Why is Daughters of Charity Health System selling to Prime Healthcare Services?

Prime Healthcare is the answer to the challenges DCHS faces. In selecting an organization to purchase DCHS, the board had many priorities, which included seeking the best buyer to ensure the hospitals survive into the future while honoring their obligations to lenders, vendors, associates, physicians and pensioners. Prime Healthcare met or exceeded more of the criteria set by the DCHS board of directors than any other bidder. They have agreed to fund the pension plans, assume DCHS’s union contracts, invest millions in capital improvements for the hospitals, and ensure that members of their communities have access to high-quality health care for years to come.


Why did DCHS decide to sell?

DCHS has been negatively impacted by changes in healthcare utilization. Inpatient utilization has declined as outpatient services have held. This is an industry-wide trend to reduce hospitalization and move care to a more efficient, lower cost outpatient setting. DCHS’s operating losses have steadily increased over the past several years due to volume trends, payer mix, limited rate increases from their managed care payers, reduction in reimbursement from Medicare and Medi-Cal, and their high cost structure. As a result of these significant operating losses, their liquidity (days cash on hand) has significantly declined over the past several years.


How Was Prime Healthcare Chosen?

DCHS began soliciting buyers in February 2014, with the goal of protecting the hospitals’ stakeholders and maintaining the essential services that the hospitals provide to their communities. Although 133 parties initially expressed interest in DCHS, many decided not to submit bids after conducting due diligence regarding the obligations of DCHS. Over the course of many months of negotiating with various remaining bidders, DCHS’s options were narrowed to four finalists, and all but one offered to purchase the entire health system. No combination of offers for individual hospitals and other assets equaled the strength of full-system bids. Prime Healthcare’s bid was the superior bid.


Who is Prime Healthcare Services?

Based in Ontario, CA, Prime Healthcare and the Prime Healthcare Foundation own and operate 29 acute-care hospitals with 4,700 beds in nine states. Prime Healthcare is the largest for-profit operator of hospitals in California, and has an established track record of turning around distressed institutions.


Who is the Prime Healthcare Foundation?

The Prime Healthcare Foundation, a 501(c)(3) charitable organization, owns and operates six of the Prime Healthcare hospitals and has over $850 million in net assets. Our DCHS Medical Foundation, LHM philanthropic foundations, and St. Vincent Medical Center will become part of the Prime Healthcare Foundation.


What are the Mission and Values of Prime Healthcare?

Mission: “Prime Healthcare Services endeavors to provide comprehensive, quality healthcare in a convenient, compassionate and cost effective manner.”

Vision: “Prime Healthcare Services is consistently at the forefront of evolving national healthcare reform. Our organization provides an innovative and integrated healthcare delivery system. We remain ever cognizant of our patients’ needs and desires for high quality affordable healthcare.”


Compassion: We provide an environment that is caring and conducive to healing the whole person physically, emotionally and spiritually. We respect the individual needs, desires and rights of our patients.

Quality: We believe that continuous quality of care and performance improvement are the foundation for preserving and enhancing healthcare delivery. Effective communication and education of our patients, physicians, staff and the community we serve are essential elements of this process.

Comprehensive: We are committed to an integrated healthcare delivery system that encompasses the entire spectrum of healthcare delivery. This continuum of care encompasses all aspects of an individual’s healthcare 

Cost-Effectiveness: We offer high quality healthcare that is accessible and affordable.”


Tell me about Prime Healthcare’s quality and patient experience.

Prime Healthcare was recognized as one of the “Top 15 Health Systems” in the nation in 2013, based on quality of healthcare and patient satisfaction. In 2014, eight Prime hospitals were ranked among the “100 Top Hospitals” in the nation by Truven Health Analytics.


Will Prime Healthcare honor employees’ pensions?

Yes. Preserving pensions was a top priority for the DCHS board. In fact, none of the other bidders would accept 100 percent responsibility for the pensions of the 16,000-plus union and non-union employees in our pension plans.


What are the other details of Prime Healthcare’s bid?

Many details of the bid have not been made public. However, Prime has committed to $150 million in capital improvements over the next three years; will maintain charity care policies and fund pastoral care programs; and will honor existing union contracts.


Who were the other three finalists and why did they fail to make the cut?

DCHS must honor its agreement to maintain confidentiality regarding the identities of the other bidders and the terms of their offers. While all finalists had merit, none met as many of the criteria specified by the board of directors as Prime Healthcare did. Another bid, which received the support of one of our unions, failed to deliver failed to deliver a competitive proposal on many criteria and in total submitted a materially inferior transaction proposal.


Will DCHS retain its Catholic identity?

Over the past two years, Prime Healthcare has purchased four hospitals with Catholic affiliations, and has respected the historical, religious, and cultural identity of the institutions. While it is not expected that the hospitals will retain their religious affiliations long-term, Prime intends to maintain the charity care policies and spiritual care that define the Daughters of Charity mission in its communities.


Will the Daughters still be present in the hospitals?

The Daughters will be present in our Local Health Ministries until the transition connected with the sale is completed and the Daughters are no longer the sponsors of the facilities.


What happens to the proceeds from the sale?

The proceeds from the hospital sale will go to paying off the debts that DCHS have incurred while upholding their mission during these economically troubling times for the health care industry. Financial details of the sale have not been released.


Will patients be impacted by the sale?

Patients will not see any disruption in the hospitals’ day-to-day operations. Patient care and access to care in all of the DCHS hospitals remains the unwavering priority.