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Source: US State of California

Thursday, September 26, 2019

Contact: (916) 210-6000, agpressoffice@doj.ca.gov

 State law requires owners of non-profit health facilities to secure approval of Attorney General for any sale of facilities  

SACRAMENTO—Attorney General Xavier Becerra today issued a letter conditionally approving the sale of several Verity Health System (Verity) medical facilities in San Mateo and Los Angeles Counties to Strategic Global Management, Inc. (SGM). The facilities at issue include Seton Medical Center and Seton Coastside in San Mateo County, and St. Vincent and St. Francis Medical Centers in Los Angeles County. Under California law, Corporations Code section 5914 et seq., and California Code of Regulations, title 11, section 999.5, any proposed sale of a nonprofit health facility to a for-profit corporation must secure the approval of the state Attorney General, whose statutory charge is to consider the factors set forth in the statute and regulations, including whether the transaction is in the public interest and whether the transaction affects the availability or accessibility of healthcare services to the affected community. The sale conditions specified in the Attorney General’s letter seek to protect the health and safety of patients and ensure continuity of care in the surrounding communities served by the hospitals. If Verity and SGM close on the sale, they are consenting to comply with the conditions. 

“The California Department of Justice has responsibility under state law to ensure that any proposed sale or transfer of a non-profit health facility protects the health and safety interests of the surrounding community. That’s because non-profit health facilities are established for the specific purpose of offering services to and benefitting the surrounding community,” said Attorney General Becerra. “The owners of these non-profit facilities benefit from favored tax and legal treatment that individuals and for-profit enterprises in the community cannot receive. Any prospective buyer of these non-profit hospitals understands the obligations to the community and to taxpayers that attach when assuming control of these health facilities. Maintaining the crucial, life-saving care that families in San Mateo County and Los Angeles County rely on – from cancer treatment to emergency services – is the backbone of this conditional sale agreement involving Verity’s hospitals.”

The Attorney General’s conditional approval of the sale of the Verity hospitals aims to protect the health and safety of patients who use and rely on these facilities and to maintain general access to medical care, like emergency room care, in surrounding communities. The Attorney General’s conditions are based on an independent expert’s in-depth analysis of the health and medical needs in the surrounding communities. These conditions call for SGM, the prospective purchaser, to:

  • Maintain Operations at the Hospitals: 
    • Conditional approval requires that St. Francis stay open for at least ten years after sale.
    • Conditional approval requires that St. Vincent stay open for at least five years after sale.
    • Conditional approval requires that Seton stay open for at least approximately 6 years after sale. 
  • Maintain Adequate Charity Care:
    • At St. Francis, conditional approval requires $12,793,435 in charity care for patients in the surrounding community;
    • At St. Vincent, conditional approval requires $696,643 in charity care for patients in the surrounding community; and
    • At Seton, conditional approval requires $1,055,863 in charity care for patients in the surrounding community.
  • Maintain Safety in Hospitals:
    • The expert report identified seismic issues at St. Vincent and Seton. Conditional approval requires construction benchmarks, including that seismic retrofitting construction at Seton start by April 1, 2020 and be completed by July 1, 2022, and that SGM commit the necessary investments required to maintain seismic compliance at St. Vincent.

A copy of the conditional approval letter can be found here.

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