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Prime Healthcare completes $350M acquisition of St. Francis Medical Center from Verity

Prime was chosen for its financial commitment and a history of turning around financially distressed hospitals.

Jeff Lagasse, Associate Editor

St. Francis Medical Center (Prime Healthcare)St. Francis Medical Center (Prime Healthcare)

After an extensive four-month review process and public hearing, Prime Healthcare has successfully completed its acquisition of St. Francis Medical Center, a 384-bed Los Angeles County medical facility that until this past week was owned by Verity Health.

In July, California Attorney General Xavier Becerra conditionally approved the application to transfer ownership of the hospital. That followed an earlier decision by the U.S. Bankruptcy Court of the Central District of California granting Verity's request to reject the existing collective bargaining agreements which impose legacy cost structures that it said contributed to bankruptcy.

Becerra noted that his approval of the sale of St. Francis to Prime Healthcare "protect(s) access to care for the Los Angeles communities served" by St. Francis.

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Prime acquired St. Francis for a net of more than $350 million, including a $200 million base cash price and $60 million for accounts receivable. In addition, Prime has committed to invest $47 million in capital improvements and extend offers of employment to nearly all staff.

WHAT'S THE IMPACT

Prime was chosen as the best and highest bidder to acquire St. Francis based on its significant financial commitment, a history of being able to turn around struggling hospitals, its history of clinical quality and a commitment to continue the mission of the hospital.

Prime not only offered the highest purchase price, but also committed to meeting and exceeding mandates for healthcare access and services. The organization will continue service lines, charity care and community benefits while investing millions in technology, systems and infrastructure improvements to modernize the delivery of patient-centered care.

Prime has already begun executing on its capital improvement commitments, it said, by installing best-in-class technology and systems such as the Epic electronic health records platform, Omnicell systems for automated medication dispensing, and new interventional radiology and cardiology capabilities, all of "which will improve the patient and caregiver experience."

Substantially all of St. Francis's employees have been retained, and Prime has successfully reached initial three-year collective bargaining agreements with the hospital's labor unions, SEIU-UHW and UNAC, which represent more than 85% of the hospital's employees.

St. Francis Medical Center, located in Southeast Los Angeles, is a historic acute care hospital with one of the largest and busiest emergency departments and Level II trauma centers in Los Angeles County, treating nearly 64,000 emergency patients and more than 2,000 trauma patients a year.

With the addition of St. Francis, Prime Healthcare now owns and operates 46 hospitals in 14 states with nearly 40,000 employees and physicians.

THE LARGER TREND

Prime Healthcare has built a reputation for saving financially distressed hospitals across the U.S., touting improved clinical quality. Healthgrades said Prime had hospitals named among the nation's 100 best 53 times, and has been the recipient of several Patient Safety Excellence Awards.

In early April, the U.S. Bankruptcy Court granted Verity's request to reject the existing collective bargaining agreements with two unions that represent associates at St. Francis Medical Center, SEIU and UNAC. The court noted that Prime Healthcare was the only party to submit a qualifying bid for St. Francis and that without rejecting the existing CBAs, "St. Francis would not continue to operate as a going concern, and all of the UNAC (and SEIU) represented employees would lose their jobs."

The court also noted that Prime and Verity had made multiple efforts to negotiate in good faith with the unions, and the parties devoted "hundreds of hours to negotiations," but ultimately were unable to agree on new CBAs. Further, the court determined that one of the reasons for the hospital's bankruptcy was the "legacy cost structure imposed by the existing CBAs." 

It then said that the proposals were rejected "without good cause" by the unions. Prime said it negotiated in good faith and proposed increasingly generous offers to UNAC and SEIU with wages far above its existing agreements at its Los Angeles-area hospitals. Prime's latest offer to SEIU maintained existing wages for roughly 90% of SEIU members, and increased wages for some of them. Prime said these wages would be substantially higher than those recently voted by SEIU members at three of Prime's Los Angeles hospitals.

ON THE RECORD

"Prime Healthcare is honored to continue the legacy of St. Francis Medical Center, an indispensable community partner comprised of committed doctors, nurses, and staff dedicated to saving lives and serving all those in need," said Dr. Sunny Bhatia, CEO of Region I of Prime Healthcare. "Prime is prepared to lead St. Francis into a bright future and we are grateful for the opportunity along with the support we have received from the community."

"Prime has remained deeply committed to St. Francis and was chosen as the most capable and only bidder with the fortitude to support the hospital in its time of greatest need, despite the burden of the pandemic, the uncertain future and economic impact on hospitals," said Rich Adcock, CEO of Verity Health. "We have been impressed by the unwavering dedication and talent of the Prime team and we are confident that Prime will preserve and improve upon the St. Francis legacy for future generations of the South Los Angeles community, as it has done for hospitals and communities time and time again across this nation."
 

Twitter: @JELagasse
Email the writer: jeff.lagasse@himssmedia.com