HAYWARD -- The state attorney general has approved an agreement between St. Rose Hospital and Alecto Healthcare Services to manage the financially struggling facility with an option to buy.

But Attorney General Kamala Harris imposed strict conditions on the pact between the nonprofit St. Rose and for-profit Alecto, requiring the hospital to:

  • Maintain obstetric, cardiac, 24-hour emergency care and other services.

  • Continue treating low-income Medi-Cal patients.

  • Grant at least $6.2 million worth of charity care annually for those who lack adequate insurance. The charity care required would rise each year based on the increase in the Consumer Price Index.

  • Provide at least $470,000 annually in community benefit services approved by the hospital board, and

  • If Alecto decides to buy the hospital, spend at least $5 million within five years on capital improvements, equipment, information technology and infrastructure.

    "This was the important step that we needed," said Charles Ramorino, chairman of the St. Rose governing board. "I'm pleased. We've been waiting for this."

    Ramorino said he could not predict when or if Lex Reddy, who heads Alecto and is St. Rose's new president and chief executive officer, will exercise his option to buy the hospital.

    The attorney general's

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    approval was necessary because state law requires her office to consent to any sale or transfer of a nonprofit health facility whose assets are held in public trust.

    The outcome of her decision was anything but certain. Before forming Alecto, Reddy was the CEO of Prime Healthcare Services for 11 years. He resigned last February after the company became the target of investigations by the inspector general of the U.S. Department of Health and Human Services, the state attorney general's bureau of Medi-Cal fraud and the state Department of Public Health.

    Harris had blocked Prime from taking over Victor Valley Community Hospital in San Bernardino County shortly before Reddy resigned.

    But during a public hearing in December, numerous speakers said they feared St. Rose, a vital community asset, would close if the three-year pact with Alecto was rejected.

    Reddy could not be reached for comment, but he said in a prepared statement: "Alecto Healthcare is pleased with the attorney general's approval and looks forward to working with St. Rose's board of directors, medical staff, employees, patients and community members to ensure that St. Rose provides quality health care to all members of the community and is successful for years to come."

    Sandy Kleffman covers health. Contact her at 510-293-2478. Follow her at Twitter.com/skleffman.