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Daughters: Deal saves financially troubled hospitals

December 17, 2015

Daughters of Charity Health System has closed a transaction with BlueMountain Capital Management/Integrity Healthcare and created Verity Health System, saving the system’s six financially troubled hospitals.

The transaction, approved by California Attorney General Kamala Harris Dec. 3, preserves the system’s mission of care while protecting labor agreements and pensions for thousands of current and former employees, Daughters announced Dec. 14.

Under the terms of the transaction, BlueMountain is contributing up to $260 million of capital and sponsoring Integrity, an entity owned by BlueMountain to manage Verity’s six California hospitals and medical foundation.

“We thank Attorney General Harris for approving the transaction,” said DCHS president and CEO Robert Issai. “This large infusion of capital will provide a great jump-start on the many strategic, operational and capital initiatives desperately needed in our hospitals.”

Effective immediately, the DCHS hospitals, DCHS Medical Foundation and other subsidiaries are part of Verity, a new, nonreligious, not-for-profit California healthcare system governed by a new, independent board of directors. Integrity will provide management services and operational support to Verity for a minimum of 15 years. Verity has pledged to preserve the hospitals’ mission of charity care, honor existing labor agreements and preserve the pensions of over 17,000 current and former employees.

“Verity will proudly continue the mission of care begun by the Daughters of Charity more than 150 years ago,” said Mitchell R. Creem, CEO of Verity Health System. “I am extremely pleased and grateful for the opportunity to carry on this tradition of excellence, with new leadership and significant investments.”

The Los Altos-based Daughters health system consists of Seton Medical Center, Daly City; Seton Coastside, Moss Beach; O’Connor Hospital, San Jose; Saint Louise Regional Hospital, Gilroy; St. Vincent Medical Center, Los Angeles; St. Francis Medical Center, Lynwood; and the DCHS Medical Foundation based in San Jose.

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