Daughters of Charity Health System chooses hedge fund as new owner
The selection of
Under terms of the new deal,
"In evaluating candidates to manage the hospitals, our priority was to seek the strongest bidder who could provide the greatest long-term financial stability while honoring the obligations to our associates, physicians, retirees and other constituents," said Daughters President and CEO
Issai said BlueMountain's selection ensures the communities served by the hospitals will have uninterrupted access to high quality health care, and that current and former hospital employees will see their current pension benefits remain the same. Upon the close of the transaction, all pension and retirement plans that are currently "church plans" will be required by law to become plans that are subject to the Employee Retirement Income Security Act of 1974.
And the 12-year-old hedge fund is taking on the chain with the understanding of the conditions established by Harris's office in February.
Industry observers say that's because BlueMountain has already benefitted from cuts that Prime had proposed -- and Daughters has since implemented -- to improve the chain's balance sheet. That includes shedding almost 300 of its 7,000 workers and shuttering some unprofitable health care services at its six hospitals:
"Daughters did themselves a big service by undertaking those actions, because it made itself more attractive to others who won't get saddled with all the baggage from the attorney general," said
In February, Harris -- who by law must review all hospital sales in the state -- allowed Prime to buy the chain, but only if it met 12 key conditions. Particularly onerous to the
Prime had agreed last October to pay
Key to any deal then and now was the hospital board's insistence that prospective buyers agree to purchase the entire chain to better manage the hospital chain's
BlueMountain -- with
"
Experts say the health care sector is gaining traction with private equity and hedge funds that recognize a wealth of opportunities under the Affordable Care Act, which has increased the number of Americans receiving health care services.
And there's another aim, said
"Some hedge funds have been going into nonprofits to do greater good as well -- and help turn around the image of them being ruthless profiteering or predator investors," Altshuller said.
Private hedge funds operate with little to no regulation from the
While Friday's announcement was welcomed by many of Daughters' employees and patients worried about its uncertain future, the decision isn't final. It will take months for Harris' office to review the proposal and gather public comment at outreach meetings, before she could sign off on the deal.
However, the news probably won't stop the bleeding: For the nine months leading up to
Another wound opened in March, just weeks after being jilted by Prime, when the state
And others were disappointed with the announcement.
The Service Employees International Union-United Healthcare Workers West, which represents 2,675 hospital workers in the Daughters chain and worked hard to undermine the Prime deal, had hoped an updated bid by labor-affiliated Blue Wolf would prevail this time.
Over the last year, SEIU-UHW had accused the hospital chain of gutting services for low-income patients and slashing workers' pay and benefits.
Prime and other union critics alleged that SEIU-UHW poisoned its bid with Harris, a Democrat who is counting on union support in her upcoming run for the
Reacting to today's news, SEIU-UHW president
Meanwhile,
"The county's priority is the welfare of our residents" said County Executive
Contact
HIGHLIGHTS OF THE DEAL
* Access to
* Immediate conversion of all pension and retirement plans that are "church plans" to
become subject to ERISA's standards and requirements.
* Full assumption of current collective bargaining agreements with the hospital unions.
* Maintaining philanthropic foundations.
Source:
NEW MANAGEMENT FOR DAUGHTERS: INTEGRITY HEALTHCARE
Led by
Creem has 33 years of experience in health care management with
Meyers has 37 years in health care leadership roles with 22 years as a hospital CEO and nine additional years supervising multiple hospitals. Most recently he guided the formation of an
Source:
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