House members urge AG to nix hospital sale

Rep. Mike Honda and Rep. Zoe Lofgren led 16 other California House members Thursday in urging California Attorney General Kamala Harris to reject the sale of six Daughters of Charity Health System hospitals to a for-profit company they say has a history of unfair business practices.

Honda and Lofgren, both D-San Jose, cited concerns that under Prime Healthcare Services, “patient care and healthcare worker rights will suffer at these hospitals.”

Los Altos Hills-based Daughters of Charity, a Catholic system, wants to sell Daly City’s Seton Medical Center and Seton Coastside satellite campus, O’Conner Hospital in San Jose, Gilroy’s Saint Louise Regional Hospital and two Los Angeles-area medical centers to Ontario, Calif.-based Prime Healthcare, a $2.5 billion system with 29 hospitals and 4,700 beds in nine states.

Harris may reject the sale based on any factors found relevant, including: whether the sale is in the public interest; whether it would create significant effects on the availability of health care services in the community; or whether the proposed use of the proceeds from the transaction is consistent with the charitable trust under which the hospitals have operated.

“Our biggest concern is Prime’s history of unfair business practices that have resulted in civil and criminal investigations by government agencies for allegedly overbilling Medicare as well as violations of patient confidentiality,” the lawmakers wrote in their letter to Harris. “The National Labor Relations Board has issued charges against Prime for such illegal practices as unilaterally cutting employee health insurance plans, interrogating and intimidating employees who are supportive of their union, bad faith bargaining and bribing employees to vote to decertify the union. Class action and wage and hour violation lawsuits have been filed against Prime at 11 of their 15 California hospitals.”

That, combined with the mission of these hospitals to serve the most-needy residents raises substantial doubts as to the sensibility of this sale, they say.

Others House members signing the letter included Sam Farr, D-Carmel; Anna Eshoo, D-Palo Alto; Jackie Speier, D-San Mateo; Barbara Lee, D-Oakland; Mike Thompson, D-Napa; and George Miller, D-Martinez.

UPDATE @ 10:07 FRIDAY: It seems these House members have taken a side in a battle between two unions. SEIU-United Healthcare Workers opposes letting Daughters of Charity sell to Prime Healthcare, while the California Nurses Association/National Nurses United supports the deal.

CNA/NNU in October reached an agreement with Prime Healthcare including a pledge to keep open for at least five years O’Connor in San Jose, Saint Louise Regional Hospital in Gilroy, Seton Medical Center in Daly City, and St. Vincent Medical Center in Los Angeles. Prime also promised it has no intention of reducing patient services or taking actions that would put the services at risk, as well as respecting collective bargaining rights, jobs, pension rights and existing labor standards at the hospitals covered by the pact.

Another potential buyer, private equity firm Blue Wolf Capital, refused to commit to keeping the hospitals open, protecting patient services, or honoring employee contracts or existing labor standards, CNA/NNU says.

And so CNA/NNU nurses, joined by nuns associated with Daughters of Charity, will hold a vigil Friday afternoon outside O’Connor Hospital “to urge state officials to take the steps needed to preserve the hospitals for public safety. CNA co-president Zenei Cortez said those opposing the sale “without offering an alternative that would protect our patients and our communities are putting everyone at risk. Nurses will not be silent in the face of this emergency.”


Jerry Brown nixes state buildings’ sale/leaseback

Gov. Jerry Brown announced this morning that he’s deep-sixing former Gov. Arnold Schwarzenegger’s already-in-motion plan to sell and then lease back 11 state office buildings, saying it would fleece taxpayers in the long run.

Among the state buildings that had been on the sale block were the Elihu Harris Building, at 1515 Clay St. in Oakland; the Earl Warren/Hiram Johnson complex that houses agencies including the state’s Supreme Court, at 350 McAllister/455 Golden Gate Ave. in San Francisco; and the Public Utilities Commission Building, at 505 Van Ness Ave. in San Francisco.

The nonpartisan Legislative Analyst’s Office had panned the plan last April.

“We estimate that the sale of buildings would result in one-time revenue to the state of between $600 million and $1.4 billion, but that annual leasing costs would eventually exceed ownership costs by approximately $200 million. Over the lives of these buildings, we estimate the transaction would cost the state between $600 million and $1.5 billion,” the LAO reported at the time. “In our view, taking on long-term obligations—like the lease payments on these buildings—in exchange for one-time revenue to pay for current services is bad budgeting practice as it simply shifts costs to future years.”

Brown apparently took that to heart, saying today that the plan “was short-sighted and would have cost taxpayers billions of dollars in the long-run. Selling and leasing back the state’s buildings for one-time gains is not prudent.”

State Controller John Chiang quickly agreed. “While the sale of these buildings would have provided immediate cash for the state, it would have cost Californians more over the long haul. Selling low and renting high would not have served taxpayers’ interests,” he said. “This decision shows Governor Brown is serious about ending the budget gimmicks and sideshows. Only real, on-going solutions will improve our balance sheet and solve our annual fiscal problems.”

The Legislature approved a 2009-10 budget that authorized the sale, and the 2010-11 budget assumes $1.2 billion in revenues from it. But Brown said he’ll propose amending his budget proposal to include borrowing $830 million from special fund reserves, to be paid back by FY 2013-14, so program budgets won’t be affected by the sale’s cancellation. He said that’s all that needs to be borrowed because of other new revenues and cost savings including $90 million more from the Medi-Cal managed care tax and $100 million less in prison infrastructure project costs.

The new owners – California First LLC, a partnership led by a Texas real estate firm and an Irvine-based private equity firm – were to take over the buildings Dec. 15, but that was scuttled by a November lawsuit filed in San Francisco by former state building officials whom Schwarzenegger had removed for questioning the deal. A judge’s emergency stay pushed the deal’s closing beyond Schwarzenegger’s term in office, and put the ball in Brown’s court.

UPDATE @ 11:58 P.M.: State Senate President Pro Tem Darrell Steinberg, D-Sacramento, is down with Brown’s “wise decision,” too. “The proposed sale and lease-back of state buildings was a fiscally irresponsible idea conceived by the former administration as an alternative to an honest budget proposal,” he said. “Governor Brown’s plan preserves the state’s assets and is fiscally responsible.”


State buildings, UC costs, Jean Quan on ‘TWINC’

I was on KQED’s “This Week in Northern California” last night to discuss the plan to sell and then lease back state buildings in order to raise quick cash to help close our budget gap. Other topics included UC tuition hikes and San Francisco’s governmental tumult, and Belva Davis interviewed Oakland Mayor-Elect Jean Quan.