2 California hospitals face closure if sale delayed

https://www.beckershospitalreview.com/finance/2-california-hospitals-face-closure-if-sale-delayed.html?origin=cfoe&utm_source=cfoe

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Santa Clara County (Calif.) officials criticized California Attorney General Xavier Becerra at a press conference Jan. 24 for trying to block the county’s purchase of two bankrupt hospitals, according to The Mercury News.

In December, the bankruptcy court approved Santa Clara County’s $235 million offer to buy O’Connor Hospital in San Jose and St. Louise Regional Hospital in Gilroy from El Segundo, Calif.-based Verity Health, which entered Chapter 11 bankruptcy in August. Mr. Becerra appealed the bankruptcy court’s approval of the sale earlier this month, putting the deal in jeopardy.

Mr. Becerra is seeking to halt the sale because Santa Clara County has not agreed to conditions put in place in 2015 when private hedge fund Blue Mountain Capital acquired six hospitals owned by Los Altos, Calif.-based Daughters of Charity Health System. The deal and name change to Verity were approved, subject to several conditions.

“In this case, we have the responsibility to ensure any transfer of the hospital maintains previously imposed conditions,” Mr. Becerra’s office said in an emailed statement to The Mercury News. “The conditions include the requirement to have an emergency room, inpatient facility beds, intensive care services, and NICU. The Attorney General is fighting to ensure these conditions are enforced.”

At the Jan. 24 press conference, Santa Clara County CEO Jeff Smith, MD, said Mr. Becerra cares more about maintaining “power and control” over regulations than local residents’ access to public hospitals, according to the report.

A bankruptcy court hearing on Mr. Becerra’s request to halt the sale of the hospitals is set for Jan. 30. Dr. Smith said the outcome of the hearing could determine whether the hospitals shut down.

“If that stay is granted, that will delay the process … and it is highly likely those hospitals will close,” he said, according to The Mercury News.

O’Connor Hospital and St. Louise Regional Hospital are two of the six hospitals Verity operated when it filed for bankruptcy protection. On Jan. 18, Verity announced it had received a $610 million offer for the other four hospitals.

 

 

Hospital bankruptcies continue to skyrocket: 3 things to know

https://www.beckershospitalreview.com/finance/hospital-bankruptcies-continue-to-skyrocket-3-things-to-know.html?origin=ceoe&utm_source=ceoe

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More than 20 hospitals have filed for Chapter 11 bankruptcy since 2016, according to an Oct. 30 report from the law firm Polsinelli.

The Polsinelli-TrBK Distress Indices Report details how healthcare trends have affected the U.S. economy. Researchers determined that while the economy, specifically Chapter 11 bankruptcies across all industries and the real estate industry, have remained stable during the past several quarters, healthcare exhibited consistently high levels of distress during eight of the last 11 quarters.

To compile the report, researchers use Chapter 11 bankruptcy data as a proxy for measuring financial distress in the overall U.S. economy and breakdowns of distress specifically in real estate and healthcare.

Here are three things to know from the report:

1. Southwestern states have been hit the hardest by healthcare bankruptcy filings. For example, increased competition, insurance payer pressure and overexpansion contributed to Neighbors Legacy Holdings in Houston, a freestanding emergency facility operator with more than 30 facilities, to file for bankruptcy earlier this year.

2. While general Chapter 11 bankruptcies have decreased 53 percent from the 2010 benchmark, healthcare industry distress increased by 305 percent during the same period.

3. The law firm’s Health Care Services Distress Research Index was 405 for the third quarter of 2018, an increase of 65 points from the second quarter of 2018. The third-quarter figures represent a year-over-year increase of 82 points.

To learn more, click here.

California health system’s bankruptcy challenged by employee union

https://www.beckershospitalreview.com/finance/california-health-system-s-bankruptcy-challenged-by-employee-union.html

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El Segundo, Calif.-based Verity Health System, the nonprofit operator of six hospitals, filed for bankruptcy protection Aug. 31. The bankruptcy proceedings are being challenged by SEIU-UHW, a union representing 2,000 workers at Verity Health hospitals.

The hospitals were originally owned by Los Altos, Calif.-based Daughters of Charity Health System. The financially troubled system began seeking a buyer for the hospitals in 2014, and Integrity Healthcare, a company created by BlueMountain Capital Managementtook over the facilities in 2015 and renamed them Verity Health System. Billionaire Patrick Soon-Shiong, MD, bought Integrity in July 2017, according to the Los Angeles Times.

Dave Regan, president of SEIU-UHW, expressed concern about Verity entering bankruptcy.

“When Verity bought these hospitals from Daughters of Charity four years ago, they made promises to these communities that they would not lose access to the care they needed,” he said in a press release. “Now it looks like Verity’s billionaire owner wants to go back on those commitments.”

In the bankruptcy filing, Verity seeks court permission to sell the hospitals from any liens and encumbrances. SEIU-UHW contends this shows Verity’s “intent to nullify their obligations both to their union collective bargaining agreements and the conditions of sale imposed by former Attorney General Kamala Harris when Verity purchased the hospitals.”

By challenging the bankruptcy filing, SEIU-UHW intends to ensure the hospitals are kept open and continue to meet pension obligations and maintain current services and levels of employment.

 

 

California’s Verity system files bankruptcy, faces $175M in annual losses

https://www.healthcaredive.com/news/californias-verity-system-files-bankruptcy-faces-175m-in-annual-losses/531524/

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Dive Brief:

California-based Verity Health System filed for Chapter 11 bankruptcy late last week. The nonprofit operator blamed ongoing losses and debt, along with aging infrastructure and an inability to renegotiate contracts, for its tenuous operating position. The system secured debtor financing of up to $185 million, and plans to keep its six hospitals open during the bankruptcy proceedings.

The Friday filing follows a statement in July noting that Verity was exploring different avenues to pull the system out of its slump, including the potential sale of some or all of its hospitals and other facilities.

Last year, billionaire investor and entrepreneur Patrick Soon-Shiong purchased Integrity Healthcare, the company that manages Verity, with the intent to revitalize the system and upgrade its technology while continuing to serve lower-income populations. Yet, “after years of investment to assist in improving cash flow and operations, Verity’s losses continue to amount to approximately $175 million annually on a cash flow basis,” and more than $1 billion overall, Verity CEO Richard Adcock said in the company’s bankruptcy announcement.

Dive Insight:

The company has been struggling for a while and can “no longer swim against the tide” of its operating reality, which includes a legacy burden of more than a billion dollars of bond debt and unfunded pension liabilities, an inability to renegotiate burdensome contracts, the continuing need for significant capital expenditures for seismic obligations and aging infrastructure,” Adcock said.

Verity’s problems come in an caustic environment for U.S. hospitals, many of which are suffering from costs that are rising faster than revenues. Credit rating agency Moody’s warned just last week that the nonprofit provider industry was on an “unsustainable path.”

A recent MorganStanley analysis found that about 18% of American hospitals were at risk of closure or performing weakly, a high figure in historical context. Only 2.5% of hospitals closed over the past five years, yet Moody’s estimated 8% of the 6,000 hospitals studied were apt to close their doors. Additionally, more nonprofit hospitals suffered credit downgrades in 2017, and Moody’s revised its outlook for the hospital sector from stable to negative.

But it’s not only industry pressure that’s causing Verity to fold. Another burden is the management of Soon-Shiong, who’s been hit with backlash for the way he runs his businesses and methods.

The South Africa-born surgeon and investor purchased the hospitals in July 2017, following a 2015 acquisition by New York hedge fund BlueMountain Capital Management. The system had struggled financially for years and needed the influx of cash both buys gave it.

“There’s going to be a huge capital need,” Soon-Shiong said at the time. “There’s been little investment because these hospitals could not afford it.” He said he planned to bring in new equipment and technology, along with expanded oncology, transplant, cardiology and orthopaedic services. Through his company NantWorks, Soon-Shiong funneled more than $300 million into the system within the year, but Verity’s losses continued to mount.

At the time of the acquisition, Soon-Shiong, who has founded and sold multiple biotech companies and now owns a stake in the Los Angeles Times and L.A. Lakers, heralded the charity work done by the hospital, but said the restructuring was “inevitable” due to years of underinvestment.
Touted plans to revitalize the flagging hospital system didn’t pan out, and some of Soon-Shiong’s critics say it was intentional.

“It has become crystal clear by the bankruptcy announcement that he virtually had no intention of keeping these hospitals open and to continue to serve the poor,” San Mateo County Supervisor David Canepa told news outlets following the announcement.

Labor unions are similarly displeased. SEIU-UHW representative David Miller reportedly said “there were other paths out of this” and that it’s a “very destructive approach,” as the bankruptcy filing could put employee pensions at risk.

But in the press release, Adcock said the bankruptcy filing was the best thing for all involved, and told Reuters that the 1,650-bed, 6,000-employee company has already received interest from more than 100 parties. Potential suitors include large national operators. Any sales will now be supervised by the bankruptcy court and approved by regulators

 

 

6-hospital Verity Health files for bankruptcy

https://www.beckershospitalreview.com/finance/6-hospital-verity-health-files-for-bankruptcy.html

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El Segundo, Calif.-based Verity Health, which operates six hospitals in Northern and Southern California and maintains ties to billionaire former surgeon Patrick Soon-Shiong, MD, filed for bankruptcy Aug. 31, Reuters reports.

Verity Health CEO Richard Adcock told Reuters he expects the system to remain in bankruptcy protection for at least a few years as it restructures and continues working with potential buyers.

The bankruptcy announcement comes on the heels of several deals that left the system with more than $1 billion in pension liabilities and bond debt. Verity Health reportedly secured a $185 million loan to remain operational.

Mr. Adcock added the system has been losing nearly $175 million per year on a cash flow basis.

In July, Verity Health revealed it is examining all strategic options, including a sale, of some or all of its hospitals. Mr. Adcock told Reuters the system has received a number of offers, including from several large national hospital operators.

Dr. Soon-Shiong, who has founded and sold several biotech companies and recently purchased the Los Angeles Times and other newspapers for $500 million, acquired Verity Health’s management company in 2017. At the time, he said his goal was to revitalize the health system, which has come to employ 6,000-plus people as of 2017.

Mr. Adcock said the health system is re-examining all of its contracts, including the management deal with Dr. Soon-Shiong, Reuters reports.

 

6 latest hospital bankruptcies

https://www.beckershospitalreview.com/finance/6-latest-hospital-bankruptcies-082018.html

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From reimbursement landscape challenges to dwindling inpatient volumes, many factors lead hospitals to file for bankruptcy.

Here are six hospitals that have filed for bankruptcy protection since Jan. 1:

1. Rockdale, Texas-based Little River Healthcare, its parent company and several of its affiliated entities entered Chapter 11 bankruptcy July 24. One of the hospitals included in the bankruptcy filing, Crockett, Texas-based Timberlands Hospital, closed in 2017.

2Florence (Ariz.) Hospital at Anthem entered Chapter 11 bankruptcy in late May after it failed to contest an involuntary bankruptcy petition from creditors within the required 21-day timeline.

3. Gilbert (Ariz.) Hospital, which is affiliated with Florence Hospital at Anthem, entered Chapter 11 bankruptcy May 24.

4. The Miami Medical Center, a 67-bed hospital that suspended services in October 2017, filed for Chapter 11 bankruptcy protection March 9. The hospital was sold in auction in late June.

5. Iron County Medical Center, a critical access hospital in Pilot Knob, Mo., filed for Chapter 9 bankruptcy Feb. 21. The hospital is owned by the Iron County Hospital District.

6. Surprise Valley Health Care District, which operates 26-bed Surprise Valley Hospital in Cedarville, Calif., filed for Chapter 9 bankruptcy Jan. 4.

 

‘No profit, no mission’ — Why this CEO believes every healthcare leader needs a strong understanding of finance

https://www.beckershospitalreview.com/hospital-management-administration/no-profit-no-mission-why-this-ceo-believes-every-healthcare-leader-needs-a-strong-understanding-of-finance.html

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In this special Speaker Series, Becker’s Healthcare caught up with Mark R. Anderson, CEO of AC Group, a healthcare technology and advisory research firm based in Montgomery, Texas.

Mr. Anderson will speak on a panel at Becker’s Hospital Review 7th Annual CEO + CFO Roundtable titled “The CEO paradox: Can you really have volume and value?” at 12:00 p.m. on Monday, Nov. 12. Learn more about the event and register to attend in Chicago.

Question: What keeps you excited and motivated to come to work each day?

Mark Anderson: The knowledge that we are finally moving away from fee-for-service billing to value-based reimbursement. For example, at AC Group, we have been able to cut medical costs for diabetic patients by 38 percent just by tracking blood sugar levels at home. Pay for results — don’t pay for just seeing the patient.

Q: What major challenges, financial or otherwise, are affecting hospitals in the markets you serve? How is your hospital responding?

MA: With hospital bankruptcies on the rise, we need to change how we deliver cost effective care and how we are paid. Because of high deductible health plans, the patient portion of the bill has increased from 9.4 percent in 2019 to 26.9 percent in 2017. How do we collect from the patient? How can we share clinical information about the patient with all providers without hurting our financial position?

Q: What initially piqued your interest in healthcare?

MA: It was my high school graduation present from my father. I wanted a trip to Hawaii and all I got was a letter stating, “Congratulations for finishing in the top 4 percent of your high school class. For your reward, you start work on Monday as the statistician for the hospital CEO.” Forty-five years and 250 hospitals later, I am still in hospital executive management.

Q: What is one of the most interesting healthcare industry changes you’ve observed in recent years?

MA: To name a few: Moving to electronic billing in 1985, moving from spending 2.1 percent on IT in 2005 to over 6.5 percent today (was it worth it?), forcing physicians to become data entry clerks so we can maximize coding with very little improvement in “health,” and moving to value-based reimbursement from fee-for-service so we are finally paid on quality, outcomes and our ability to lower costs through care coordination and remote patient monitoring. The four walls of the hospital are not the only care delivery system. Ninety-five percent of healthcare is delivered in the home.

Q: What is one piece of professional advice you would give to your younger self?

MA: Don’t enter the healthcare market without a strong financial knowledge base. Healthcare is a business. As the nuns told me back in 1976, no profit — no mission to help the poor and disadvantaged.