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Physicians for Healthy Hospitals Inc.

Providing Leadership Throughout the Bankruptcy Process, Sale, and Transfer of Ownership

Overview

The ECG team collaborated with Valley Health System leadership, district board members, and legal counsel to identify the optimal strategy for the district that would maximize the long-term financial health of its hospitals through the eventual sale of assets to Physicians for Healthy Hospitals.

the challenge

Valley Health System, a California Local Health Care District, had sought protection under Chapter 9 of the bankruptcy code to restructure its operations and debt obligations. The system included two hospitals: Hemet Valley Medical Center, a 327-bed facility, and Menifee Valley Medical Center, an 84-bed facility. District trustees, confronted with an expensive and protracted turnaround process, looked for strategic support and assistance as the system went through bankruptcy proceedings.

the process

The system selected ECG to assist with a strategic and operational assessment and as a partner to guide them through the high-stakes process. Our team collaborated with system leadership, district board members, and legal counsel to identify the optimal strategy for the district that would maximize the long-term financial health of its hospitals.

Our role included helping the system optimize operations during the bankruptcy proceedings, analyzing the offers, reviewing the asset sales agreement, assisting with the due diligence process, and facilitating the leadership transition. This process culminated in the district’s unanimous decision to sell organization assets to a local physician organization.

the outcome

With the sale of Valley Health System’s assets to Physicians for Healthy Hospitals in 2010, the bankruptcy process concluded quickly, allowing the new owner to move forward with operational and financial reforms. Since the transaction (2-year reporting period, 2011 through 2013), Physicians for Healthy Hospitals has realized:

  • A 20% increase in consolidated hospital net patient revenue and a 40% increase in consolidated hospital net income
  • Enhanced management capabilities and operational discipline, including significant improvements in negotiated commercial contract rates

Full financial recovery has been challenged over the past few years by the economic downturn, which hit the Hemet Valley particularly hard, as well as the opening of two new general acute care hospitals on the southern edge of the organization’s service area.