Wednesday, November 25, 2009

Shh! VHS has another bid, don't tell anyone!

What maybe the most important news about Valley Health System (VHS) was not mentioned at Monday evening’s meeting. In a Nov. 19 letter, Prime Healthcare Services Foundation has submitted an offer to purchase substantially all of VHS’s assets.

In his letter to VHS Chairman, Dr. William Cherry, Michael Sarrao, secretary and treasurer of the Foundation, describes the offer as “… a structure which is similar in many respects to the proposal submitted by Physicians for Healthy Hospitals (PHH) … there are several important differences which make [the Foundation’s] offer far superior to PHH’s proposal for the District, its residents, and its creditors.”

Not only was the new proposal omitted from the agenda, which was prepared on Nov. 20, none of the directors urged consideration of the offer, refuted its value or even mentioned its existence during their individual comments.

VHS’s legal counsel, John Marshall said the letter arrived too late to be printed in the agenda documentation. In addition, he linked the offer to the pending litigation to explain why the board would not discuss it in open session.

“…[I]t was not appropriate to discuss this in open session. While the pending litigation was properly agendized and discussed in Executive Closed Session, the specific terms of Prime's proposal were not discussed,” he said in an e-mail. “In addition, VHS is contractually bound by the terms of the Asset Sale Agreement with PHH approved by the Board in September and which is the subject of the December 15 election. Thus, VHS would be in breach of the agreement with PHH if it entered into negotiations with another party at this time.”

Sarrao also reported that the State Superior court had ordered VHS to release material regarding the sale. VHS had withheld this information (such as their consultant’s(the Piera Group) report on PHH) as privileged information.

Subsequently, Marshall said VHS is trying to overturn this ruling with respect to the evaluation materials, but has provided Prime with more than 12,000 pages of information — just what PHH requested and received.

Sarrao claims, “[Dr. Kali] Chaudhuri has an ownership interest in PHH and is the managing member of the Physicians for Healthy Hospitals, LLC, the sole shareholder of PHH. We suspect (based on, among other things, the efforts by VHS to shield these reports from disclosure by trying to create a ‘privilege’) the Peira Group reports may include a much more information about the process or lack thereof employed by VHS and PHH.”

Since the board had no new business for action, most the meeting was occupied with a dismal financial report from Interim Chief Financial Officer, Michael Bernstein, who is leaving VHS within weeks.

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