Downey Regional Medical Center, a financially troubled Los Angeles-area hospital, will soon be acquired by another non-profit facility in southern California.
Downey Regional and Whittier, Calif.-based Presbyterian Intercommunity Hospital have signed a non-binding letter of intent calling for Presbyterian's acquisition of Downey. The two institutions intend to execute a definitive agreement in the near future.
Under the proposed structure, Presbyterian would form a nonprofit entity to acquire Downey's assets under a plan of reorganization. Consideration for the asset purchase would be the promise of the nonprofit hospital to make payments to general unsecured creditors according to a proposed schedule.
James R. West, Presbyterian's president and CEO, said Downey's outstanding bonds could either be guaranteed by Presbyterian or an appropriate affiliate, or possibly be assumed into the Presbyterian Obligated Group.
"Now that the letter of intent is signed, PIH and DRMC can begin the process of creating an integrated regional healthcare system," said West. "The two hospitals will be able to create a comprehensive network of healthcare services that will be unsurpassed in the area."
Downey filed for protection under Chapter 11 of the U.S. Bankruptcy Code on Sept. 14, 2009, citing financial system breakdowns and poor contracts. The hospital has operated at normal capacity with its full range of services throughout the proceedings.
"We are hopeful that we can quickly come to terms under a definitive asset purchase agreement with PIH and allow for the new nonprofit Downey-based hospital to commence operations as early as this summer, as previously planned," said Rob Fuller, Downey's executive vice president and COO.
Fuller noted that, while the letter of intent is non-binding and preliminary, there is a "natural geographic and operational affinity" between the two organizations that should allow for Downey to enjoy successful operations once the asset purchase agreement is concluded.
Presbyterian Intercommunity Hospital is a 400-plus-bed acute care, non-profit hospital employing 600 physicians. Downey Regional is a 199-bed not-for-profit facility.
"Our overall plan in these discussions is to execute a strategic transaction that allows for a Downey-based nonprofit hospital to continue providing superior healthcare services to patients in the community," said Kenneth Strople, Downey's president and CEO. "I want to reassure our patients, our employees, the physicians and the community that DRMC and its services will continue to be open as we move through these discussions."