Case Study: DCHS

Daughters of Charity Health System (DCHS)

 

 

 

 

 

 

Situation

 

Daughters of Charity Health System (DCHS) in California was losing millions of dollars a month and  looking for a way to save the system’s five  safety net hospitals, skilled nursing facility and medical foundation. An earlier attempt to merge with another hospital system failed and then, a potential sale derailed when the state attorney general  imposed conditions the buyer considered too onerous. Rick was engaged in early fall as the system was trying to close an innovative, new deal with a hedge fund by the end of the year. The stakes were high. If the deal was approved by the attorney general and the terms were acceptable to the hedge fund, it could save the system and its mission of charity care, protecting thousands of  jobs and pensions. If the deal failed, the system  faced the very real threat of bankruptcy or even closure.

 

Approach

 

After assessing the situation, Rick took a “less is more” approach to DCHS communications regarding the transaction.

 

While there appeared to be support for the new hedge fund deal, there also was an undercurrent of suspicion and fear stemming from the negative reputation of the hedge fund industry. A small group of opponents was providing misleading information to the media and local politicians, hoping the attorney general would impose even tougher conditions this time around.

 

Given the complexity of the transaction and the short approval window, Rick decided the less DCHS said, the better. Responding to the sometimes anonymous naysayers’ claims could not only lend credibility to their misinformation, but create even more public confusion about the complicated deal.

 

Rick’s approach was to contain the news coverage as much as possible, only reaching out to the media to inform them of new developments or correct patently false information. When speaking with reporters, he continually reinforced the importance of closing the transaction to ensure the hospitals remained open for the communities they served.

 

In the background, Rick and the corporate communications team worked closely with hospital spokespeople to keep the attorney general’s public meetings on the transaction more on point and low key than the previous buyer’s meetings. This kept negative headlines to a minimum. At the same time, Rick and the team regularly updated union and non-union employees on the status of the deal to keep them informed and supportive of the transaction.

 

Result

 

Calling it “the largest and most complex nonprofit hospital transaction in California history,” the attorney general approved  the new transaction with  virtually the same conditions as those for the previous buyer, and the  new partner accepted. The transaction was completed just before the end of the year, saving the financially-troubled system from possible bankruptcy and closure. Today the regional healthcare system is under new management supported by the hedge fund, operating as Verity Health System with more than 8,000 employees and physicians.