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Conditions on sale of 4 California hospitals endanger deal

El Segundo, Calif.-based Verity Health, which entered Chapter 11 bankruptcy in August 2018, filed a motion requesting the bankruptcy court enforce the sale order related to its four hospitals.

In January, Corona, Calif.-based KPC Group bid $610 million to purchase the following four Verity hospitals: St. Francis Medical Center in Lynwood, St. Vincent Medical Center in Los Angeles, Seton Medical Center in Daly City, and Seton Coastside in Moss Beach. The bankruptcy court approved the bid earlier this year, and California Attorney General Xavier Becerra approved the sale subject to conditions in late September.

The conditional sale requires St. Francis to stay open for at least 10 years after the sale, St. Vincent to stay open for at least five years and Seton to stay open for at least six years. The conditional approval also requires the hospitals to maintain adequate charity care levels and seismic retrofitting construction at Seton to begin by April 1, 2020, and be completed by July 1, 2022. 

Verity argues the conditions imposed by the California Attorney General threaten the sale. The nonprofit health system filed a motion asking the court to rule that the conditions on the sale are unenforceable.

"Absent relief from the court, the sale of the hospitals to the KPC Group likely will collapse, jeopardizing the continued operation of these facilities as hospitals, which would result in the loss of access to critical healthcare in underserved communities, as well as thousands of jobs and anticipated recoveries to trade vendors, retirees, physicians, employees and other creditors," Verity CEO Richard Adcock said in a press release.

Mr. Becerra says the conditions on the sale will help maintain crucial care that residents in multiple counties rely on.

"The owners of these non-profit facilities benefit from favored tax and legal treatment that individuals and for-profit enterprises in the community cannot receive," Mr. Becerra said in a press release. "Any prospective buyer of these non-profit hospitals understands the obligations to the community and to taxpayers that attach when assuming control of these health facilities. Maintaining the crucial, life-saving care that families in San Mateo County and Los Angeles County rely on — from cancer treatment to emergency services — is the backbone of this conditional sale agreement involving Verity's hospitals."

The hearing on the motion is scheduled in the U.S. Bankruptcy Court for the Central District of California on Oct. 15.

More articles on healthcare industry transactions:

CHS' shrinking hospital portfolio: 12 latest divestitures
Dartmouth-Hitchcock, GraniteOne to merge
Ascension sells Connecticut hospital

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