A hospital owned by Orange-based St. Joseph Health System has offered $35 million for a Victorville hospital being sold in U.S. Bankruptcy Court.
St. Mary Medical Center is conducting due diligence on Victor Valley Community Hospital in Victorville, said Randy Bevilacqua, the hospital’s vice president of strategic services.
The hospital is “probably a couple of weeks away” from finishing its work, Bevilacqua said.
Apple Valley-based St. Mary will prepare a detailed purchase agreement to be presented to the Victor Valley board if due diligence goes well.
Any sale must be approved by bankruptcy court and the state attorney general’s office.
Victor Valley has 101 beds and is managed by Ontario-based Prime Healthcare Services, which in October reportedly made a $6 million loan to the hospital. Prime—which owns Garden Grove Hospital and Medical Center, West Anaheim Medical Center, Huntington Beach Hospital and La Palma Intercommunity Hospital—made a $35 million bid for Victor Valley last year that was nixed by the attorney general’s office.
AG’s Decision
Victor Valley was notified at the time that the attorney general’s office had concluded that the sale “is not in the public interest and will likely create a significant effect on the availability or accessibility of health care services to the affected community.”
It’s unclear if Prime might try to address the concerns and make a new offer.
Previous Offer
Also last year, a group including Kali P. Chaudhuri—a Hemet doctor-entrepreneur with a stake in Santa Ana-based Integrated Healthcare Holdings Inc.—won preliminary approval of a $37 million offer to buy Victor Valley. But the sale didn’t close within an agreed period.
St. Mary said it would spend another $25 million to upgrade Victor Valley during the next five years.
The hospital intends to upgrade its diagnostic, laboratory and pharmacy equipment if it succeeds in buying Victor Valley’s assets, Bevilacqua said.
He said it was “our understanding” that Victor Valley, which filed for Chapter 11 bankruptcy proceedings in 2010, is compliant with a state law that requires acute-care hospitals to be operational after a major earthquake by 2030.
“That’s something we’ll take a very long look at in due diligence,” the St. Mary executive added.
He said the hospital would be operated under St. Mary’s name and license.
St. Mary is interested in acquiring Victor Valley to increase its hospital group’s operating capacity, among other reasons, Bevilacqua said. St. Mary has 206 beds and often runs completely full.
Market Need
He added that a large portion of the Victorville area population is poor and underserved.
At Victor Valley, its board’s top priority is to get it into the hands of an operator that can make needed improvements, board attorney Charles Slyngstad told the California Watch website.
“Time is not on our side at Victor Valley; we have to do something as soon as we can do it,” said Slyngstad, of Burke, Williams & Sorensen LLP in Los Angeles.
Prime has been the subject of criticism for offering what some say is an overly limited medical network.
According to California Watch, Prime has avoided managed care contracts and charged higher prices to insurance companies that cover the patients who end up in its emergency rooms.
