Hospital operator Verity Health System of California Inc. won bankruptcy-court approval to sell a Los Angeles-area facility to Prime Healthcare Services Inc. for more than $350 million despite objections from the state attorney general and an opposing bidder, the Wall Street Journal reported. California Attorney General Xavier Becerra, a Democrat, had set 21 conditions for the sale of St. Francis Medical Center in Lynwood, Calif., to Prime, three of which Verity challenged as overly burdensome. The attorney general opposed authorizing the sale of St. Francis to Prime and objected to Verity’s chapter 11 liquidation plan. However, Judge Ernest Robles of the U.S. Bankruptcy Court in Los Angeles overruled the objections yesterday, paving the way for St. Francis to be sold free and clear of the regulatory obligations asserted by the attorney general. The judge also said he would confirm Verity’s liquidation plan. The company filed for bankruptcy protection in 2018.
There’s no end in sight to the coronavirus pandemic, Dr. Anthony Fauci and other top government health experts will tell Congress on Friday, the Associated Press reported. “While it remains unclear how long the pandemic will last, COVID-19 activity will likely continue for some time,” Fauci, along with Centers for Disease Control and Prevention head Dr. Robert Redfield and Health and Human Services testing czar Adm. Brett Giroir say in prepared testimony for a special House panel. The panel, the House Select Subcommittee on the Coronavirus Crisis, is divided about how to reopen schools and businesses, mirroring divisions among Americans. The U.S. knocked back the initial spread, but it never got the background level of new cases quite as low. And the resurgence of COVID-19 in the Sunbelt in recent weeks has driven the number of new daily cases back up into the 60,000-70,000 range. It coincided with economic reopening and a return to social gatherings, particularly among younger adults. Growing numbers of emergency room visits, hospitalizations and deaths have followed as grim consequences.
Prospect Medical Holdings Inc., a hospital manager backed by private-equity firm Leonard Green & Partners LP, is trying to block Prime Healthcare Services Inc.’s $350 million purchase of a bankrupt Los Angeles-area hospital, The Wall Street Journal reported. Los Angeles-based Prospect is making a last-minute attempt to scoop up St. Francis Medical Center in Lynwood, Calif., by offering to top Prime Healthcare’s bid by as much as $50 million. A bankruptcy judge this spring approved the bid by Prime to buy St. Francis from owner Verity Health System of California Inc., which filed for chapter 11 protection in 2018. This month, California Attorney General Xavier Becerra approved the sale to Prime with conditions. Now, Prospect is lobbying Verity and the attorney general to stop the sale from closing and to reopen bidding, or at least to select it as the backup bidder. Because of the COVID-19 outbreak, the company believes it didn’t have a meaningful opportunity to participate in the sale process. St. Francis, which was founded in 1945, has one of the busiest trauma centers in the Los Angeles area. The 384-bed hospital hit the bankruptcy auction block again in February after a previous buyer failed to close on a sale.
A White House meeting with top pharmaceutical executives that President Donald Trump promised for Tuesday is off, Politico reported. Three said the drug-pricing discussion was canceled because the major drug lobbies, reeling from Friday’s cluster of executive orders on the topic, refused to send any members. Drugmakers and President Trump were slated to discuss an executive order, signed Friday but not yet released, that would order health officials to release a plan linking Medicare payments for certain medicines to lower costs paid abroad. The provision, known as a most-favored-nations rule, has been lambasted by the drug industry and some patient groups that say it would curb innovation and reduce drug access.President Trump said Friday that drugmakers would have a month to present a better option to the rule. The drug lobbies PhRMA and BIO were reluctant to send representatives from their member companies after conflicting reports last week about whether the White House would include the rule and little information to date about what the new rule would look like. Several pharmaceutical companies believed that the most-favored nations rule had been dropped ahead of the Friday afternoon announcement.
Pennsylvania’s state’s top attorney has launched an investigation into senior living facilities accused of seizing their residents’ stimulus checks, KDKA (Pittsburgh) reported. Investigator Meghan Schiller found a local man who claims this happened to his loved one. Justin Ciesielski says he will do anything to keep his dad comfortable. “My dad is clean and healthy and seems to be happy every time I go to see him,” he said. At 62 years old, his father now lives at Mt. Lebanon Rehabilitation and Wellness Center, and his dad’s life savings and Medicare funds funnel directly to this facility, in exchange for his care. But in April, Ciesielski received this letter about his dad’s stimulus check. “I got a letter from the IRS basically saying it went into his account so I went and checked his account and it did not.” He called the facility and learned it planned to use his father’s stimulus check to pay down his balance and other expenses. Ciesielski said it didn’t seem right. “We have advised those nursing homes that they can’t do that. That money belongs to the individual,” said Attorney General Josh Shapiro. “They can’t effectively garnish that stimulus check from the resident.” The state’s longterm care ombudsman Margaret Barajas said she’s tracking 200 complaints statewide, in addition to the cases Attorney General Shapiro’s office will handle. “I think in some cases the providers saw this as an opportunity to shore up some past debt,” Barajas said. “The federal government has made it clear that the stimulus check is not considered income. It is not taxable income and for that reason, it would be excluded from any contracts that a resident has signed and agreed to for provision of their care.” In Ciesielski’s case, he said the facility told him his father signed one of the forms Barajas is referencing.
As Gregg Gibbes walked through the doors of his new hospital in April 2019, he faced a frightening yet all-too-possible future: The facility he had been tasked with leading was at risk of shutting down and taking hundreds of jobs with it, and leaving Simpson County, Miss., without an essential source of medical care, the Clarion Ledger reported. Magee General Hospital, a nonprofit, 44-bed acute-care facility, had filed for bankruptcy eight months earlier in a bid by former owners to save the community facility from financial death. The hospital is an economic hub in the area, and an essential source of care. Entering as the hospital’s new CEO, Gibbes was part of a restructured board of directors and a shrewd plan to beat the bankruptcy through sharing staff with a critical-access hospital in Covington County 20 miles to the south. This May, Magee General exited its bankruptcy, achieving a feat the likes of which “you’d be hard pressed to find another rural hospital” completing successfully, said Gibbes. But now a second storm is ravaging the land. After the pandemic forced Magee General to cut elective care, which six months ago accounted for two-thirds of its revenue, the hospital must confront a pandemic that has been the latest battle for survival for rural hospitals around the country. To date, Magee General has received the lowest amount of coronavirus-related stimulus money of any acute-care facility in the state. To navigate chapter 11 over the past two years, Magee General had to be guided out of a storm of uncompensated care costs, increasingly expensive equipment and shrinking elective care visits — common challenges for rural hospitals in the South.
More and more hospitals are in danger of going bankrupt the longer the coronavirus surge lasts. Through June of this year, 29 hospitals have declared bankruptcy. During the full 2019 calendar year, there were 30 such bankruptcies, the Washington Examiner reported. As the pandemic grew in March, hospitals saw steep revenue declines in their most profitable areas. Many states restricted the ability of hospitals to perform elective surgeries and outpatient procedures. Additionally, emergency room volumes dropped as more people did not visit the hospital for fear of COVID infection. "Hospitals were left with critical care and inpatient services, and that is the least profitable revenue for hospitals," said Nathan Kaufman, managing director of Kaufman Strategic Advisors. "That puts hospitals in a very precarious financial position … hospitals in difficult financial condition prior to COVID are now in dire straits." The hospital industry has been on rocky terrain financially for years. The Posnelli-TrBK Distress Index measures the distress in an industry based on recent chapter 11 filings in that industry. The closer the index is to zero, the healthier the industry. In the first quarter of 2020, the index for hospitals stood at 233. More than 260 hospitals furloughed employees to make ends meet between March and June. Most notably, the esteemed Mayo Clinic furloughed and reduced the hours of 30,000 employees to offset an estimated $3 billion in losses. According to the American Hospital Association, hospitals nationwide lost over $161 billion due to canceled surgeries and other services from March to June of this year. In March and April, 55 percent fewer people sought care at hospitals, while visits from the uninsured rose 114 percent, according to Strata Decision Technology. Yet hospitals are still struggling with ER volume, even in areas where the pandemic has abated. Read more.
Don't miss the "The Pros and Cons of Transactions Involving Distressed Hospitals and Health Care Providers" session at ABI's Mid-Atlantic Virtual Bankruptcy Workshop on August 6-7. Sessions offer up to 4/4.5 hours of CLE/CPE credit, including 1 hour of ethics credit, for a total price of $100. Register today.
Eastern Niagara Hospital, which filed for chapter 11 protection in November, temporarily withdrew its filing last month so it could obtain a $5.85 million loan from the federal government, the Buffalo (N.Y.) News reported. The legal maneuver made the Lockport, N.Y., hospital eligible for funds from the Paycheck Protection Program, a federal program to help businesses avoid laying off workers during the COVID-19 pandemic. The U.S. Small Business Administration, which administers the program through participating banks, rejected Eastern Niagara's application because of the chapter 11 filing. In late May, Eastern Niagara sued the SBA for rejecting its PPP application, even though the first question on the application form was whether the applicant has filed for bankruptcy. The form said that if the answer is yes, there would be no loan. But the hospital's attorneys, Jeffrey A. Dove and Beth A. Bivona of the Barclay Damon law firm, came up with an easier way of obtaining the $5.8 million. On June 18, they asked to withdraw the chapter 11 petition, so the hospital could file a PPP application before the program's money ran out on June 30. The hospital also dropped its lawsuit against the SBA, with Dove and Bivona writing in a court filing that even if the hospital beat the SBA in court, the federal agency might not have any money by then. U.S. Bankruptcy Court Judge Carl L. Bucki signed the dismissal order June 24. Two days later, the SBA approved the hospital's loan application. Last Wednesday, the hospital filed a fresh bankruptcy petition in Judge Bucki's court and announced all the employees it furloughed during the pandemic had returned to work. Hospital spokeswoman Carolyn Moore said all the loan money was used for payroll. "This financial reorganization must be concluded to ensure our sustainability," hospital president and CEO Anne E. McCaffrey said in a prepared statement.
