VHS + Lawyers + Doctors = Ka-Ching!

As the Emcee sang in "Cabaret",
"Money makes the world go around, It makes the world go 'round.
A mark, a yen, a buck, or a pound"

The federal judge overseeing Valley Health System’s (VHS) bankruptcy petition has granted a special hearing that could result in a challenge of the agreement to sell virtually the entire hospital district to local physicians.

On Tuesday, Oct. 13, the Los Angeles law firm of Latham and Watkins, on behalf of several clients, including save Hemet Valley Hospital and Prime Healthcare Services and three local residents, requested bankruptcy Judge Peter Carroll to lift the a stay to permit the pursuit of state court litigation.
The plaintiffs are challenging the legality of the agreement between VHS and Physicians for a Healthy Hosptial (PHH).

They lodge three principal complaints. First, the challengers argue that VHS was required to notify and to work with the Riverside County Local Area Formation Commission if it plans to divest most or all of its services.

Secondly, “Save Hemet Valley Hospitals” claims that the VHS board has so many connections with Dr. Kali P. Chaudhuri, a Hemet physician and healthcare businessman, its decisions were tantamount to insiders’ actions rather than representatives of district’s constituents.

“The board members’ approval of the sale of VHS to a Chaudhuri entity — while they are employed or receiving substantial financial benefits from Chaudhuri’s other interests — is a patent conflict of interest,” they alleged.

The third major objection focuses on the boards sudden June decision to “explore” a sale and the lapse of only 30 days until it conferred an exclusive negotiating pact with PHH.

VHS’s legal counsel, John Marshall says, “Valley Health System will oppose the Motion.”

The sales agreement between VHS and PHH would provide VHS with about $160 million if you count $55 million of alleged claims from PHH members. Otherwise, PHH needs about $50- $60 million cash to close the deal, borrow some and will then have possession of about $38 million of VHS cash and receivables.

The owner of Prime Healthcare is another physician, turned healthcare entrepreneur, Prem Reddy.

The hearing will be 9:30 a.m., Monday, Nov. 2 at the Federal Bankruptcy Courthouse in Riverside.

Heading to some sports' photo ops and interview in Hemet. More tomorrow, as “the Scalpel twists”.