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KPC Group Gets Court Approval to Acquire Four Verity hospitals
A bankruptcy court judge has approved Corona-based KPC Group’s $610-million bid to acquire four of the nonprofit Verity Health System hospitals, including two in Southern California, KPC Group said Wednesday.
Verity’s board of directors had approved KPC Group’s bid Monday, but the state attorney general’s office still must sign off on the acquisition.
The four hospitals included in the KPC Group bid are St. Francis Medical Center in Lynwood, St. Vincent Medical Center and St. Vincent Dialysis Center in Los Angeles, Seton Medical Center in Daly City and Seton Coastside in Moss Beach.
Verity’s six hospitals were originally owned and operated by the Daughters of Charity of St. Vincent de Paul. After years of financial struggles, Integrity Healthcare took over management of the hospitals in 2015.
NantWorks, the Culver City company controlled by Dr. Patrick Soon-Shiong, purchased Integrity in 2017. (Soon-Shiong, a physician and entrepreneur, purchased The Times last year.)
In August, Verity filed for bankruptcy protection, citing mounting losses and debt.
The other two Verity hospitals — O’Connor Hospital in San Jose and St. Louise Regional Hospital in Gilroy — were sold to Santa Clara County in a transaction that closed last month. California Atty. Gen. Xavier Becerra had sought to halt the sale until the county agreed to conditions, such as requirements for job security and treatment of the poor, that were initially imposed by then-Atty. Gen. Kamala Harris in 2015. But in February, a federal judge refused to put a hold on the transaction.
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California company buys Overland Park hospital
A California-based hospital operator now owns Promise Hospital of Overland Park after its parent company, Promise Healthcare, filed for Chapter 11 bankruptcy in November.
Strategic Global Management, a for-profit hospital operator run by main investor and orthopedic surgeon Kali Chaundhuri, recently bought the Overland Park facility. Chaundhuri is chairman and founder of the KPC Group of Companies, which includes Strategic Global.
Promise Hospital of Overland Park is a 56-bed, long-term, acute-care hospital at 6509 W. 103 St. Hospital officials said all questions about the transaction should be directed to KPC. It’s unclear what the new management plans for the facility; KPC officials did not respond to a request for comment.
Promise Healthcare, based in Boca Raton, Fla., filed for bankruptcy in November and is selling 14 hospitals and two skilled nursing facilities through U.S. Bankruptcy Court.
The company, now led by a chief restructuring officer, has more than $565 million in debt, plus unpaid interest of $110 million, accrued expenses and accounts payable of $94 million, and capitalized leases of $13 million, according to its motion to obtain a loan to keep its operations ongoing.
Promise Health Care of Overland Park reported declining gross revenue year over year, with $11.25 million in gross revenue from Jan. 1, 2018, to Nov. 4, 2018, compared with gross revenue of $13.99 million the year prior. The hospital also reported $26.39 million in assets and $97.07 million in liabilities at the time of filing.
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KPC Group Offers $610M For Four Verity Health Hospitals
Verity filed a motion Thursday in Los Angeles bankruptcy court to implement a public auction where other buyers could outbid KPC for 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 winning bid is subject to the approval of the court and the California attorney general, depending on the buyer.
“Verity has remained committed to finding the right buyer to provide uninterrupted service and operations for all employees, physicians and patients, and we will continue that commitment as this process advances,” Rich Adcock, CEO of Verity Health, said in prepared remarks. KPC pledged to keep current employees.
KPC Group, which is the parent company of KPC Healthcare that operates seven hospitals in Southern California, would pay $420 million for St. Francis, $120 million for St. Vincent and $70 million allocated for Seton Medical Center and Seton Coastside, according to bankruptcy filings.
Private investment firm BlueMountain Capital Management bought the six-hospital system spanning Southern and Northern California from the financially encumbered Daughters of Charity Health System in late 2015, when it changed its name to Verity Health. BlueMountain pledged to invest up to $260 million in exchange for a lease on its information technology assets.
Nantworks, led by controversial entrepreneur Dr. Patrick Soon-Shiong, bought its stake in July 2017 and infused another $148 million in capital as Soon-Shiong eyed a testing ground for his precision medicine endeavors.
But Verity filed for bankruptcy in September, overburdened by more than $1 billion in bond debt and unfunded pension liability as well as its aging infrastructure.
The health system has been bleeding about $175 million a year, according to bankruptcy filings. Verity reported a $111.4 million operating loss in 2018, up from a $35.3 million operating loss in 2017.
The health system also aims to sell its other two hospitals, O’Connor Hospital in San Jose and St. Louise Regional Hospital in Gilroy, to the county of Santa Clara for $235 million. But the California attorney general has delayed the deal.
Santa Clara argues that it, as a public entity, doesn’t have to comply with the conditions imposed by the attorney general on the BlueMountain transaction. The attorney general disagrees.
The sticking point is related to assuming pension obligations or collective bargaining agreements, given that the county operates under different statutory requirements.
Notably, Daughters of Charity Health System tried to sell the organization to Prime Healthcare Services before it reached a deal with BlueMountain. But Prime pulled out of the deal because of the attorney general’s “onerous” conditions, the company said.