It’s hard enough to go through Chapter 11 bankruptcy proceedings once. Verity Health System, which has had a string of for-profit owners since it was sold by the Daughters of Charity Health System to BlueMountain Capital Management in 2016, is on its second round after a deal fell through last December. It’s just one of several distressed healthcare services stories, sad to say.
The latest news came the week ending April 10, 2020, as a federal bankruptcy court judge approved the sale of St. Francis Medical Center (344 beds) in Lynnwood, California to Prime Healthcare Services for $262 million and the sale of St. Vincent Medical Center in Los Angeles for $135 million. The buyer was a family foundation established by a previous owner of Verity Health, Dr. Patrick Soon-Shiong.
In April 2019, St. Francis and St. Vincent were part of a four-hospital deal that was approved by a Delaware bankruptcy judge. The buyer of the four hospitals, which included Seton Medical Center in Daly City and Seton Coastside in Moss Beach, was KPC Healthcare, through its subsidiary, Strategic Global Management. The price was $610 million.
That deal never closed in December 2019, as scheduled. St. Vincent in Los Angeles was the most precariously financed, and Verity Health closed the facility in January 2020, just as the COVID-19 pandemic was ramping up in the United States.
On April 10, Judge Ernest Robles of the U.S. Bankruptcy Court in Los Angeles approved the sale of St. Vincent to the Chan Soon-Shiong Family Foundation, which was founded more than 10 years ago by Dr. Soon-Shiong and his wife Michele Chan. California Attorney General Xavier Becerra alleged the couple have a “material financial interest” in the sale, claiming they would realize some $66 million of the proposed $135 million purchase price.
Dr. Soon-Shiong, a surgeon and entrepreneur, owns the Los Angeles Times and founded NantWorks, LLC. That entity acquired Integrity Healthcare, LLC, Verity’ Health System’s management parent, for an undisclosed price in July 2017 from BlueMountain Capital. The private equity firm, which kept a minority interest, had committed $260 million to the struggling Daughters of Charity Health System when it acquired their five hospitals. A year later, in August 2018, Verity Health filed for Chapter 11 bankruptcy protection in Delware.
The Soon-Shiong foundation’s goal is to reopen St. Vincent to treat coronavirus patients.
At the end of March 2020, Seton Medical Center and its sister skilled nursing facility, Seton Coastside, were acquired by for-profit healthcare provider AMHC Healthcare in Alhambra, California, for $40 million. We’re tempted to add, “All’s well that ends well,” but with all these former not-for-profits still in the hands of for-profit providers, we’ll have to wait and see.
