A U.S. Bankruptcy Court judge last week ordered a public auction to sell two Ohio hospitals owned by Primary Health Systems, in effect undoing a deal PHS had struck privately to close both facilities and sell one-as well as sell a working ambulatory surgery center-to the Cleveland Clinic Foundation.
Wayne, Pa.-based PHS had filed for Chapter 11 bankruptcy a year ago in Wilmington, Del. U.S. Bankruptcy Court Judge Mary Walrath gave PHS 30 days to solicit bids on the two hospitals, 199-bed Saint Michael Hospital, Cleveland, and 98-bed Mount Sinai Medical Center East, Richmond Heights, as well as PHS' Integrated Medical Campus in Beachwood, Ohio. In effect PHS must keep the hospitals open during the process.
The judge's decision threw into question a $62.7 million deal between PHS and the Cleveland Clinic Foundation that would have transferred Saint Michael Hospital and Integrated Medical Campus, which includes an ambulatory surgery center and a physician office complex, to the foundation. Under that deal, PHS had begun to shut down Saint Michael Hospital as an acute-care hospital but had pledged to keep long-term-care and urgent-care beds available at the facility.
According to sources familiar with the bankruptcy proceedings, Walrath chastised PHS for negotiating a deal with the foundation that she said was not intended to seek the highest bids and also for misrepresenting issues to the court.
PHS spokesman Edward Nebb did not return telephone calls late last week.
A meeting was to be held late last week at which the Cleveland Clinic Foundation was to tell the judge whether it intended to keep its bid on the table.
Farah Walters, president and chief executive officer of University Hospitals Health System-parent of 747-bed University Hospitals of Cleveland- hailed the judge's remarks as a vindication of University's stance that it had been left out of the negotiations.
"We are extremely pleased that the Bankruptcy Court has supported the position of University Hospitals Health System and the sentiment of the greater Cleveland community to open the bidding process," she said in a written statement.
University's latest bid for the still-operational Saint Michael and Mount Sinai East was $12 million, up from an earlier $10 million bid.
The judge's comments did not address the fate of Deaconess Hospital of Cleveland, PHS' remaining hospital in the city, although PHS has in the past said it would like to sell the facility.
PHS in February closed 344-bed Mount Sinai Medical Center-University Circle in Cleveland.