After seeking bankruptcy protection, Pipeline Health strikes deal to sell two hospitals

Pipeline Health, which filed for bankruptcy protection last month, said Wednesday it has brokered a deal to sell two hospitals in the Chicago area.

Pipeline, a for-profit system based in El Segundo, Calif., said it is selling West Suburban Medical Center in Oak Park and Weiss Memorial Hospital in Chicago’s Uptown neighborhood to Resilience Healthcare and Ramco Healthcare Holdings, LLC. Pipeline previously said the financial performances of the Chicago-area hospitals was dragging the system.

Pipeline said it sought approval of the sale in a motion submitted late Tuesday to the U.S. Bankruptcy Court for the Southern District of Texas. If the court signs off on the deal, Resilience would assume operation of both hospitals beginning Dec. 2, Pipeline said.

“We are pleased to have reached this important milestone after months of discussion, planning and full transparency, and we are grateful to the physicians and staff who have continued their dedicated service to their patients during this year of change,” Pipeline CEO Andrei Soran said in a statement.

“We are proud of the investments we have made in these Chicago facilities, and we wish Weiss and West Suburban all the best in their continued service to their communities,” he said.

The sale has two phases, according to Pipeline.

The first phase involves Resilience taking over the hospitals, a medical office building adjacent to Weiss, the River Forest Medical Campus affiliated with West Suburban and the Chicago Health Medical Group.

In the second phase, Ramco is expected to buy the real estate associated with the Chicago medical facilities, Pipeline said. That second phase should close in the next few months, according to Pipeline.

Pipeline Health currently operates seven safety net hospitals in three states.

Assuming the sale occurs as anticipated, Pipeline would be left with five hospitals: White Rock Medical Center in Dallas; and four hospitals in the Los Angeles area: Memorial Hospital of Gardena, Coast Plaza Hospital in Norwalk, Community Hospital of Huntington Park, and East Los Angeles Doctors Hospital.

However, Pipeline has struggled to improve the finances of the two hospitals in the Chicago area. The system said it has invested $60 million to upgrade the facilities.

Pipeline has been trying to arrange the sale with Resilience throughout much of the past year. The Illinois Health Facilities and Services Review Board approved the sale June 7, but Pipeline has been working since then to finish the deal.

“We have worked diligently and transparently in our engagement, partnering with the community in ongoing conversations about the hospitals and their service to patients and about our work toward a change of ownership,” Soran said in a statement.

Resilience is led by healthcare executive Manoj Prasad and financial partner Rathnakar R. Patlola, who manages Ramco.

In paperwork filed in the bankruptcy court last month, Pipeline said the poor financial performance of the Illinois hospitals was taking a toll on the entire system.

The Chicago facilities lost $69.7 million over the 12-month period that ended in August 2022, according to the court filing. Pipeline said higher labor and supply costs in the COVID-19 pandemic have exacerbated the financial woes of the Illinois hospitals.

“Due to the financial state of the Illinois Facilities, Pipeline’s California- and Texas- based healthcare operations have effectively subsidized the Illinois Facilities to avoid operational disruptions,” Russell Perry, Pipeline’s chief transformation officer, wrote in the court filing.

Many hospital systems have been struggling in the COVID-19 pandemic, particularly in the past year. More than half of all hospital systems are expected to finish 2022 in negative margins, according to a report from the American Hospital Association. Facing higher costs and inconsistent volume, hospitals have been in the red for nine consecutive months, according to Kaufman Hall.