Unions Fight Sale of Safety-Net Hospitals

Six safety-net hospitals owned by the Daughters of Charity Health System — four in the Bay Area and two in Los Angeles — are for sale. The company says it’s out of money and needs another organization to take over.

The mission of Daughters of Charity hospitals is to take care of the poor and needy. CEO Robert Issai says that three-quarters of the patients are covered by government health programs, which pay significantly less than private insurers.

“We’ve always had that 25 percent of commercial business to make ends meet,” he said.

But a lot of that dried up when the recession hit in 2008. People lost their jobs and their insurance. Then the government cut back too, slashing reimbursement rates.

“End result is, 2014, now we are in a situation where we cannot sustain this operation going forward.”

Daughters decided its only option was to sell its six hospitals. Issai says he has two or three solid bidders but he doesn’t want to rush into a deal.

“The goal is to get the best buyer,” he said.

That hasn’t stopped the health workers’ union from voicing its opposition to one of the potential buyers, Prime Healthcare. Prime is a Southern California hospital chain currently being investigated by the federal government for overbilling Medicare.

SEIU’s David Miller says Prime told the union that if it won the bid, it planned to put the hospitals through bankruptcy.

Miller said a bankruptcy would be “catastrophic,” because employees’ pensions would be on the chopping block in restructuring.

“People may lose 50 to 70 percent of their accrued benefit unexpectedly,” he said.

Prime Healthcare declined to comment.

Health economist Ben Umansky says hospital sales like this one have grown more common as hospitals across the country face similar economic pressures and demographic shifts.

“The simple fact that the country is getting older, and you’re going to have 10 million more Medicare beneficiaries by 2020 than you have today, that is a threat to hospital finances,” Umansky said.

There is hope that the Affordable Care Act will ease some of these pressures. But Umansky thinks it could be years before hospitals see tangible financial benefits.