Bankrupt Prospect Medical Holdings is close to launching the auction process to sell Waterbury, Manchester Memorial and Rockville General hospitals, one of its lawyers told a judge on Wednesday.
Prospect is in final talks to secure a “stalking horse” bidder, a party that sets the minimum price on assets sold as part of a bankruptcy auction, attorney Anne Wallice told Judge Stacy Jernigan at a hearing Wednesday morning.
The bankrupt hospital operator, which hopes to sell hospitals in both Connecticut and California to satisfy debts estimated at up to $10 billion, plans to file documents relating to the stalking-horse bidder in coming weeks, Wallice said. Prospect said it intends to meet or beat an Aug. 15 deadline set as part of an emergency loan deal struck earlier in the month, she said.
“We are working with multiple active parties that cover all hospital operations in California and Connecticut,” Wallice said. “We will be back before your honor and file a notice with the court related to the deadlines for qualified bids, auction and a sale order, but we are focused right now on ensuring we have that stalking horse.”
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“So it sounds like it’s looking positive you’re going to have a stalking horse,” Jernigan said.
“Your honor, it is looking very positive that we are going to have a stalking horse,” Wallice replied.
“We are pleased to hear that they will be hopefully beating that Aug. 15 milestone ? that’s something we’ve been pushing for a while as well,” said Gabe Sassoon, attorney to the Official Committee of Unsecured Creditors in the Prospect bankruptcy. Connecticut union members and cities like Waterbury who are owed property taxes are among the company’s unsecured creditors.
Gov. Ned Lamont said at an event on Tuesday that several bidders remain “at the table” for the Connecticut hospitals.
“We’re paying special attention to make sure our hospitals keep going and quality of care is never compromised,” Lamont said. “We’re making sure that the bidders are there, making sure they have a full response, letting them know what a priority it is for all of us.”
The Prospect sales update comes as anxiety mounts in Waterbury, Manchester and Vernon about the fate of the three Connecticut hospitals that are ensnared in the bankruptcy process. After failing to find any willing bidders, Prospect shut down its two hospitals near Philadelphia in April.
Medical records costly
The fallout of the Pennsylvania closures was also on view at Wednesday’s hearing, when the judge heard a plea from former patients of the hospitals to get affordable access to their medical records. Prospect closed Crozer-Chester Medical Center in Chester and Taylor Hospital in Ridley Park, both safety-net hospitals in low-income areas.
After closing the hospitals, Prospect started charging fees from $35 to $75 to transfer each electronic medical record to a patient, fees that quickly mount into the hundreds of dollars for multiple records, according to Pennsylvania officials.
“Many of the citizens here live in poverty. They just do not have the money. It is not going to come from anywhere, and they had no control over this hospital being closed,” said Kristin Motley, health commissioner of the city of Chester. “I would like to see that this cost is not placed on the community that is already burdened by having to find new providers and all the health risks that will come from that.”
Jernigan urged the parties to come to an agreement that would lower the cost for patients.
“We've got a sad, sad situation where, despite what everyone wanted, these Pennsylvania hospitals shut down,” Jernigan said. “The debtor entity has been cash-strapped from the moment it filed bankruptcy.”
Layoffs argued
Laid-off employees of Prospect’s two Pennsylvania hospitals also argued in court on Wednesday that the company should have given them more notice before closing down the facilities and terminating their jobs. Crozer-Chester employed 1,856 people and Taylor Hospital employed 347 people prior to the closings.
Another Prospect attorney argued that the company could not have foreseen the financial morass that led to the layoffs, including a failed sale deal involving major hospital system Penn Medical.
“An abrupt turn is what happened here,” said Jon Muenz, Prospect’s lawyer in the matter. “Everyone was working towards a solution that we thought was in view with a consortium of transaction partners. We lost it, and then the (state layoff) notice was issued shortly thereafter.”
Jernigan ruled that the court arguments relating to the layoffs could continue. “The plaintiffs have stated enough facts to state a claim of a possible (layoff notice) violation that is plausible on its face,” she said in ruling for the terminated Prospect employees.
Additional reporting by Cris Villalonga-Vivoni.