Verity Health Systems, a nonprofit healthcare system which operates four San Francisco Bay Area hospitals, filed for bankruptcy protection last week, as it explores strategic options to eliminate burdensome debt. The organization has been weighing the possibility of selling its Santa Clara County hospitals to relieve the financial pressure of $500 million in long-term debt, combined with aging facilities that need some $66 million in improvements. The organization filed for Chapter 11 bankruptcy with the US Bankruptcy Court in the Central District of California to keep all six of its hospitals operating while it organizes an orderly and efficient sale of its assets.
Verity Health Systems Bankruptcy
The bankruptcy filing included no less than seventeen separate medical facilities. The CEO of Verity Heath, Rich Adcock, states that the company decided to declare Chapter 11 bankruptcy, "after a diligent process of assessing all possible options alongside our financial and legal advisors, Verity Health has made the best strategic decision for all of our patients, employees and other stakeholders." The company has secured a $185 million loan in order to continue operating throughout the bankruptcy process.
Employee Union Challenges Bankruptcy
Not everyone involved with Verity Health Systems believes that the California bankruptcy is for the best, however. The union of healthcare workers that make up roughly 2,000 of Verity Health Hospital workers, the SEIU-UHW, is challenging the bankruptcy. The SEIU-UHW is challenging the bankruptcy in an effort to ensure that the communities served by the hospitals continue to receive access to care. Additionally, the California union wants to ensure that its hospitals stay open and continue to meet employee pension obligations. The challenge signifies that Verity will have a tough time attempting to nullify any collective bargaining agreements.
Hunt for Buyers Continues
It's no secret that Verity Health has been searching for buyers for some time, and will continue to find a suitable offer that it can accept. Struggling businesses often use California Chapter 11 bankruptcy in order to sell all or a great number of their assets. Chapter 11 can offer many unique advantages for both the buyer of a business, as well as, the seller.