KPC Group Gets Court Approval to Acquire Four Verity hospitals

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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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Seton Sale Overcomes Big Hurdle

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Seton Sale Overcomes Big Hurdle

Nearly three months after a bid to acquire Seton Medical Center in Daly City and Seton Coastside in Moss Beach was filed in federal bankruptcy court, Southern California-based KPC Health announced its $610 million bid for four hospitals was approved by U.S. Bankruptcy Court Judge Ernest M. Robles Wednesday, according to a press release issued by KPC Health.

By moving to acquire the two facilities in San Mateo County alongside St. Francis Medical Center in Lynwood, St. Vincent Medical Center in downtown Los Angeles and St. Vincent Dialysis Center, KPC Health’s offer to purchase the financially-challenged facilities formerly operated by Verity Health now awaits approval by California Attorney General Xavier Becerra.

News of the milestone for the two Seton facilities was welcomed by San Mateo County Supervisor David Canepa, who expressed relief that critical services would remain in place at the two health care facilities delivering care to the indigent. Having met with members of KPC Health, Canepa was confident the group will bring an end to the uncertainty that has been looming over the facilities many expected to shutter.

“I think they’re going to bring a tremendous amount of stability to Seton Medical Center that is needed at this time,” he said. “We’ve just saved … a hospital that was on the brink of extinction and … that is … something that should be celebrated.”

The “stalking horse” bid KPC Health filed in January was not exceeded by any other proposed bids and no auction was required for the four Verity Health hospitals. The group’s bid was also approved by Verity Health System’s Board of Directors April 15.

Owner and operator of seven full-service acute care hospitals in Southern California, KPC Health’s integrated health system is set to include 20 facilities across the nation once ongoing acquisitions of hospitals and skilled nursing facilities in Arizona, California, Kansas, Louisiana Mississippi, Texas and Utah are complete, according to the release.

Dr. Kali P. Chaudhuri, chairman of The KPC Group and KPC Health, said the judge’s decision Wednesday marks an important milestone for KPC Health’s bid to acquire the four remaining Verity Health hospitals. Despite an attempt on behalf of Becerra to block the sale of two other hospitals previously operated by Verity Health in San Jose and Gilroy, Santa Clara County’s bid on O’Connor Hospital and Saint Louise Regional Hospital was finalized in March, according to multiple news sources.

“We look forward to working with Verity Health on a successful acquisition and welcoming these important community hospitals into our integrated [health care] system,” Chaudhuri said in the release.

The financial uncertainty looming over the 350-bed Seton Medical Center, Daly City’s largest employer, as well as the 116-bed coastside hospital and skilled nursing facility has weighed heavily for officials, residents and employees of the facilities since Verity Health filed for bankruptcy in August.

County impact

Canepa represents north county’s District 5 on the Board of Supervisors and acknowledged the benefits of the sale for residents living in northern San Mateo County who depend on its services or are among Seton Medical Center’s 1,600 employees. But he also noted the benefits to county taxpayers who could have been on the hook for the hospitals if no buyer stepped forward.

County officials have already contributed some $25 million for patient care and set aside $15 million toward a seismic upgrade project at the Seton Medical Center, and Canepa expected the county to continue to help the hospitals when possible. But he also acknowledged San Mateo County Health officials have projected a structural deficit for County Health’s two-year budget starting in the 2019-20 fiscal year.

Canepa was also optimistic the hospitals would continue to be held to service obligations set by then-attorney general Kamala Harris when the New York hedge fund BlueMountain Capital purchased the six hospitals from the cash-strapped Daughters of Charity in 2015. Aimed at ensuring the safety-net hospitals continue offering services until 2025, the transaction was considered by some to be the largest and most complex nonprofit hospital transaction in California’s history.

Before Santa Clara County’s bid for the San Jose and Gilroy hospitals was approved, Becerra appealed the sale, asking at the time for the existing conditions protecting the health and safety of the hospital community to be preserved. Canepa expected Becerra to determine whether he would approve the sale in the next few weeks.

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KPC’s Global Mission to Save Community Healthcare Began in Hemet

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KPC’s Global Mission to Save Community Healthcare Began in Hemet

In 1984, a young orthopedic surgeon, Dr. Kali P. Chaudhuri, arrived in Hemet with the dream he one day would have a lasting impact on community healthcare.

Hemet happened to be the perfect place to set up shop and call home. Single-family residences were starting to become more prevalent, with businesses and retailers following right behind. The large retirement community made the need for local healthcare options all the more obvious and important. Dr. Chaudhuri began working out of Hemet Hospital, where he quickly built a successful practice and established a reputation as one of the top orthopedic surgeons in the country.

Shortly thereafter, patients from around the United States began making the journey to Hemet for their surgeries.  It was reminiscent of Dr. Chaudhuri’s journey here back in 1984.  While the efforts of Dr. Chaudhuri and his fellow physicians led to initial success and profitability, trouble lay ahead for Hemet Hospital.  Poor upper-level management and decision-making eventually led to many problems for the District Hospital System known as Valley Health System, which included Menifee and Moreno Valley.

That fateful decision resulted in the demise of Hemet Hospital, putting it on the path to bankruptcy and, perhaps most importantly, a pivotal turning point in Dr. Chaudhuri’s career.  Rather than moving on to another job, at another hospital, in another city, Dr. Chaudhuri made it his personal mission to save Hemet’s only hospital.

Galvanized by his efforts, other physicians regained their confidence in the hospital and joined the cause.  By 2010, public support for Dr. Chaudhuri’s mission to save the hospital reached critical mass, with 87 percent of voters approving the privatization of the District Hospital System.

Despite initial skepticism, the valuable community hospital that was once on the brink of bankruptcy continues its operations today as Hemet Valley Medical Center under Dr. Chaudhuri’s leadership.  The hospital’s financial position has completely turned around, and continuous improvements to the facility, technology, and staff are being made.

Due to these efforts, Hemet Valley Medical Center is now home to a medical education and residency program that is attracting some of the brightest young doctors from around the world.  Moreover, what Dr. Chaudhuri started right here in Hemet was only the beginning of his pursuit to save community healthcare.

Today, Dr. Chaudhuri serves as chairman of KPC Health, which owns and operates a nationwide integrated healthcare delivery system consisting of acute care hospitals, independent physician associations, medical groups, and various multi-specialty and ancillary facilities.  Hemet was the first of a series of hospital turnaround successes led by Dr. Chaudhuri.

In the past five years, KPC Health achieved a similar feat after fully acquiring a group four Orange County hospitals in Santa Ana, Anaheim and Orange.  More of the same appears to be on the horizon given KPC Health’s recent acquisition of seven Promise Healthcare hospitals and two skilled nursing facilities, as well as an astonishing $610 million bid to purchase four Verity Health Hospitals in Los Angeles and the Bay Area.  KPC Health’s national footprint spanning across eight states including Kansas, Utah, Mississippi, Arizona, Louisiana, and Texas including northwest Dallas is poised to become a 21-hospital system sometime this year.

Over the past decade, Dr. Chaudhuri has expanded his journey beyond healthcare.  The KPC Group includes a vast international real estate portfolio and a number of successful businesses throughout the pharmaceutical and biotechnology, education, real estate, infrastructure development, agriculture, architecture and engineering, alternative energy, waste management, travel services, and information technology industries.

For Dr. Chaudhuri, a dream that started in Hemet in 1984 has truly come to fruition in 2019.

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