California approves $40 million sale of Daly City hospital with conditions
Danielle Echeverria July 29, 2020 Updated: July 29, 2020 6:48 p.m.
Seton Medical Center is seen on Thursday, January 9, 2020 in Daly City, Calif. Seton Medical Center a hospital that is the largest employer in Daly City and serves mostly low-income patients, seniors and a large Filipino population, is facing an uncertain future after the company that was closing a deal to buy the hospital from its current bankrupt owner Verity Health backed out of the deal.
Photo: Lea Suzuki / The Chronicle
After months of negotiations, the state has conditionally approved the $40 million sale of Seton Medical Center in Daly City and its Moss Beach facility. The hospital system, long plagued by financial instability, serves many low-income and elderly patients in the Bay Area.
The office of Attorney General Xavier Becerra will allow Southern California-based AHMC Healthcare to purchase the hospital system from its current owner, Verity Health of California, as long as the buyer accepts a list of conditions.
Because a for-profit company is buying the medical centers from a nonprofit, the attorney general must evaluate whether the sale is in the public interest or impacts the accessibility of health care.
AHMC is required to keep both centers open for at least 5½ years after the sale and to maintain cardiac, critical care services and women's health services.
It will also have to cover the full cost of health care for the uninsured and underinsured, or those who earn at or less than 250% of the federal poverty level — $31,900 for an individual and $54,300 for a family of three. The buyer must also provide discounted health care for other low-income patients.
AHMC is required to commit $1 million in charity care for patients in the surrounding community for six years after the sale.
The approval of the sale offers a lifeline to Seton, which has recently been at risk for closure.
For decades, the Seton hospitals were two of six run by the Catholic nonprofit Daughters of Charity. In 2015, the nonprofit transferred the hospitals to a subsidiary of New York hedge fund Blue Mountain Capital, which became known as Verity Health System after losing millions of dollars each year in part due to treating uninsured patients who could not pay for medical care.
In 2018, Verity filed for Chapter 11 bankruptcy, casting more uncertainty onto the hospitals' future. In 2019, negotiations to sell to Strategic Global Management, an affiliate of health management company KPC Group, fell through. A bankruptcy court approved the sale to AHMC in April.
During the coronavirus pandemic, the 300-bed Daly City center has been designated by the state to accommodate people with COVID-19, including San Quentin State Prison inmates.
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San Mateo County Supervisor David Canepa has said that if Seton closed, it would create a "doughnut hole" in medical care.
"Seton hospital serves a lot of people, poor people and indigent people. Without having that hospital there, the adverse effects to health outcomes will be disastrous," he previously told The Chronicle.
Becerra said that the conditional sale will maintain quality care that the community relies on.
"As the COVID-19 public health crisis continues to mount, it's crucial that California communities have access to lifesaving hospital care," he said in a statement on July 27. "That's why the conditions we have attached to the proposed sale of Seton focus on improving care and services at the facilities — increasing the amount of charity care, the benefits to the community, and investment in improvements for the facilities."
Danielle Echeverria is a San Francisco Chronicle staff writer. Email: danielle.echeverria@sfchronicle.com Twitter: @DanielleEchev
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Danielle Echeverria is a reporting intern for The Chronicle's business team. She studied Science, Technology, and Society as an undergraduate at Stanford, where she is now a master's student in journalism. She writes for her campus newspaper and previously interned at Big Local News focusing on data journalism. She is originally from Bakersfield, California.
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