California hospital chain Verity Health filed for Chapter 11 bankruptcy on Friday and will attempt to sell some or all of its six hospitals after the failure of a yearlong effort by Los Angeles billionaire Patrick Soon-Shiong to save the system.
In an official news release, as well as a letter provided by union and hospital employees, the nonprofit system said its hospitals will remain open during the bankruptcy proceedings with $185 million in secured financing.
Story Continued Below
The filing was meant to “facilitate a court-supervised sale of some or all of the hospitals” while addressing debts and claims that have built up over two decades, CEO Rich Adcock said in a letter. Verity is struggling under long-term debt of $500 million, according to recent financial disclosures.
Soon-Shiong took over management of the system in July 2017, promising to provide “the highest level of care with the best outcomes at lowest cost for all Californians.”
In the year since then, Verity began implementing a new electronic health record system with a company Soon-Shiong had ties to, but fell behind on seismic repairs and reduced charity care, according to consultants and a hospital executive quoted in an article published this week by POLITICO.
Soon-Shiong, who hoped to make the hospitals a proving ground for his ambitious cancer science and therapies, has lent at least $148.2 million to the system, with most of that money secured by real estate and future revenues as collateral.
Soon-Shiong has received at least 100 letters of interest in various parts of the system, a spokeswoman for Verity said. Potential buyers including Santa Clara County, which has discussed purchasing O’Connor Hospital in San Jose and St. Louise Regional Hospital in Gilroy.
The news release promised that care quality would remain the same during the proceedings. Repair work and the digital health record implementation were put on a pause three weeks ago at the hospitals.
In previous cases, hospital bankruptcies have disrupted patient care by snarling business negotiations with insurers and leading staff to seek other jobs, said Holly Lang, a health care economist.
“While some hospitals do come back from bankruptcy, many do not,” she said. “Quality is inevitably impacted. Without serious and significant forethought and planning, patient care will suffer.”
San Mateo County Supervisor David Canepa, whose district includes Daly City, where Seton Medical Center is located, charged that Soon-Shiong had falsely “propped himself up as a savior to Seton and these other hospitals.
“It has become crystal clear by the bankruptcy announcement that he virtually had no intention of keeping these hospitals open and to continue to serve the poor like the Daughters of Charity [the past owners] did,” Canepa said. “The whole thing seems like one big lie.”
The other Verity hospitals include St. Francis Medical Center and St. Vincent Medical Center in Los Angeles County, and Seton Coastside in Moss Beach, in Northern California.