California Attorney General Kamala Harris approved on Thursday a deal for a management change at the Daughters of Charity Health System. Now, BlueMountain Capital Management has red light to direct the six locations and, after having fulfilled certain conditions, it will be allowed to purchase the chain.

The New York investment firm must maintain the historic level of charity care at the hospitals that aim to provide care to the poor in all its facilities, including St. Vincent Medical Center in Los Angeles and St. Francis Medical Center in Lynwood. The company would sign a 15-year management agreement and receive the right to purchase the chain after keeping it nonprofit for at least three years.

BlueMountain will pay $150 million for the catholic hospital groups’ financial and capital needs, as well as $180 million for capital improvements. The right to finally acquire the chain will cost the firm $100 million.


“This approval includes strong conditions that will maintain the charitable purpose of the Daughters of Charity Health System, ensuring that low-income Californians will continue to have access to critical healthcare services, including emergency, trauma, surgical, and reproductive health services,” Harris said in a statement.

As part of the deal, for a 10-year period five of the six facilities must maintain the same levels of emergency and non-emergency services to support Medi-Cal beneficiaries, keeping the Medi-Cal managed-care contracts, according to Harris.

Also for 10 years, the St. Francis hospital in Lynwood must remain a prestigious care hospital with emergency service. BlueMountain must keep that status for five years at St. Vincent in Los Angeles and maintain the Medi-Cal service for the same time period.

Given that Daughters of Charity employs 7,600 workers and its medical care efforts benefit a large number of lower-income communities, its management future has been closely monitored. Insurers have denied it favorable reimbursement because it is a small nonprofit chain that lacks bargaining clout. As a consequence, it has reported $10 million monthly losses.

Apart from the two hospitals in L.A County, Daughters of Charity has four others in Northern California: Saint Louise in Gilroy, O’Connor Hospital in San Jose, Seton Medical Center in Daly City and Seton Coastside in Moss Beach, near Half Moon Bay.

BlueMountain has yet to decide if it accepts the deal. In case it does, the catholic hospital chain would be renamed Verity Health System of California.

Source: Los Angeles Times