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Verity Health seeks to auction hospitals, receives $235M initial bid

El Segundo, Calif.-based Verity Health, which filed for bankruptcy earlier this year, filed a motion Oct. 2 to auction off its hospitals in Santa Clara County.

The health system seeks to hold the auction in December 2018 to sell its hospitals in Santa Clara County, including San Jose, Calif.-based O'Connor Hospital and St. Louise Regional Hospital in Gilroy, Calif.

The bidding process is being led by Santa Clara County, which placed a $235 million "stalking horse bid" for the hospitals, The Mercury News reports. The bid serves to set the floor for any competing offers. If no other offers emerge, Santa Clara County's offer would stand.

"O'Connor and Saint Louise are two critically important institutions in the communities they serve, and the county has shown great leadership to ensure both can continue their mission of providing high-quality care to patients well into the future," Rich Adcock, CEO of Verity Health, said in the news release.

Santa Clara County has expressed interest in acquiring the two hospitals for some time, according to The Mercury News.

"We're pretty happy. We think we have a competitive offer," a county executive told The Mercury News.

Verity Health and its six hospitals were sold to New York City-based private equity firm BlueMountain Capital Management in 2015. Last year, billionaire investor Patrick Soon-Shiong, MD, purchased Integrity Health, BlueMountain's subsidiary that manages Verity Health.

However, in the nine months that ended March 31, the health system saw operating losses of $55.8 million, The Mercury News reports. Mr. Adcock said the system's draining financials stemmed from more than $1 billion of bond debt and unfunded pension liabilities plus infrastructure costs.

Mr. Adcock said officials prefer to sell all or some of the hospitals to buyers who would continue providing healthcare services, and that they have spoken with 100-plus different organizations interested in purchasing various parts of the system.

To access the full Mercury News report, click here.

More articles on transactions and valuations:
Cleveland Clinic to invest $500M in Florida system after takeover
Ascension inks agreement to sell Connecticut hospital
Baylor, Memorial Hermann to form 68-hospital system

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