Many, many sides to every story (SEIU-UHW vs. Prime Healthcare revisited)

A year ago, I wrote a post about a conflict between the Service Employees International Union-United Healthcare Workers West (SEIU-UHW) and Prime Healthcare. The issue, as SEIU-UHW saw it:

Prime has a shameful history of buying struggling hospitals, then laying off large numbers of staff and reducing patient services in order to increase profits. Prime’s business model has been bad for patients, bad for taxpayers, and bad for workers.

Prime, of course, has a different take on the matter.

But as I followed up on some of the bits of the story, it's clear that this isn't a two-sided issue...because there are more than two parties involved.

One of those partners is the Daughters of Charity Health System (DCHS), which could be characterized as a group of "struggling hospitals" (in SEIU-UHW terms). When you're running a struggling health system, you want to become UN-struggling, and DOCHS figured that a sale to Prime would accomplish that.

Enter another party - California Attorney General Kamala Harris. Harris holds statewide office in California, which in recent years pretty much means that you're a Democrat. (Even the last Republican to hold statewide office, Arnold Schwarzenegger, used to be married into a Democratic family, and many California Republicans think he's a danged Commie anyway.) While Harris approved the acquisition, she included some tough conditions:

[S]he made the decision with conditions Harris called "strong" and the hospital systems are likely to consider onerous, including a requirement that five of the six facilities stay open for at least 10 years. Earlier, the seller said such conditions could potentially scuttle deal.

Within this backdrop, a few days later DCHS sued SEIU-UHW. (You'll recall from my previous post that Prime Healthcare had already sued the union.)

“By using extortionist threats and bid-chilling tactics to frustrate this sale as leverage for other commercial gains they seek, the defendants have cost DCHS at a minimum tens of millions of dollars in continuing operational losses and professional fees,” Daughters wrote in the suit filed in Superior Court in Santa Clara County. “DCHS continues to face the possibility that the sale will not close, with potentially catastrophic consequences for DCHS' six California hospitals, thousands of employees and retirees of those hospitals, and the patients and communities whom the hospitals serve.”

As the backdrop got dustier and dustier, a new announcement was issued a few weeks later:

Prime Healthcare Services, the for-profit system seen by many as the deep-pocketed savior of the financially ailing Daughters of Charity Health System, has pulled the plug on the $843 million deal.

Prime told the Daughters of Charity system late yesterday it has decided not to pursue the deal, after California's attorney general attached tough conditions to the deal late last month.

The next party to speak was DCHS itself - and it wasn't happy:

We are disappointed that Prime Healthcare has decided not to go forward with the purchase of our hospitals. We strongly disagree with Prime’s position on the Attorney General conditions. We are confident that Prime could successfully turn around the DCHS hospitals.

And SEIU-UHW weighed in also, saying the DCHS should get it right this time.

Healthcare workers today urged Daughters of Charity Health System to immediately designate another buyer for its six financially ailing hospitals now that Prime Healthcare has opted out of purchasing the facilities in the Bay Area and Los Angeles.

According to SEIU-UHW, there were a number of entities that were willing to buy individual hospitals in the chain, and one company prepared to buy the whole thing.

So we have a bunch of parties involved: Prime Healthcare, the SEIU-UHW, the DOCHS itself, the California Attorney General, and these various other purchasing entities. (And I'm not even getting into the whole Blue Wolf Capital Partners thing, an alleged ally of SEIU-UHW that was also sued by DOCHS.)

A month later, one other party became very interested in this whole affair - 280 DCHS employees.

The Daughters of Charity Health System, which saw its proposed sale of six hospitals to Prime Healthcare fall apart early last month, is slashing 4 percent of its workforce, officials told me Tuesday morning.

That works out to approximately 280 jobs out of about 7,000 at the Catholic hospital system, based in Los Altos Hills, said spokeswoman Beth Nikels. Some of the jobs have already been eliminated, she said, while others will be eliminated over the next few months.

The workforce reductions are part of an effort to reduce expenses, stabilize finances "and better position our hospitals while we search for a new buyer," officials said April 21 in a statement to the Business Times.

Now perhaps those 280 people would have been laid off anyway if Prime Healthcare had come in. But that was small comfort for the people who were being laid off.

I checked the SEIU-UHW's archive for reaction to this turn of events - and found none. But the California Department of Managed Care reacted to the entire situation:

Meanwhile, the California Department of Managed Care has filed a cease and desist order requiring 10 insurers to stop sending new patients to Daughter’s affiliated physician group. Regulators are concerned that the DCHS Medical Foundation is not meeting minimum solvency standards for partial-risk contracts with HMOs for about 20,000 patients.

This is yet further evidence of my contention that "Big Brother" will never happen because government agencies are at war with each other - in this case, the Attorney General's office and the Department of Managed Care. While you may disagree with her tactics, the Attorney General pursued polices that she believed would continue to provide health care to as many people as possible. Meanwhile, the Department of Managed Care was moving in the opposite direction. In both cases, DCHS was the victim.

Until a few months later, in July, when a new announcement was made.

The Daughters of Charity Health System (DCHS) Board of Directors has selected BlueMountain Capital Management (BlueMountain), a private investment firm to recapitalize its operations. BlueMountain is contributing over $250 million of capital and is sponsoring Integrity Healthcare to manage and operate the six California hospitals and medical foundation, thus assuring the communities served by the hospitals a continuance of care.

The SEIU-UHW's reaction?

SEIU-UHW health and legal experts will analyze the agreement as soon as possible to understand its effect on staff and quality care in our facilities.

We will be meeting directly with BlueMountain as quickly as possible to make sure members jobs and benefits are fully protected.

Our early analysis indicates that BlueMountain is a much better fit with Daughters than the previous bidder, Prime Healthcare.

However, the San Jose Mercury News claims that this deal may also be scuttled, since it appears to be the same as the deal that Attorney General Harris didn't like:

Desperate for a deal to save its beleaguered hospitals, Bay Area-based Daughters of Charity Health System was left at the altar this spring when California's Attorney General told its prospective new owner it must keep most of the hospitals open for at least 10 years.

Yet, newly released documents show, the New York City hedge fund that is the nonprofit chain's latest suitor is guaranteeing to keep the hospitals open for half that time. That five-year promise is exactly what Southern California-based Prime Healthcare Services offered last year in a highly controversial $843 million deal rebuffed by Attorney General Kamala Harris, whose office must approve hospital sales....

Whether or not Harris will impose similar 10-year requirements on the latest proposal by BlueMountain Capital Management is unknown. Her staff declined to comment

But DCHS did comment:

"None of us can do anything to derail this process, including the SEIU. Failure is not an option."

That could be posturing, since Harris could impose the ten-year condition, in which case BlueMountain may or may not pull out - or Harris could refuse to impose the ten-year condition, in which case Prime Healthcare may complain about unfairness.

At least the lawyers are making money over this whole deal.

But the most amazing thing about this - I have just completed a long-winded post in healthcare that does NOT involve Barack Obama.