Chiang Opposes Prime Hospital Deal
California Controller and Treasurer-Elect John Chiang has expressed concerns to California Attorney General Kamala Harris regarding the acquisition of the Daughters of Charity hospital chain by Ontario-based Prime Healthcare Services.
“I am concerned that Prime's very low credit rating and its exposure to potential liabilities associated with existing litigation introduces a level of worrisome risk that may distort Prime's healthcare and workforce decisions, leading to potential detriment to the communities served by Daughters,” Chiang wrote to Harris last week. He also expressed concerns about the potential erosion of healthcare services at the Daughters of Charity hospitals should Prime acquire them, as well as the quality of care that might be delivered to patients.
Harris will rule in early 2015 on whether the for-profit Prime can acquire the non-profit Daughters hospitals, which include six facilities in and around San Jose and Los Angeles. Prime, which has drawn criticism in the past for its business practices, has previously been rebuffed by the state attorney general's office in acquiring properties. The company is also under federal investigation for billing practices and has been entangled in litigation with labor unions regarding a variety of issues.
Moody's Investors Service has rated Prime's debt at Ba3, which places it at the lower end of its mid-level grade, and means the ratings agency consideres it a substantial credit risk. Although Moody's has acknowledged in its coverage of Prime that the company has had success turning around financially troubled hospitals, it also noted the chain is heavily dependent on acquiring new hospitals for additional cash flow and that it is also heavily dependent on government payers such as Medicare and Medicaid.
More than a dozen members of California's Congressional delegation has voiced objection to Prime taking over the Daughters of Charity hospitals, San Francisco Mayor Ed Lee, and the Service Employees International-United Healthcare Workers West union. The 121RN local of the Service Employees International Union has voiced its support of the deal.
"The state Controller’s position runs counter to the views of thousands of doctors, nurses and other healthcare professionals who support the sale of the Daughters of Charity hospitals to Prime Healthcare and preserving quality healthcare access in California," said Prime spokesperon Edward Barrera in a statement.
