Bankrupt hospital chain's plan to offload 5 California clinics faces opposition

Ayla Ellison (Twitter) - Print  | 

Verity Health, an El Segundo, Calif.-based hospital chain that filed for bankruptcy last year, is selling its assets. However, a proposed deal to divest five of its clinics has hit a snag.

In February, Silicon Valley Medical Development, an affiliate of El Camino Hospital in Mountain View, Calif., bid $1.27 million to purchase five of Verity's clinics, according to the Silicon Valley Business Journal. The tentative deal, which must be approved by the bankruptcy court, is facing opposition from some workers and a major insurer.

Unionized workers oppose the deal because it doesn't include job protections for them. The five clinics employ 146 members of SEIU-United Healthcare Workers West, all of whom are expected to lose their jobs when the sale closes. Affected workers will be allowed to reapply for their jobs using an online portal set up by El Camino Hospital, according to the Silicon Valley Business Journal.

Cigna is also opposing Verity's tentative agreement to sell the five clinics. In bankruptcy court documents filed March 12, Cigna argues Verity failed to give adequate notice of the proposed sale.

Based on a supplement to the asset purchase agreement filed by Verity on March 8, Cigna's provider agreements with the five clinics will end when they are sold. The proposed sale date of April 1 does not give Cigna enough time to notify patients of the change.

"Adequate, advance notice of the proposed severance of any clinic from the Cigna Provider Network must be provided in order to ensure that patients, covered individuals in the community and healthcare providers are smoothly transitioned from the clinics and are not economically prejudiced through no fault of their own," states Cigna's objection to the sale. "Indeed, recognizing the potential negative impact on enrollees and others, California law requires no less than 60 days' notice of any termination/discontinuation of a contract with a provider group."

Cigna said it needs additional time to notify its members of the changes. 

"To be clear, Cigna does not seek to compel the assumption and assignment of the Cigna Provider Agreements as part of the sale. Rather, it seeks adequate time to notify its members that the clinics will no longer be in-network as of a date certain," states the insurer's objection. 

In a statement to Becker's Hospital Review, Silicon Valley Medical Development President Bruce Harrison said a new contract is being negotiated with Cigna and other insurers. 

"All health insurance provider contracts are either part of the asset purchase agreement or, due to notification deadlines, will be separately entered into by SVMD," he said. "Both processes aim for continuing coverage for patients at the new clinics. In addition to Cigna, there are two other insurance payors (UnitedHealthcare and HealthNet) with whom SVMD is negotiating separate contracts."

More articles on healthcare finance:

Trinity Health posts $301M loss in first half of fiscal year
Private equity pushes into healthcare: 11 latest deals
Financial troubles force Oklahoma hospital to hold food drives to feed patients

© Copyright ASC COMMUNICATIONS 2019. Interested in LINKING to or REPRINTING this content? View our policies by clicking here.

To receive the latest hospital and health system business and legal news and analysis from Becker's Hospital Review, sign-up for the free Becker's Hospital Review E-weekly by clicking here.