The struggling Daughters of Charity Health System will finally change hands after California Attorney General Kamala D. Harris on Thursday granted conditional approval for its $250 million bailout by Integrity Healthcare and BlueMountain Capital Management.
The two entities will enter a 15-year management agreement and to pay $100 million for the option to purchase the Daughters of Charity Health System, according to the attorney general's office.
Under the terms of the agreement, the health system's name will change to Verity Health System of California and its corporate status will go from a nonprofit religious corporation to a nonprofit public benefit corporation.
For at least the first three years of the agreement, the health system will continue to operate as a nonprofit public benefit corporation.
Without the transaction, the health system faces bankruptcy as its losing millions of dollars a year, according to the attorney general's office.
The AG's approval includes strong conditions to ensure that the charitable purpose of Daughters' six facilities remain in place for at least 10 years.
The conditions ensure low-income Californians will continue to have access to critical health care services, including emergency, trauma, surgical, and reproductive health services, Harris said.
The deal includes $150 million of guaranteed financing to support the health system's financial and capital needs and help with its $180 million capital expenditures commitment. After three years and before the expiration of the 15-year agreement, the certain funds managed by BlueMountain Capital Management, LLC can exercise its option to purchase the health system, the AG's office said.
This is the largest and most complex nonprofit hospital transaction in California history, Harris said.
The parties must agree to the conditions.
BlueMountain's lifeline came after a very public collapse of $850 million takeover by Prime Healthcare Services for Daughter's collapsed. Prime pulled out of the deal over a list of conditions demanded by Harris.
Daughter's is comprised of the St. Vincent Medical Center in Los Angeles; St. Francis Medical Center in Lynwood; O'Connor Hospital in San Jose; Saint Louise Regional Hospital in Gilroy; Seton Medical Center in Daly City; and Seton Coastside in Moss Beach.