Hemet Hospital staff vigil

Midnight, Wednesday, Oct. 13, Physicians for Healthy Hospitals (PHH) finally closed its deal to purchase Valley Health Systems (the local public hospital district) on Wednesday. The physicians’ first action was to let several dozen employees go. So far at total of 14 registered nurses have been asked to leave and more than 40 other employees.

“Today marks the beginning of a new era in quality healthcare for our communities and area residents,” said Dr. Alex Denes, spokesman for PHH, in a press release. “We will honor voters’ confidence in PHH by rebuilding our hospitals into centers of medical excellence, with an emphasis on quality patient care.”

Thursday night a vigil for the dismissed staff was held outside the hospital. At the corner of San Jacinto and Devonshire streets, cars, vans and trucks blared their horns in support of the former hospital staff. The noise made conversation difficult.

“Ninety-six percent of VHS’ approximately 1350 employees were rehired as PHH employees. Those not hired represent departments across both hospitals and include staff and management, union and non-union members,” said Jerri Randrup, the VHS vice president for communication and marketing. “Some were caregivers. The law requires that we maintain specific staffing ratios between patients and caregivers.”

At least seven emergency room (ER) nurses and several from the regular night shift were part of the group the physicians chose not to employee, according to John Stead-Mendez, labor representative for California Nurses Association. Lawanda Turner has more than 20 years working in emergency and critical care nursing. VHS paid her a bonus to join their staff.

But many more, Jessica Lopez and Helen Ostott had been with VHS for decades. Lela Valencia had been 15-year registered nurse in the ER. Rose, a resource secretary for the ER, had been with VHS for years.

“It’s a travesty. People should be concerned,” Stead-Mendez said. “There will be drastic understaffing in the ER. A year ago, PHH said they wanted to keep the ER in the community. Who will hold them to their commitment? This seems politically motivated.”

Current VHS Vice President for Communications Jerri Randrup did not respond to questions about the criteria for the doctors’ decision to not hire these employees. None had been told they were underperforming. Many of the employees felt it was retaliation for their involvement in employee organizations.

“I checked the hire dates and there has not been a nurse hired into ER since August despite the fact that there have been positions posted there for some time. So it is simply disingenuous to claim as, Jerri Randrup did, that ‘We've continued to fill vacancies as they've occurred.’ In fact, they have not filled vacancies in ER for months and they just created [seven] more vacancies there,” Stead-Mendez said in an email.

“I’ll fight the battle 24/7 now,” Turner said, angry about how the nursing staff has been treated. “I’ll protect the workers.”

While she was not concerned about a new job for herself, she worried about her co-workers and patients. “The quality of care isn’t what is should be,” she stressed.

While ER nurses were being asked to leave, many remember that the hospital apparently was still trying to fill its ER staffing.

Lopez, a respiratory therapist, has more than 30 years experience. She now has to find new employment. She cares for grandson Elijah, who is now worried about where Grandma will work.

“I could lose my home, I have no savings,” Sharon Robinson, an oncology nurse, lamented. She was hired only 90 days ago, although she has more than 20 years nursing experience. While some nurses already have potential new jobs, many are still looking and worried. Despite state mandates for minimal nurse to patient ratios, the market for nurses has been weak according to many.

While many will have problems until new jobs are found, most still expressed concern about patient care. “We assumed they would be adding staff for winter,” Turner said.

When PHH initially engaged the district in selling the hospitals, one of the main arguments was the doctors lived here and wanted to protect the community. One nurse lives only two blocks from the hospital. Nurses are in high demand and she already has potential leads, but now she will work outside of the community.

In an interview a year ago, (October 2009), Dr. Alex Denes, one of the PHH founders and spokesman, said “We want to provide as much [medical] service as the communities need. We need to re-establish trust in these hospitals.

During the interview, Denes said PHH”s data suggested that almost 50 percent of patients from the Hemet area and close to 80 percent from the Menifee Valley service area seek medical care outside this hospital district.

“Keeping patients and getting them to return to this healthcare system will be a high priority for PHH” Denes added. “Look at emergency room utilization. We’ll need to make it more appropriate. This is not a ‘quality of care’ issue, it’s about the enormous wait. Sometime people have to sit six to seven hours wait for help. No one, not even the doctors like this.”

Most were informed early Tuesday morning as they came for their shift. Apparently VHS officials were concerned about employee reactions to the dismissals and asked Hemet Police to safeguard the hospital. Several police squad cars were seen parked outside the hospital Tuesday morning.

Valley Health attorney change sides

May be I don't understand the "adversarial" process very. As some have noted, I am not a law school graduate.

but what's you opinion of the following.

the firm Stutman, Treister and Glatt represents Valley Health System in its bankruptcy proceedings. They guided VHS through the process that resulted in the sale of the hospital system to Physicians for Healthy Hospitals.

In order to secure the sale, PHH had to use Dr. kali P. Chaudhuri's funds and guarantees to obtain the financing.

On Thursday, and perhaps this is the legal system's idea of an April Fool's joke, STG approached Judge Peter Carroll and said they were now "engaged by KPC Resolution company, LLC, to represent Resolution as a purchaser in the connection with a receivership proceeding in the U.S. District Court Central Cal.

"Dr. Kali P. Chadhuri is the manager and sole member of Resolution. [He] is also one of the investors in PHH, LLC which owns or will own all or substantially all of the stodck of PHH, Inc."

The law firm has no second thoughts about representing the purchaser of VHS since the VHS board consented! I don't remember that coming up in a board meeting.

Bye Bye VHS

In a low turnout election, Measure P collected nearly 88 percent of the vote. Underwhelming turnout, reflected int he lack of much debate. Mail-in ballots decided the hospitals disposition.

Votes were posted at the Riverside County Registrar of Voter's site shortly after polls closed at 8 p.m. At that time, those in favor of the sale of Hemet Valley and Menifee Valley medical centers to a group of doctors — Physicians for Healthy Hospitals — out number oppenents nearly seven to one.

Here the final results (not official yet) as of 11:22 p.m. and 100 percent of the precincts reporting.

P-Valley Health System
184/184 100.00%
Vote Count Percent
YES 22,866 87.17%
NO 3,364 12.83%
Total 26,230 100.00%

At 10:35 p.m., the following totals were released

P-Valley Health System
145/184 78.80%
Vote Count Percent
YES 21,182 87.68%
NO 2,977 12.32%
Total 24,159 100.00%

initial results from 8:04 p.m
P-Valley Health System
119/184 64.67%
Vote Count Percent
YES 20,482 87.66%
NO 2,884 12.34%
Total 23,366 100.00%

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.

Judge keeps VHS out of state court — for now

Bankruptcy Judge Peter Carroll sympathized with the parties seeking to file a state court suit to stop the sale of Valley Health System (VHS) , but he ruled for the hospital district.

Although he ruled that there was essentially no evidentiary basis to permit lifting a stay that blocks litigation based on action before the bankruptcy filing, he left the door slightly ajar by ruling without prejudice.

“The judge's ‘without prejudice’ statement means that the moving parties can bring the same motion at a later date, although they would have to demonstrate that something has changed, for example, new facts or new law since the court's ruling,” explained Gary Klausner, VHS’ bankruptcy attorney, on Friday morning “The moving parties may not go to state court; the judge expressly found that the "automatic stay" applies to the proposed new law suit, so, absent the court's permission — the relief from stay — they may not proceed in state court.”

Basically, Carroll felt the arguments presented to him did not satisfy any of the normal 12 criteria bankruptcy courts in this district apply in order to lift the stay and permit litigation to proceed.

Marc Rappel, attorney representing the parties requesting relief from the stay, had argued that case law supported this action, but Carroll was not sufficiently convinced.

The hearing opened with brief arguments from both sides before Judge Carroll began dissecting Nathan Smith’s declaration in support of the motion for relief from the stay.

Carroll threw out many of Smith’s statements and comments about VHS board members concealing possible conflicts of interest. Carroll felt most were made without any personal knowledge or were simply unfounded assumptions that Smith’s clients believed.

After listening to both sides for nearly an hour, Smith took a recess to consider the cases both sides referenced and then returned with his ruling.

“When the judge stated talking and said he sympathized with the movant's position, I had a feeling he was going to say ‘but’,” Klausner said. “But until he did, I was holding my breath.”

Rappel was not happy with the decision and replied, “We have other options,” when asked if the ruling precluded a state court filing on Friday.

“We were very please with the decision. We're not sure what to expect regarding any further litigation,” Klausner added.

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”.

VHS sale set for December vote

The Valley Health System board of directors approved the sale of the hospital district to the local physicians group — Physicians for Healthy Hospitals (PHH).

A specific price was not used during the meeting, but it is in the range of $114 to $118 million.

District voters, including Idyllwild residents, will cast their ballots in favor or against the sale on Dec. 15. The Registrar of Voters announced the election day yesterday.

Despite the urging of more than a dozen doctors for a unanimous vote in support of the sale, Director Robert O’Donnell was lone dissenter on the board that approved the action 6-1.

O’Donnell’s reasons were simple. First, he does not like the idea that if the voters reject the offer, PPH still gets to purchase Menifee Valley Medical Center (MVMC) for $29 million. Secondly, PHH promised but has yet to reveal a business plan, which demonstrates their ability to turn the hospital money sponge-like operations into a clean green profitable machine.

O’Donnell is the only person willing to publicly express a desire to review PHH’s business plan before blessing the deal, but others have expressed similar sentiments. Rob Davis, Hemet attorney who represents one of VHS’s numerous creditors, said his clients and other secured creditors expect to receive cash if the sale actually closes. However, the unsecured creditors committee has apparently requested more information from PHH, including the confidential or unrevealed business plan.

The doctors are paying VHS’ long term debt ($44.7 million), paying VHS’s pre-petition (pre-bankruptcy filing) unsecured creditors ($21 million), assuming “substantial” post-petition debt ($31 million estimate), assuming the $8.4 million owed to Select Healthcare, paying insurance premiums for future malpractice coverage ($4.1 million), giving the VHS remnant $400,000 per year for five years ($2 million), assuming annual and sick leave obligations to current staff ($6.0 million) and relief from contract breach claims levied by PHH “affiliates ($55 million).

Excluding the last item, which does not have a specific verified value, the other payments total $117.2 million. In return, PPH receives real assets, the two hospitals, the Health Center and other real estate appraised at $76 million and cash and accounts receivable of about $38 million.

Many doctors spoke in favor of the sale and PHH’s commitment to higher quality healthcare in the valley. None described how the physicians will find the capital to pay the $80 million and still have money to invest in improving facilities or expanding services.

The agreement requires PHH to maintain “core services” for five years. Basic emergency services are an example of a core service.

One of the non-physicians speaking in favor the transaction was John Petty, Riverside County 3rd District Planning commissioner. After the meeting, he explained his thoughts on why the hospital finances will improve.

“The doctors now have skin in the game. It’s pride of ownership,” he replied. He believes the Hemet Hospital reputation has been severely damaged through the recent referenda votes and now doctors have the incentive to change that reputation.

Summarizing the public’s choice in December, Director Tom Wilson said, “The bottom line when you entertain the idea to sell these facilities is they’re not just bricks and mortar. These are people, lives and safety.”

None of the sale's details were available Tuesday night. VHS counsel, John Marshall said the information including the final agreement will be posted on the district's Web site, www.valleyhealthsystem.com. However this will not occur in time to review the paperwork and still submit a comment to the county Registrar of Voter's office by 6 p.m., Thursday, Oct. 8. This is when arguments for or against the transaction must be filed.

VHS terms with PHH

Last night, the Valley Health System (VHS) directors approved a tentative agreement with the local physicians group — Physicians for Healthy Hospitals (PHH) — for the purchase of the hospital district.

A final definitive agreement is not ready for approval, but the physicians and hospital directors were getting nervous about the timing of a necessary voter approval and the approaching December and January holidays, according to VHS counsel John Marshall.

Consequently, the board adopted a memorandum of understanding with PHH that outlines the more general or basic terms and asked the county Registrar of Voters to schedule a polling place election or a mail-in ballot election or some combination of the two. The election would occur on Tuesday, Dec. 15.

The doctors are willing to pay the existing bond debt ($42.5 million), provide $21 million for unsecured creditors, assume post-petition (means debt incurred after bankruptcy was file in December 2007) of $25 to $30 million, pay a $8.4 million not to Select Healthcare and relief on other claims amounting to $50 million, eventually this might be reduced substantially.

In aggregate, PHH says it is willing to ante up $156 million for the system. VHS would sell all of its assets (with a few minor exceptions such as a small limited trust account).

In 2007, Select Healthcare’s $135 million offer for the whole district, including Moreno Valley Medical Hospital, was rejected at the polls.

The board voted 6-1 to accept the terms and request the registrar to establish an election if the directors finally accept and approve a sales agreement.

Both Board President Dr. William Cherry and Marshall indicated that the final agreement and related documents will be available in several weeks. But Marshall warned that the sheer volume of paper and number of lawyers involved will slow the process although establishing the election day will be a strong motivator.

The sole dissenter was Director Robert O’Donnell. He was disappointed that PHH did not present a business plan to demonstrate how it will generate additional revenue to pay its own debt.

VHS’s inability to create sufficient profits to pay debt and cover current expenses has been a major criticism of recent management

When asked how the doctors’ group could accomplish this task, Director Glen Holmes, chair of the Ad Hoc committee that has negotiated for the board, asked to discuss it on Thursday.

“A lot of the hospital’s deficit is the cost of bankruptcy. That’s about $300,000 per month,” replied Dr. Alex Denes, PHH spokesman. “That will disappear because we’ll be out of bankruptcy.”

He also said the doctors plan to re-established the healthcare contracts with local groups that the former management team had canceled. He also believes that patients will return to VHS facilities because the doctors can improve the image of the hospitals.

“Nearly 50 percent of residents were seeking healthcare outside the hospital district,” he noted.

If the voters reject this offer, as they did two years ago, an "Alternative Transaction" will be effective. PHH can purchase Menifee Valley Medical Center for $29 mllion. Apparently, some VHS officials have concern about this possibility since one whole slide of Marshall's presentation addressed "Concerns abou the Alternaive Transaction", such as the district will still have one hospital — Hemet — and substantial debt.

For those still excited about this transaction and healthcare finances, go to JP's blog for additional thoughts and comments.

UHS approaches VHS

A third party, Universal Heath Systems (UHS), has written to VHS expressing a desire to purchase its assets. UHS is a national healthcare company whose share are traded on the NYSE.


Rather than try to maximize the return to the district’s owners, the board has granted the local physicians 90 days to negotiate privately and exclusively with a special board subcommittee.


Unless the public can compare the different offers, how can it be sure or how can claims of giving away its assets in a sweetheart deal ever be resolved? It appears that the documentation and meetings are going to be shrouded despite assertions of the need for transparency.

The UHS offer is below and you click on the image to get a bigger and better view: [see JP ‘s blog for more on the VHS reaction to the public records request].

VHS for sale again

Almost two years after agreeing to sell the Valley Health System (VHS), Tuesday night its board of directors voted to negotiate confidentially and exclusively the sale of the both Hemet Valley (HVMC) and Menifee Valley (MVMC) medical centers with a group of local physicians.

The board ignored representatives of two other private groups interested in exploring bids for the system and the comments of many citizens recommending an open bidding process.

“Our charge is to the community not necessarily to [obtain] the highest deal,” replied Director Vinay Rao. “It is not whoever can give the most money, important part of the community are the physicians.”

In exchange to taking hospitals off the market, PHH will put $1 million in an escrow account. If a sale is consummated the money will become part of the purchase price. VHS does not receive any money for closing its eyes and ears to other potential buyers over the next 90 days.

Apparently some negotiations have already occurred as both VHS chair Dr. William Cherry and other directors said that the Physicians for a Healthy Hospital (PHH) was willing to bring a “top-tier management team”. Cherry later said this would be a firm with a national reputation such as Catholic Charities West, UCLA or Loma Linda.

Cherry did confirm that the Board’s other sale criteria would eventually be shared with the public, but only after the negotiation process had progressed further. While new Director Madaliene Dreier asserted “transparency” would be more than a “buzz word”, none of the directors volunteered to provide as much information as they have already given PHH.

During the public comment period, both Michael J. Sarrao, vice president and general counsel for Prime Healthcare Management, Inc., and Bob DeGour, executive vice president and general manager of ADR Associates, both said separately their firms would be interested in submitting a bid for part of all of the VHS.

[more will be in the print issue version]

VHS director

Last night, the Valley Health System directors appointed Madaleine Dreier, MSN, FNP,as the new Zone 4 director to replace Darren Magness, who resigned last month.


The name may sound familar to Idyllwild residents. Ms. Dreier's husband is Dr. Ralph Dreier, a general surgeon at Hemet Valley Medical Center and former VHS director.