime Healthcare

By Tracy Seipel
Posted: 02/24/2015 05:55:02 AM PST
Updated: 02/24/2015 05:55:35 AM PST

SAN JOSE — Take it or leave it. That’s the message to a Southern California for-profit company from Attorney General Kamala Harris who late last week laid out a dozen requirements for Prime Healthcare Services’ $843 million deal to buy six cash-crunched nonprofit hospitals.

On Monday, with the Daughters of Charity Health System running dangerously low on cash, Prime officials said they are diligently studying the mandates and hope to make a decision within a week. Daughters’ president and CEO Robert Issai acknowledged Monday there is no wiggle room. “We’re simply trying to understand what the recommendations mean and the implications for us,” he said.

To move forward, Prime must agree to operate four of the Daughters’ six hospitals — including O’Connor in San Jose, Saint Louise Regional in Gilroy, Seton Medical Center in Daly City and St. Francis Medical Center in Los Angeles — as acute care hospitals for 10 years, instead of the five years Prime had originally offered Daughters in its agreement last fall.

Harris also stipulated that all Daughters hospitals would have to meet seismic compliance requirements until 2030 at all the facilities, including retrofitting the patient tower at Seton Medical Center at a cost of $350 million.

“The bottom line is she really does not want it approved,” said Los Angeles-based consultant Steve Valentine. No other hospitals in California have been forced to uphold 10-year-long agreements, he said, and the requirement for seismic compliance by 2030 will cost about $3 million per bed in each hospital.

Valentine said that alone could make it tough for Prime to obtain financing for such a massive expense.

But another consultant, who did not want to be quoted because he has ties to the deal, said many of the services Harris listed that must be provided at the acute-care hospitals tend to be moneymakers, including emergency room services, intensive care services, and coronary services, among others.

However, he acknowledged, other required services, such as obstetrics and pediatrics, tend to be money losers. But the consultant said the hospitals should be able to make up the difference in the other, more lucrative areas.

He called it a “reasonable trade-off” for Prime, and the cost of doing business for the Ontario-based for-profit company that owns 32 hospitals nationwide, including 15 in California.

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