DATE: April 9, 2010
FEDERAL JUDGE CLEARS WAY FOR SALE TO PHYSICIANS FOR HEALTHY HOSPITALS
Local doctors plan to expand quality medical services in the Hemet and Menifee valleys
HEMET, Ca. – A presiding federal bankruptcy judge late Thursday rejected a lawsuit that sought to block the sale of the bankrupt Valley Health Systems hospitals in Hemet and Menifee to Physicians for Healthy Hospitals.
“This is a great day for our patients, our hospitals and our healthcare system,” said Dr. Alex Denes, a spokesman for Physicians for Healthy Hospitals. “Local physicians are committed to expanding quality state-of-the-art services in our region.”
After months of reviewing detailed court testimony and thousands of pages of records, presiding Judge Peter Carroll determined the Valley Health Systems Board of Directors followed the law and that negotiations for district’s sale with PHH were conducted in a transparent manner.
Denes, a Hemet practitioner for more than 30 years, said he hopes the ruling will end Prime Healthcare’s misuse of the courts to try and undermine the will of the voters, who approved the sale of the hospitals to local physicians by 87 percent in December.
Prime is notorious for buying distressed hospitals and cancelling health insurance contracts, increasing its profits but leaving patients saddled with exorbitant medical bills. The company had been angling to add the Hemet and Menifee hospitals to its network, nullifying overwhelming community support for their sale to local doctors.
“Physicians for Healthy Hospitals is eager to begin rebuilding our hospitals,” Denes said. “We applaud Judge Carroll’s decision to support the will of the voters and the VHS board by upholding the sale agreement.”
Judge Carroll in February approved VHS’s debt adjustment plan, which hinges on the sale of the hospitals to PHH, a group primarily made up of local physicians who admit patients to the Hemet and Menifee hospitals.
PHH will pay about $70 million in cash to VHS for it’s the hospitals and other assets. As part of the sale, PHH also is assuming the district’s massive debts and liabilities, which total more than $90 million. The sale is expected to be finalized as soon as possible.
“We made a decision last spring to rescue our hospitals from an uncertain future when creditors began threatening to foreclose to satisfy the district’s debt,” Denes said.
“Judge Carroll clearly agrees that PHH has demonstrated sound financial footing, transparency, and a solid business plan. We are positioned to lift our hospitals out of bankruptcy and transform them into vibrant and stable medical institutions,” Denes said.
The sale will raise enough cash to allow VHS to immediately repay secured bondholders about $44.7 million. Unsecured creditors – those not guaranteed repayment by law – will be reimbursed $4 million at closing with the remaining $17 million over a four-year period.
The PHH plan also calls for retention of VHS employees and Denes said he anticipates PHH will add employees as hospital services and the local network of physicians expand to meet local needs.
“Prime has cost this bankrupt hospital district millions of dollars in legal fees in a ruthless effort to drive our healthcare system into the ground,” he added. “It is time for Prime to get the message that its services are not wanted by a majority of residents in our communities."
Denes said a last-ditch offer from Prime to buy the struggling hospitals was a day late and a dollar short.
“It’s just one more shameless tactic by Prime to drive our hospitals into the ground in an effort to get control of them,” Denes said. “We are absolutely thrilled that Judge Carroll has recognized that local physicians are in the best position to provide local healthcare solutions.”
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