California Attorney General Grants Conditional Approval for Daughters of Charity Hospital Deal

Ending months of uncertainty, California Attorney General Kamala Harris late Thursday gave her conditional approval for the largest nonprofit hospital transaction in state history — and the first to involve a hedge fund.

Harris’ provisional consent allows BlueMountain Capital Management to invest in the troubled nonprofit Daughters of Charity Health System, with an option to purchase the Los Altos Hills-based hospital chain after three years.

But the $21 billion New York hedge fund must also agree to similar demands that were placed on Prime Healthcare Services’ 2014 bid to buy the Los Altos Hills-based hospital chain for $843 million. The for-profit Prime pulled out of the deal in March, saying Harris’ “unprecedented” contingencies were too onerous.

“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 health care services, including emergency, trauma, surgical, and reproductive health services,” Harris said in a prepared statement.

A spokesman for BlueMountain said the company is now reviewing the terms, which include keeping all but one of six Daughters facilities open for 10 years; maintaining all Medi-Cal contracts and services at each site for 10 years, and providing charity care at historical levels.

Daughters owns O’Connor Hospital in San Jose, Saint Louise Regional Medical Center in Gilroy, Seton Medical Center in Daly City and Seton Medical Center Coastside in Moss Beach — and two hospitals in Los Angeles.

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