Planned sale of 6 hospitals to for-profit ignites debate

The state attorney general’s office will hold a series of public hearings this week on the controversial sale of six nonprofit hospitals, including Seton Medical Center in Daly City and O’Connor Hospital in San Jose, to a for-profit Southern California company.

The proposed sale of the hospitals, operated by the cash-strapped Daughters of Charity Health System of Los Altos, to Prime Healthcare Services in Ontario (San Bernardino County) has pitted unions against each other and prompted several Bay Area lawmakers to criticize the deal.

Supporters, including the powerful California Nurses Association, say the sale is essential to keep the hospitals open, while opponents, such as SEIU-United Healthcare Workers West, argue that Prime’s reputation for cutting staff and health services, and the company’s admission of being under federal investigation for allegedly overcharging Medicare, make it an unfit buyer.

State Attorney General Kamala Harris is required to approve the sale in order for it to go into effect. A decision is expected in February.

Public hearings for the two hospitals that are in Southern California will be held Monday and Tuesday. The meetings for the four Northern California hospitals — San Jose’s O’Connor Hospital, St. Louise Regional Hospital in Gilroy, Daly City’s Seton Medical Center and Seton Coastside in Moss Beach — will be held Wednesday through Friday.

Under the proposed deal, Prime has agreed to assume about $350 million in pension debt and pay off more than $400 million of Daughters of Charity’s tax-exempt bonds and other debt. The chain has also promised to keep the hospitals open for at least five years, spend $150 million in upgrades and retain most of the hospital’s 7,600 jobs.

A consultant’s report, commissioned by the attorney general’s office and released on Dec. 24, recommended that Prime keep the hospitals open for at least 10 years and participate in the Medi-Cal managed care and Medicare programs.

Prime Healthcare has come under federal and state scrutiny for aggressive billing practices. The company has also been accused of transferring Medicare patients from its emergency room to hospital beds as a way to maximize profits.

Several Bay Area elected officials, including San Francisco Mayor Ed Lee and state Sens. Jim Beall, D-San Jose, and Jerry Hill, D-San Mateo, have been critical of the proposed sale and called on Harris to conduct a careful review.

Daughters of Charity’s chief executive officer, Robert Issai, asked the lawmakers to reconsider their “uninformed position and avoid the dire consequences of having our hospitals close.”

“Attorney General Kamala Harris has a clear choice to make,” Issai said in a statement released Friday that touts a new advertising campaign to support the sale. “Our hospitals continue to lose money and are in danger of closing or filing for bankruptcy. Prime has vowed to keep the hospitals open and retain the charity care mission that we have carried out for generations. Prime is not just the right choice, it is the only choice to save our hospitals.”

Prime officials, for their part, defend the company’s reputation.

“Prime Healthcare takes great pride in the quality of care we provide,” said Dr. Prem Reddy, Prime’s CEO, in a statement. “We don’t close our hospitals — we sustain them while expanding services needed most by our communities. We are committed to retaining and expanding essential services at the (Daughters of Charity) hospitals, especially their critical emergency and trauma centers.”

Prime operates 29 hospitals in California and eight other states, but the sale would mark the company’s entry into the Bay Area. Of the company’s 15 California hospitals, all but one — Shasta Regional Medical Center in Redding — are in Southern California.

Victoria Colliver is a San Francisco Chronicle staff writer. E-mail: vcolliver@sfchronicle.com Twitter: @vcolliver

Hospital sale hearings

A series of Bay Area public meetings is scheduled starting Wednesday over the proposed sale of Daughters of Charity Health System hospitals to Prime Healthcare:

O’Connor Hospital

Time: Jan. 7, 10 a.m.

Location: O’Connor Hospital Medical Office Building, 2101 Forest Ave., San Jose

St. Louise Regional Hospital

Time: Jan. 8, 10 a.m.

Location: Gilroy City Hall (Council Chambers), 7351 Rosanna St., Gilroy

Seton Medical Center Coastside

Time: Jan. 9, 9 a.m.

Location: Seton Coastside, 600 Marine Blvd., Moss Beach

Seton Medical Center

Time: Jan. 9, 1 p.m.

Location: City of Daly City’s Merced Room, 145 Lake Merced Blvd., Daly City

For more information, go to http://oag.ca.gov/charities/nonprofithosp