VVCH creditors initiated renegotiation
June 29, 2012 4:50 PM
Tomoya Shimura, Staff Writer

VICTORVILLE • In a surprising turn of events, bankrupt Victor Valley Community Hospital agreed to a $33.8 million purchasing offer by Riverside-based KPC Global medical group, who had once failed to close out a deal.

Judge Catherine Bauer approved their agreement Wednesday for the second time at the federal bankruptcy court in Santa Ana. The judge also approved KPC to lend $4 million to keep the hospital open until the deal seals. Now it’s up to California Attorney General Kamala Harris to give the final go sign.

Executive Vice President Bill Thomas of KPC said he is expecting Harris to approve the deal as early as July 31 because the attorney general’s already familiar with the situation.

“We have always wanted to acquire the hospital,” Thomas said. “We are very enthusiastic. Our model is to work with the medical staff up in Victorville to make this hospital first rate. We have a very doctor-friendly business model and we’ll be working really close with local physicians.”

VVCH filed for Chapter 11 bankruptcy protection in September 2010.

The nonprofit hospital’s finance suffered from high amounts of uncompensated care to uninsured and low income members of the community. Hospital officials said 70 percent of the patients are on Medi-Cal, Medicare or charity care.

Since the beginning of the search for the new owner, VVCH management had openly stated that the hospital and Prime Healthcare Services Foundation were in mutual agreement. Prime Healthcare Services Foundation is a nonprofit arm of Dr. Prem Reddy, who heads Desert Valley Hospital in Victorville.

But KPC, bidding under Victor Valley Hospital Acquisition Inc., beat out Prime with $37 million in an auction.

KPC got the attorney general’s approval, but couldn’t seal the deal by the deadline in May 2011.

The tension grew between KPC and VVCH officials, as the two parties gave conflicting accounts of what had happened during their negotiations. KPC kept approaching the hospital, but VVCH management remained skeptical of KPC’s ability to follow through.

Meanwhile, the bankruptcy court judge approved an agreement allowing Prime to purchase the hospital for $35 million. But Harris denied the proposed sale, stating in a short release that it’s not in the public interest.

St. Joseph Health, St. Mary made an offer to buy VVCH, but St. Mary’s never presented a written purchase agreement, according to VVCH officials.

As time and money ran out for VVCH in June, the hospital’s creditors decided to re-engage in talks with KPC, Thomas said. They brought the proposal to the VVCH board, and the board approved it two weeks ago, VVCH Interim CEO Edward Matthews.

Matthews said he expects the attorney general to announce her decision between July 31 and Aug. 31.

While the management stays in place, VVCH will start the transition process Monday, Matthews said. The hospital will enter a consulting agreement with KPC, ending a financial and consulting contract with Prime.

“The board is very, very appreciative of what Prime has done for this hospital,” Matthews said.

Tomoya Shimura may be reached at (760) 955-5368 or TShimura@VVDailyPress.com. Follow Tomoya on Facebook at facebook.com/ShimuraTomoya.

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