The California Attorney General issued a letter conditionally approving the sale of St. Francis Medical Center, a Verity Health System medical facility in Los Angeles County, to Prime Healthcare, Inc.
Daughters of Charity of St. Vincent de Paul, Province of the West, a religious organization, originally owned Verity. In 2015, the Daughters recapitalize the system with an investment of about $250 million. Verity was losing close to $175 million per year on a cash flow basis. In 2018 it filed for bankruptcy to help resolve a cash crunch while it found a buyer.
Under California law, any proposed sale of a non-profit health facility to a for-profit corporation must secure the approval of the state Attorney General, whose statutory charge is to consider the factors set forth in the law, including whether the transaction is in the public interest and whether the transaction affects the availability or accessibility of healthcare services to the affected community.
The Attorney General’s conditional consent represented in the letter seeks to protect access to care for the Los Angeles communities served by the hospital. If Verity and Prime close on the sale with the conditions outlined in the letter, they are consenting to comply with the conditions. The transaction must still be approved in Court where Verity has filed for bankruptcy.
The Attorney General’s conditions are based on an independent health expert’s in-depth analysis of the health and medical needs in the surrounding communities. Among other things, these conditions call for Prime, the prospective purchaser, to:
— Keep St. Francis open for at least ten years after sale and continue operating as a Trauma II Center. St. Francis will continue to provide cancer services, cardiac services, women’s health services, neonatal intensive care, perinatal and pediatric services, psychiatric and other critical services recommended by the health expert;
— Increase of its reach of charity care policy at St. Francis by covering care in full, serving those who earn at the 400 percent of federal poverty level ($51,040 for an individual and $86,880 for a family of three) and up to 600 percent of federal poverty for the discount payment policy;
— Commit $10,186,173 in charity care for patients in the surrounding community, and Prime has agreed to improve its charity care policies to cover significantly more patients;
— Increase the community benefit of St. Francis to $1,597,077 for six years exclusive of any grants received, to support the Southern California Crossroads Program, the Health Benefit Resource Center, Welcome Baby Program, Healthy Community Initiatives, American Career College access for onsite training, Paramedic Training and Education, and Patient Transportation Support;
— Maintain admitting privileges for staff in good standing, maintain on-call coverage contracts and comparable arrangements with physicians at fair market value to maintain Level II trauma care at St. Francis;
— Commit the necessary investments required to maintain seismic compliance at St. Francis. Prime will be required to expend at least $35 million for capital improvements, excluding seismic retrofit costs, at St. Francis Medical Center over the five-year period from the closing date, including but not limited to upgrading its electronic medical records system. The expert report identified seismic issues at St. Francis; and
— Maintain access to women’s healthcare services for ten years, and no limitations on LGBTQ healthcare services offered at St. Francis.