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Calif. AG conditionally approves sale of 6 nonprofit hospitals to hedge fund

California Attorney General Kamala Harris has conditionally approved the sale of Los Altos, Calif.-based Daughters of Charity Health System's six hospitals to hedge fund BlueMountain Capital Management.

After Ontario, Calif.-based Prime Healthcare Services backed out of a deal to acquire Daughters of Charity's hospitals in March due to restrictions placed on the transaction by the California Attorney General's Office, BlueMountain was selected in July to manage and operate the system's facilities.

With the California attorney general's approval, BlueMountain can invest in financially troubled Daughters of Charity, with an option to purchase the health system after three years, according to a San Jose Mercury News report. The conditional approval allows the hedge fund to pay $100 million for the option to purchase Daughters of Charity, which BlueMountain will rename Verity Health System.

Many of the conditions placed on the Prime-Daughters of Charity deal have also been applied to the BlueMountain transaction. The approval requires BlueMountain to provide the same types of emergency and nonemergency services to Medi-Cal beneficiaries and maintain Medi-Cal managed care contracts at each of the facilities for 10 years. The hedge fund must also invest $180 million in capital improvements at the facilities.

"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," Ms. Harris said in a statement, according to the report.

SEIU-United Healthcare Workers West, which strongly opposed Prime acquiring Daughters of Charity, showed support for the BlueMountain deal and urged the hedge fund to accept the conditions placed on the transaction.

Daughters of Charity's California hospitals include: O'Connor Hospital in San Jose; Saint Louise Regional Hospital in Gilroy; Seton Medical Center in Daly City; Seton Coastside in Moss Beach; St. Francis Medical Center in Lynwood; and St. Vincent Medical Center in Los Angeles.

More articles on healthcare industry transactions:

25 hospital transactions and partnerships in November
4 recent hospital transactions and partnerships
Northwestern, KishHealth merger receives approval

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