Scripps to buy hospital and assume patients, employees from failing hospice

Scripps Health has agreed to buy the inpatient hospice facility and assume the remaining patients and employees of a San Diego hospice organization that filed for Chapter 11 bankruptcy protection last week.

According to a Feb. 13 filing in U.S. Bankruptcy Court in San Diego, Scripps Health will pay $10.7 million for San Diego Hospice's 23-bed facility and will extend a debtor-in-possession loan of up to $5 million to help the hospice maintain operations pending the transition. The plans must be approved by the court.

Scripps Health, a four-hospital system based in San Diego, also last week acquired a small hospice company in order to get a state license to immediately begin assuming patients from the foundering San Diego Hospice. Scripps Health has been that organization's largest referral source.

San Diego Hospice has been under the lens of a federal audit since 2011. In October, Medicare began requiring prepayment review of its claims, causing severe cash-flow problems. The results of the audit aren't known yet, San Diego Hospice Chief Operating Officer William Parker said in the declaration, and the hospice got notice last month that the U.S. Justice Department had launched an inquiry.

Over the past 90 days, San Diego Hospice suffered a 50% decline in patients and revenue, according to a declaration by Parker filed in the bankruptcy court. The company faces an annual operating loss of $19 million, he said.

“In our talks with San Diego Hospice, we both agreed that we did not want to see patients fall through the cracks during this process, and we wanted to help as many hospice employees as we could,” Chris Van Gorder, president and CEO of Scripps Health, said in a news release.

San Diego Hospice laid off about 300 employees and expects to shed another 240 of the remaining 500 before the rest are transferred to Scripps Health. Operations of the inpatient facility have been suspended and the organization provides care for about 300 patients in their homes, all of whom will be transferred to Scripps Health unless they choose another provider.

The system said in the release that the money paid for the hospice's real estate will go toward supporting operations and avoiding additional debt as the organization winds down business.

The not-for-profit organization owes about $9.8 million to its 20 largest creditors, according to a previous bankruptcy filing.