In California, a financially troubled nonprofit hospital closes unusual deal with hedge fund in attempt to remain afloat for several more years. According to a Monday’s announcement, Daughters of Charity, one of the oldest nonprofit hospital chains in the state, will receive $260 million from a $21-billion hedge fund.
The deal with BlueMountain Capital was approved 11 days ago by the state’s attorney general Kamala Harris, but under some strict conditions over concerns raised by experts and the public.
But some critics are now concerned that the Bay Area hospital will no longer be run by a Catholic board, but by a panel of NYC shareholders. Patients are also worried that the change may affect how they are treated and alter the human aspect of the organization.
Yet, some of the hospital’s employees do not think that the deal is a bad thing especially if it saves the organization from financial collapse. In recent years, Daughters of Charity lost hundreds of millions of dollars.
Daughters of Charity is a nonprofit hospital that provides health care services to low income patients and those that do not have access to the much needed care. So, if the hospital chain were to close, the poor would have very few options left.
After the deal, the hospital chain will be rebranded as Verity Health System, the group announced. The chain’s chief executive Robert Issai believes that the injection of capital can help the chain remain committed to its mission of care, while also caring for its employees.
The hedge fund must loan Daughters hospitals $160 million and give an extra $100 million if it plans to buy the hospitals by the end of 2018. The attorney general forced the group to invest $180 million as capital improvements at the chain of hospitals.
According to the deal, the chain will be managed by a company called Integrity Healthcare, instead of Catholic managers. The multi-billion hedge fund will have to run the group as a nonprofit for up to 15 more years.
But in the meantime BlueMountain needs to find new ways to boost their revenues. The fund plans to attract people with private insurance from other health care facilities in the state.
Daughters hospitals were nearly bought by Prime Healthcare Services who placed a bid of $843 million in 2014. But the transaction was called off as Prime dropped the deal because the conditions imposed by the California’s AG were too ‘onerous.’ One of those conditions was to keep the facilities open for at least 10 more years and continue to function as nonprofit.
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