Embattled nonprofit health system Verity files for bankruptcy, secures additional liquidity
The system has secured debtor-in-possession financing of up to $185 million, which will enable its hospitals to continue operations.
Verity Health System, which in July began the process of selling six of its hospitals to alleviate financial pressure, has filed for bankruptcy, according to its website.
The health system, based in Redwood City, California, has gone through its share of ownership changes, and at one point was attached to the controversial Patrick Soon-Shiong, MD, whose company NantWorks acquired a majority stake last year in Integrity Healthcare, the company that manages the nonprofit Verity.
The system has secured debtor-in-possession financing of up to $185 million. This additional liquidity will enable continued operations, the system said.
"Despite many efforts over the last decade to create opportunities for success, we can no longer swim against the tide of our operating reality, which includes a legacy burden of more than a billion dollars of bond debt and unfunded pension liabilities, an inability to renegotiate burdensome contracts, the continuing need for significant capital expenditures for seismic obligations and aging infrastructure," said Rich Adcock, Verity CEO.
The system is now seeking buyers, and will entertain offers to acquire its assets: O'Connor Hospital, Saint Louise Regional Hospital, Seton Medical Center, Seton Medical Center Coastside, St. Vincent Medical Center and St. Francis Medical Center.
Sales of these assets are subject to certain conditions under California law, according to Medium. St. Francis, O'Connor, Saint Louise and Seton Medical must operate as acute care hospitals and offer emergency services for 10 years. Seton Coastside must operate as a skilled nursing facility for 10 years and offer 24-hour service and a minimum of 116 beds. St. Vincent must operate as a general acute care hospital for five years and have at minimum eight emergency treatment stations and six Fast Track stations.
For all hospitals, each facility must provide the same types and quality of services to Medi-Cal beneficiaries; charity care must be provided; and the 7,000 cumulative jobs at the facilities should largely remain in place.
The system chalked up its operating losses to, among other things, challenging cost structure, low reimbursement rates and the ever-changing healthcare landscape.
"After years of investment to assist in improving cash flow and operations, Verity's losses continue to amount to approximately $175 million annually on a cash flow basis," said Adcock.
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Email the writer: susan.morse@himssmedia.com
