Daughters of Charity Health System Board Selects BlueMountain to Recapitalize Six DCHS...

Daughters of Charity Health System Board Selects BlueMountain to Recapitalize Six DCHS Hospitals and Medical Foundation

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DOC-logo BlueMountain-logoThe Daughters of Charity Health System (DCHS) Board of Directors has selected BlueMountain Capital Management (BlueMountain), a private investment firm to recapitalize its operations. BlueMountain is contributing over $250 million of capital and is sponsoring Integrity Healthcare to manage and operate the six California hospitals and medical foundation, thus assuring the communities served by the hospitals a continuance of care.
Under the terms of the transaction, the DCHS board will transfer control of the hospitals to an independent board of directors, which will direct hospital operations. Integrity Healthcare, an entity owned by BlueMountain and formed to oversee the hospital group, will provide key management services and day-to-day operational support, while BlueMountain will provide significant new capital investment in the operations and facilities. BlueMountain is a global investment firm with more than $21 billion under management, having made several strategic equity and debt investments in companies and platforms that operate in complex sectors impacted by dynamic change and regulatory pressures, including healthcare facilities.
The transaction, which maintains DCHS and its hospitals as nonprofit entities, includes an option for BlueMountain to purchase the health system after three years. The DCHS board of directors and each hospital’s board of directors approved the transaction unanimously.
DCHS President and CEO Robert Issai announced the decision.
“In evaluating candidates to manage the hospitals, our priority was to seek the strongest bidder who could provide the greatest long-term financial stability while honoring the obligations to our associates, physicians, retirees and other constituents,” said Issai. “The transaction represents an extremely attractive opportunity for DCHS, allowing it to continue its operations and mission as a non-profit system with the support and backing of strong and well-qualified partner organizations. We are extremely excited by today’s announcement.”
Issai said BlueMountain’s selection ensures the communities served by the hospitals will have uninterrupted access to high quality health care, and that current and former hospital employees will see their current pension benefits remain the same. Upon the close of the transaction, all pension and retirement plans that are currently “church plans” will be required by law to become plans that are subject to the Employee Retirement Income Security Act of 1974, as amended (ERISA) and funded in accordance with ERISA’S requirements and standards. The transaction agreement must be reviewed and approved by the California Attorney General before it is finalized.