>>“As a public agency, ETHD cannot legally make a ‘gift of public funds’ for $1.15M for the benefit of a for-profit corporation”
HEALTH CARE | The Eden Township Healthcare District really wants to support the purchase of Hayward’s St. Rose Hospital to a Southern California operator, but before doing so, it wants repayment of the remainder of its $3 million loan to the facility.

St. Rose, which ran the risk of bankruptcy in late 2011, turned to the District for emergency assistance to make payroll to be repaid in March 2012. However, by December 2011, St. Rose nearly defaulted on the loan before receiving an extension from the District.

Despite rosy prognostication at the time by the former CEO of St. Rose Michael Mahoney, the hospital’s fortunes have not improved. Over $1.1 million remains outstanding, according to the District, but the potential new owners excluded the remainder of the loan from its asset purchase agreement last November with the St. Rose Board of Directors.

“As a public agency, ETHD cannot legally make a “gift of public funds” for $1,150,000 for the benefit of a for profit corporation,” the District’s own elected Board of Directors said in a statement following their Dec. 19 meeting.

Although the asset purchase agreement filed by Alecto calls for the repayment of all loan agreements, it specifically excludes the remaining balance of the District’s loan to St. Rose. “We expect that Alecto will honor this loan agreement and treat the residents of the District consistently with the way they are treating the private banks and other creditors,” said Carole Rogers, the District’s board chair.

Alecto Healthcare Services, which was created just last year and is fronted by Dr. Lex Reddy, the former CEO of Prime Healthcare, the notorious for-profit hospital chain founded by his brother-in-law Dr. Prem Reddy. Prime also inquired about operating St. Rose last September.

The immediate fate of St. Rose presently rests in hands of the state attorney general’s office, who is reviewing Alecto’s proposal to run the facility. However, Attorney General Kamala Harris’s office has been cool to Prime’s consolidation of bankrupt hospitals into considerable profit centers on the backs of the state’s health care system and the poor. It is not clear whether Alecto, under the auspices of Prime’s former CEO will convert the safety net hospital into a for-profit enterprise.

In hindsight, the District’s ultimately poor investment in St. Rose starting in August 2011 was designed to prop up the struggling facility with an eye on a potential merger of the two. By the beginning of 2012, St. Rose and the county switched gears in favor of merging St. Rose with Fremont’s Washington Township Health Care District. In the end, neither plan came to fruition and the facility has continued to trudge along with short-term subsidies from the county and other groups. Many county officials maintain, despite wariness of Alecto and its ties to Prime, without approval of the purchase agreement by the attorney general, the facility will likely close.