Daughters of Charity now officially under new management

The financially troubled Daughters of Charity Health System that includes Daly City's Seton Medical Center, Seton Coastside in Moss Beach, San Jose's O'Connor Hospital, Gilroy's Saint Louise Regional Hospital and two safety-net hospitals in Los Angeles announced on Monday that it has completed its deal to transfer six hospitals to the control of BlueMountain Capital and its Integrity Healthcare subsidiary after 2 years of looking for a buyer.

Under the terms of the contract, BlueMountain is required to loan the hospital system for $160 million and stash an additional $100 million for it to have the option of buying the hospitals after three years.

Daughters' CEO Robert Issai noted in an interview with the San Francisco Business Times that Blue Mountain's capital "will provide a great jump-start on the many strategic, operational and capital initiatives desperately needed in our hospitals".

Harris' office must approve all sales of nonprofit hospitals.

Based in New York, BlueMountain Capital Management was founded in 2003 by former JP Morgan executive Andrew Feldstein and former McKinsey senior consultant Stephen Siderow.

Harris said a minimum of $180 million in investments must be released so that the hospitals can improve its facilities.

The deal is so far the largest and the most complex nonprofit hospital transaction in the state's history.

Although the health system's Catholic affiliation will end, Verity will be operated as a nonprofit for up to 15 years. And Verity program also said this is for the best.

"Our goal is to build up the hospitals and make these hospitals vibrant health providers in the communities they serve", said Mitchell Creem, Verity's chief executive officer.

Steve Valentine, a West Coast vice president for Premier, a Charlotte, N.C.-based health care improvement company, said the biggest challenge facing BlueMountain is increasing revenues. BlueMountain will contribute up to $260 million as part of a new Verity Health System.

"They seemed very confident during the meetings with stakeholder groups that all those other hospitals would just roll over and allow the patients to be raided", he said.

The hospital chain was to be taken over by Prime Healthcare Services of Ontario earlier this year.