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January 08, 2020 11:38 AM

Verity proposes closing Los Angeles hospital after deal falls through

Tara Bannow
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    Embattled Verity Health is asking a judge to let it close its Los Angeles hospital after a deal to buy the company out of bankruptcy fell through.

    El Segundo, Calif.-based Verity said in a court filing this week that it needs to close St. Vincent Medical Center and its dialysis clinic on an emergency basis within 30 days to avoid continued economic losses, which it says amounted to $65 million in fiscal 2019—more than $175,000 per day.

    Verity CEO Rich Adcock called the closure "the only viable solution at this point" in a court filing.

    "This decision is not taken lightly and comes only after exhausting every option to keep the hospital open," he said in a statement.

    St. Vincent would have been included in the $610 million purchase of Verity by Strategic Global Management, owner of the KPC Group, but that deal fell through, giving rise to a bitter back-and-forth between Verity and SGM.

    Verity blamed KPC Group in a news release, and said KPC defaulted on a binding purchase agreement to acquire Verity's hospitals. Verity sued KPC Group and its affiliates on Jan. 3.

    In its own statement, KPC's affiliate, SGM, disputed Verity's assertion that it defaulted on the agreement, citing Verity's own admission that the hospital had been losing money for years. SGM said it had raised "serious concerns" in the fall regarding Verity's compliance with the purchase agreement, including health and safety issues at St. Vincent.

    SGM said it is still interested in closing the deal, but Verity has refused to meet with its representatives.

    The California Nurses Association, a creditor in the Verity bankruptcy case, swiftly opposed Verity's proposal in court filings. In its filing, the CNA wrote Verity's proposal violates California laws regarding hospital closures, including providing 90-days notice before closing a hospital that provides emergency services.

    Christine Chung, a registered nurse representing the CNA, said in a news release that St. Vincent's emergency room treats more than 80 patients a day.

    "Many of these patients are in critical condition, where seconds can mean the difference between life and death," she said. "I fear that closing St. Vincent could lead to unnecessary and preventable deaths."

    No other buyers were interested in St. Vincent, Verity said in court filings. The health system wrote that it needs to have enough cash on hand to close the hospital, and pointed out that operating costs will rise as staff flee in response to the news that the hospital may close.

    St. Vincent was the first hospital in Los Angeles when it opened in 1856. A new facility opened in 1971 at its current location. The hospital is now licensed for 366 beds and services residents of Los Angeles, San Bernardino, Riverside and Orange counties.

    Verity said it has worked out a deal with Good Samaritan Hospital about a mile away to accept its patients.

    St. Vincent's fate was uncertain even without the latest proposal. SGM's would-be purchase agreement only required St. Vincent be maintained as an acute-care hospital until 2020. Verity's other three hospitals would have had to stay open longer.

    The CNA's filing also accuses Verity of being aware in November that SGM did not have the financing to close on the Verity purchase. It says Verity should have notified the appropriate entities at that time.

    Correction: An earlier version of this story misstated the relationship between SGM and KPC. This error has been corrected.
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