LOS ANGELES — The Daughters of Charity Health System has reached an agreement with a private investment firm that will invest $250 million in the ailing California hospital nonprofit.
The deal comes several months after restrictions imposed by California Attorney General Kamala Harris nixed the hospital chain's plans to sell its six hospitals in the San Francisco Bay and Los Angeles areas to Prime Healthcare Services.
Prime backed out of the $843 million deal in March, putting in doubt the future of the nonprofit system and its more than $400 million of bond debt.
The $250 million in capital provided by BlueMountain under the agreement announced Friday will enable DCHS to repay certain outstanding obligations, provide needed operational liquidity and invest in physical plant improvements and operations.
BlueMountain, a global investment firm with more than $21 billion under management including healthcare facilities, wasn't mentioned previously as a potential suitor.
Integrity Healthcare, an entity wholly owned by BlueMountain, was formed to oversee the hospital group. It will manage and operate the six California hospitals and the medical foundation enabling the system to maintain its nonprofit status.
"The transaction represents an extremely attractive opportunity for DCHS, allowing it to continue its operations and mission as a non-profit system with the support and backing of strong and well-qualified partner organizations," DCHS President and COO Robert Issai said in a prepared statement.
Daughters of Charity will transfer control of the hospitals to an independent board of directors, which will oversee operations as part of the deal.
The hospital would maintain its nonprofit status, avoiding any issues over the tax-exempt debt it has issued.
SEIU-United Healthcare Workers West was among several unions that opposed the sale to Prime. Some unions, however, did support the sale to Prime seeing it as the best way to preserve the hospitals and their jobs.
The new agreement calls for BlueMountain to assume current collective bargaining agreements with the hospital unions.
"We are anxious to see the details of the Blue Mountain proposal so we can understand what commitments they make to ensure the community receives the best possible healthcare," SEIU-United Healthcare Workers West President Dave Reagan said in a prepared statement.
Among the hospital chain's previous suitors in the process that led to the aborted Prime deal, SEIU-UHW preferred Blue Wolf, another investment firm.
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, Issai said.
The transaction agreement must be reviewed and approved by the California Attorney General before it is finalized.
"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, retires and other constitutents," Issai said.
Integrity Healthcare's leadership team includes Mitch Creem and Mark Meyers, seasoned health care executives with decades of experience successfully leading hospitals to financial stability in California and across the country, Issai said.
Creem has led several hospitals through significant financial and cultural transformations, he said.
DCHS was founded in 1858 with the opening of Los Angeles Infirmary, now known as St. Vincent Medical Center. The other hospitals include St. Francis Medical Center in Lynwood, O'Connor Hospital in San Jose, Saint Louise Regional Hospital in Gilroy, Seton Medical Center in Daly City, Seton Coastside in Moss Beach and the statewide DCHS Medical Foundation.