A U.S. bankruptcy court judge is expected early this week to approve a $12 million offer by University Hospitals Health System in Cleveland to acquire two area hospitals that had recently been slated to close.
Primary Health Systems, Wayne, Pa., was required to put the two hospitals up for auction as part of the company's bankruptcy proceedings.
For-profit, privately held PHS filed for Chapter 11 bankruptcy protection in March 1999, with assets of $157 million and liabilities of $237 million. PHS in February closed 344-bed Mount Sinai Medical Center-University Circle in Cleveland and intends to operate its last hospital, 212-bed Deaconess Hospital of Cleveland, until it can find a buyer.
University Hospitals submitted its bid for 199-bed Saint Michael Hospital in Cleveland and 98-bed Mount Sinai-East Medical Center in nearby Richmond Heights, Ohio, and promised to keep both open as acute-care facilities, satisfying the bidding requirements set by U.S. Bankruptcy Court Judge Mary Walrath in Wilmington, Del.
Also as part of the auction, the Cleveland Clinic Foundation will buy PHS' Integrated Medical Campus, an ambulatory surgery center and office complex in Beachwood, Ohio, for $52.7 million.
Edward Nebb, a PHS spokesman, did not return telephone calls last week.
Last month, Walrath rejected a deal PHS had proposed earlier to transfer the ambulatory surgery center and both hospitals to the Cleveland Clinic but close the hospitals before transferring them. Her decision came in the wake of protests and legal challenges from members of the community served by St. Michael Hospital, doctors affiliated with the hospital and local officials.
"Our position is that if someone believes they can run those hospitals open, profitably, then we wish them the best," said Mark Cohen, spokesman for the Cleveland Clinic, which agreed to take the two hospitals only if they were closed first.
University Hospitals, which owns six hospitals and co-owns four others through a joint venture with the Sisters of Charity of St. Augustine Health System, had offered $28 million for Mount Sinai-East alone in mid-1998. It made a subsequent offer for $25 million.
PHS did not respond to either bid, said Eileen Korey, a University Hospital spokeswoman.
The $12 million bid for both facilities reflects the hospitals' declining value, she said.
"We clearly have had an interest in what's known as Mount Sinai-East for a couple of years," Korey said. "That's because it is located in an area where we have a lot of primary-care physician offices and outpatient facilities, but we did not have an inpatient presence in the eastern part of Cuyahoga County."
Korey said the system hopes to close the deal and take ownership by June 1.
The public auction had only one other bidder, two-hospital Lake Hospital System, in nearby Lake County, which bid $1.1 million for Mount Sinai-East.