Verity gets OK to sell 384-bed bankrupt hospital to Prime Healthcare, despite objections

St. Francis Medical Center | Verity Health

Despite objections for California attorney general and a last-minute attempt from an opposing bidder to block the sale, El Segundo, Calif.-based Verity Health System won bankruptcy court approval to sell a 384-bed hospital in Lynwood, Calif., to Prime Healthcare Services, according to The Wall Street Journal.  

California Attorney General Xavier Becerra conditionally approved the sale to Prime in July. Mr. Becerra set 21 conditions for the sale of St. Francis Medical Center to Prime Healthcare, a for-profit provider based in Ontario, Calif.

Verity challenged three of the conditions outlined by the attorney general, saying they were overly burdensome. The disputed conditions revolved around the amount of charity care and community-benefit services the hospital would need to provide.

As a result, the attorney general opposed authorizing the sale and approving Verity’s Chapter 11 liquidation plan, according to the Journal. 

U.S. Bankruptcy Judge Ernest Robles overruled the objections, which should allow the $350 million sale to finalize. The judge also said he would approve Verity’s Chapter 11 liquidation plan.

In addition, in late July, Los Angeles-based Prospect Medical Holdings made a last-minute attempt to block Prime from buying St. Francis Medical Center.

Prospect Medical, backed by a private equity firm, reportedly offered to pay $50 million more than Prime and offered to accept all of the attorney general’s conditions. 

However, the bankruptcy judge said Prospect lacked standing to oppose the Prime sale, and it didn’t submit its bid until after the deadline passed, according to the report.

Read the full article here




Quorum Health to emerge from bankruptcy next month

Dive Brief:

  • For-profit hospital operator Quorum Health received approval of its plan to recapitalize the business Monday in U.S. Bankruptcy Court for the District of Delaware. Quorum expects to emerge from bankruptcy in early July, according to regulatory filings.
  • The system filed for Chapter 11 bankruptcy April 7 to address current liquidity needs while continuing to care for patients and keep its hospitals operating amid a pandemic, according to a statement. It entered into a restructuring agreement with a majority of its lenders and noteholders.
  • Quorum still needs the court to issue a final order, but said the reorganization will reduce its debt by about $500 million, as originally expected.

Dive Insight:

Tennessee-based Quorum Health, which operates 22 rural and mid-sized hospitals in 13 states, may have been more ill-positioned financially than other systems going into the pandemic.

The company went public in May 2016 with 38 hospitals — 14 of which have since shuttered. In 2017, private equity firm KKR took a 5.6% stake in the system for $11.3 million.

Beyond being Quorum’s largest debt-holder today, KKR also owns about 9% of its public shares. In December, the firm offered to buy Quorum out and take the hospital chain private at $1 a share.

But that didn’t pan out, and Quorum instead ended up filing for bankruptcy in April, soon after the COVID-19 pandemic hit. The restructuring agreement now “allows our company to begin a new chapter with the flexibility and resources to continue supporting our community hospitals as they serve on the frontlines of this pandemic and beyond,” Marty Smith, Quorum’s executive vice president and chief operating officer, said in a statement Monday.

“We are grateful for the confidence of our financial stakeholders and partners, as well as our dedicated employees and physicians, and look forward to building on the significant progress we have made in strengthening our operations in recent years,” he said.





29 hospital bankruptcies in 2020

Hospital Bankruptcy | HENRY KOTULA

From reimbursement landscape challenges to dwindling patient volumes, many factors lead hospitals to file for bankruptcy. At least 29 hospitals across the U.S. have filed for bankruptcy this year, and the financial challenges caused by the COVID-19 pandemic may force more hospitals to enter bankruptcy in coming months.

COVID-19 has created a cash crunch for many hospitals across the nation. They’re estimated to lose $200 billion between March 1 and June 30, according to a report from the American Hospital Association. More than $161 billion of the expected revenue losses will come from canceled services, including nonelective surgeries and outpatient treatment. Moody’s Investors Service said the sharp declines in revenue and cash flow caused by the suspension of elective procedures could cause more hospitals to default on their credit agreements this year than in 2019.

The hospitals that have filed for bankruptcy this year, which are part of the health systems listed below, have not cited the pandemic as a factor that pushed them into bankruptcy. Though most of the hospitals are operating as normal throughout the bankruptcy process, at least two of the hospitals that entered bankruptcy this year have shut down.

Quorum Health
Brentwood, Tenn.-based Quorum Health and its 23 hospitals filed for Chapter 11 bankruptcy April 7. The company, a spinoff of Franklin, Tenn.-based Community Health Systems, said the bankruptcy filing is part of a plan to recapitalize the business and reduce its debt load.

Randolph Health
Randolph Health, a single-hospital system based in Asheboro, N.C., filed for Chapter 11 bankruptcy March 6. Randolph Health leaders have taken several steps in recent years to improve the health system’s financial picture, and they’ve made progress toward that goal. Entering Chapter 11 bankruptcy will allow Randolph Health to restructure its debt, which officials said is necessary to ensure the health system continues to provide care for many more years.

Faith Community Health System
Faith Community Health System, a single-hospital system based in Jacksboro, Texas, filed for bankruptcy protection on Feb. 29. The health system, part of the Jack County (Texas) Hospital District, entered Chapter 9 bankruptcy — a bankruptcy proceeding that offers distressed municipalities protection from creditors while a repayment plan is negotiated.

Pinnacle Healthcare System
Overland Park, Kan.-based Pinnacle Healthcare System and its hospitals in Missouri and Kansas filed for Chapter 11 bankruptcy on Feb. 12. Pinnacle Regional Hospital in Boonville, Mo., formerly known as Cooper County Memorial Hospital, entered bankruptcy about a month after it abruptly shut down. Pinnacle Regional Hospital in Overland Park, formerly called Blue Valley Hospital, closed about two months after entering bankruptcy.

Thomas Health
South Charleston, W.Va.-based Thomas Health and its two hospitals filed for Chapter 11 bankruptcy on Jan. 10. In an affidavit filed in the bankruptcy case, Thomas Health President and CEO Daniel J. Lauffer cited several reasons the health system is facing financial challenges, including reduced reimbursement rates and patient outmigration. The health system said the bankruptcy process will help it address its long-term debt and pursue strategic opportunities.




Envision hires restructuring advisers, considers bankruptcy filing

Envision Healthcare Said to Be Considering Bankruptcy, 2 Years ...

Envision Healthcare, a Nashville, Tenn.-based physician staffing company owned by private equity firm KKR, is struggling to manage its $7 billion debt load and recently hired lawyers and an investment bank to advise on its restructuring options, sources told Bloomberg.

The company is looking at restructuring options, including a potential Chapter 11 bankruptcy filing, as it faces financial pressure from the COVID-19 pandemic, according to Bloomberg. Envision has seen a significant decline in patient volume across its practices and specialties during the pandemic.  

No decision has been made on a course of action for Envision, and the company is still seeking to ease its debt burden by swapping $1.2 billion of unsecured notes for a new term loan. Creditors have until the end of the month to decide whether to participate in the deal.

The company is exploring its restructuring options after taking several steps to improve its financial position, including holding back pay for physicians, reducing salaries of senior leadership and furloughing nonclinical staff. The company said clinical pay will be reduced in services with low patient volumes, and performance-based bonuses and clinician profit-sharing will be delayed until the fall. Additionally, Envision temporarily suspended retirement contributions, merit increases and promotions for all employees.

About a week after Envision implemented many of the changes, U.S. Sen. Elizabeth Warren of Massachusetts and U.S. Rep. Katie Porter of California sent a letter to Envision and other healthcare staffing companies backed by private equity regarding pay and benefits.

The letter, which Ms. Porter posted on Twitter, said Envision is cutting its physicians’ pay and benefits, “all while our doctors face new financial strains of their own” amid the COVID-19 pandemic.

In response, Envision cited challenges healthcare organizations are facing.

“The nation’s healthcare system has experienced a drastic drop in patient volume since the beginning of the COVID-19 crisis,” wrote Envision, which has more than 40,000 team members, 27,000 of whom are physicians and clinicians. “Even as COVID-19 fills emergency departments in hot spots around the country, Envision’s overall emergency volume is actually down 45 percent.”

Hospital and physician groups are trying to secure funds from the Coronavirus Aid, Relief and Economic Security Act and get additional aid. Though the private equity industry is lobbying Washington to gain access to the funds, it remains unclear whether private equity-backed companies like Envision will receive the emergency government funds. 





Hospital M&A update: 6 latest deals

Looking at Hospital M&A Activity in the Value-Based Care World ...

Six transactions involving hospitals and health systems announced, finalized or advanced in the last month:

1. Bankrupt Verity Health to sell 384-bed hospital to Prime Healthcare Services
Bankrupt Verity Health System will sell its 384-bed hospital in Lynnwood, Calif., to for-profit hospital operator Prime Healthcare Services.

2. Kootenai Health acquires 2 hospitals from Essentia Health
Coeur d’Alene, Idaho-based Kootenai Health has acquired two hospitals from Duluth, Minn.-based Essentia Health.

3. West Virginia hospital on brink of closure secures buyer
A bankruptcy court has approved a $3.7 million bid for Williamson (W.Va.) Hospital. The new owner, Williamson Health & Wellness Center, will take over the facility on April 30.

4. Christus Health finalizes acquisition of AdventHealth’s 170-bed hospital
Christus Health has finalized its acquisition of Central Texas Medical Center, a 170-bed facility in San Marcos.

5. CarePoint Health reaches deal to sell New Jersey hospital
After months of uncertainty about a potential sale, Jersey City, N.J.-based CarePoint Health has agreed to sell one of its hospitals to Bayonne, N.J.-based BMC Hospital.

6. Penn Highlands Healthcare to absorb Pennsylvania hospital
Tyrone (Pa) Hospital plans to integrate with DuBois, Pa.-based Penn Highlands Healthcare, the two organizations announced March 18.