Attorney General Considers New Deal for Daughers of Charity Hospital System

This week, the Attorney General held public meetings at each of the Daughters of Charity hospitals to gather public comment on the proposed restructuring of the Daughters of Charity Hospital System (DCHS). The system includes hospitals in Los Angeles (St. Vincent and St. Francis), Santa Clara (O’Connor and St. Louise) and San Mateo (Seton and Seaton Coastside) counties. Health Access provided public testimony in multiple locations this week on behalf of California’s health care consumers, particularly those living in communities that have relied on DCHS hospitals for decades.

Health Access will keep you posted on what the Attorney General decides.

Earlier this year, we, along with a number of community groups and labor organizations, opposed the sale of DCHS to Prime Healthcare. The Attorney General approved the sale with a number of conditions sought by Health Access, including the requirement that the hospitals and their existing services remain open for ten years. Prime Healthcare was unwilling to take on those conditions and ultimately walked away from the deal.

DHCS is now proposing a restructuring agreement where BlueMountain, a hedge fund, and Integrity Healthcare, its subsidiary, would manage the hospital system, make a $250 million capital investment, and have the option to purchase it after three years. The non-profit hospital system would convert to a for-profit company if and when it is purchased.

DCHS hospitals should remain open for at least 10 years.

An independent analyst hired by the Attorney General has recommended that BlueMountain be required to keep most of the hospitals open for at least a decade, which is consistent with its previous recommendation as well as with what Health Access is seeking. The proposed deal only promises to keep general acute care hospital services and the emergency department open for five years, subject to conditions that are wholly in the discretion of Daughters of Charity and BlueMountain.

These hospitals currently offers a number of services beyond the basic eight services required of general acute care hospitals. They include, among other things, rehabilitation, cardiovascular, gastroenterology, imaging and lab, skilled nursing services, pediatrics, and cancer care services. The Agreement, by excluding any requirement that these services be continued, allows these services to be eliminated at any time and for any reason because they are not part of the eight basic services required of general acute care hospitals.

Health Access believes the Attorney General should require all existing services, and not just those minimally required of general acute care hospitals and emergency services, to be maintained for ten years so communities that have relied on DCHS hospitals for decades can continue to access these important health care services.

Charity Care Should be Maintained at Current Levels.

The Agreement requires charity care to be maintained at current levels for at least five years, and other documents filed suggest that there may be less need for charity care due to lower rates of uninsured resulting from implementation of the Affordable Care Act (ACA) and Medi-Cal expansion.

While California’s robust implementation of the ACA has reduced the rate of uninsured, there remains a sizable uninsured population, particularly in the communities served by DCHS. Up to four million Californians remain uninsured, which includes the undocumented, as well as individuals who are exempted from the ACA’s individual mandate. In addition, consumers with new coverage options through Covered California still face affordability issues, particularly if they are enrolled in plans with high deductibles and cost-sharing.

As a result, charity care continues to play a critical role in the health care safety net, both for those who do not have coverage and those who have coverage that is unaffordable to them. Therefore, the Attorney General should require charity care to be maintained at current levels.

The Attorney General Should Ensure All Californians Continue to Have Access to the Hospital, Not Just Those Enrolled in Medicare and Medi-Cal.

The state has an interest in ensuring that all Californians have access to the full range of care they need, regardless of the source of their health coverage. The Attorney General must condition any approval of this transaction on continued participation in Medicare and Medi-Cal, as well as contracting with Medi-Cal and commercial managed care plans and with Qualified Health Plans offered through Covered California.

Health Access believes including clear and enforceable conditions on this transaction will protect and preserve patient health and finances, maintain the integrity of public programs, protect valuable taxpayer resources, and strengthen the health system of each community. The Attorney General has until November 19 to review and to make a decision on whether to approve, reject, or approve with conditions.