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San Diego
Wednesday, May 22, 2024
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Scripps Health Wins With Bid for Hospice

A heated auction in federal bankruptcy court last week culminated in Scripps Health making a winning $16.55 million bid for San Diego Hospice’s eight-acre Hillcrest property.

It faced stiff competition, however, from Sharp HealthCare.

Scripps and Sharp both vied for the purchase of the bankrupt hospice’s 24-bed hospital and grounds. The auction began at $11 million and a total of 50 bids were placed by the region’s two largest health systems.

But while Scripps had been in talks to acquire San Diego Hospice’s assets for several months, Sharp made a public entrance into the game just a few days before the auction took place.

“When Sharp submitted the bid, they did it confidentially the Friday before,” said Chris Van Gorder, CEO of Scripps Health. “It was a surprise because they came in at the last minute, but that’s the whole idea of bankruptcy — to stimulate an auction like this to be able to help generate money to pay off the creditors.”

San Diego Hospice filed for bankruptcy Feb. 4. But rather than restructuring, the respected and long-running hospice chose to liquidate its assets. It faced scrutiny following a November audit that found that its admissions policies didn’t adhere to government guidelines, and that it owed millions to creditors.

The hospice generated revenue of $83 million annually, largely from Medicare dollars, but still owed $9.8 million to creditors such as Wells Fargo and the Price Family Charitable Fund, according to bankruptcy filings.

Longstanding Relationship

Van Gorder announced soon after that Scripps would put in a “stalking horse” bid of $10.7 million. He said that San Diego Hospice President and CEO Kathleen Pacurar approached him following the November 2012 audit to discuss options following the hospice’s forthcoming liquidation.

In the past few months Scripps has hired 117 of San Diego Hospice’s workers, and plans to continue using the Hillcrest facility for hospice care.

Scripps and San Diego Hospice have had a longstanding relationship — the hospice provided care for about 4,000 patients per year, and about 40 percent were Scripps Health patients, Van Gorder said. San Diego Hospice also had a graduate education program that was licensed under Scripps Mercy.

In the months following San Diego Hospice’s bankruptcy announcement, more than 30 organizations had toured the San Diego Hospice premises. One was Sharp.

“We went over and evaluated the property, and considered its value add to Sharp in a number of different scenarios,” said Mike Murphy, CEO of Sharp HealthCare. “It has a very large footprint in the community and has already been licensed as a health care facility, so we thought it had significant potential.”

Murphy said that Sharp evaluated the Hillcrest property for a number of uses, including clinical inpatient and outpatient services or even as an extension of its current hospice division.

“It was an attractive building at an attractive price, and we thought it would be a worthwhile acquisition to Sharp HealthCare if we could get it at the right price,” he said.

Sharp Has Extensive Network

Sharp already has an extensive network of hospice care, treating about 430 patients in the San Diego area. Sharp currently operates several small hospices, and is currently building another small, six-bed end-of-life home in South Bay.

Scripps is newer to the space and has roughly half that, treating about 200 hospice patients.

But it recently purchased Poway’s Horizon Hospice, which provides in-home services countywide to about 30 patients. Van Gorder said this acquisition was an early step in expanding Scripps’ role in providing hospice care in San Diego.

The California Attorney General has to still approve the San Diego Hospice sale before it becomes official. Van Gorder said that he expects the deal to close in the next two months.

Pacurar said she was happy that the Hillcrest hospice property would continue to be used in health care.

“Having two great corporate citizens and respected health care leaders bidding on the property, we are pleased with the news that Scripps Health will assume ownership of the campus to support its programs and services,” Pacurar said.

The San Diego Hospice was built in the 1980s, following an $18.5 million donation from philanthropist Joan Kroc. At its peak, it provided about 1,000 patients with end-of-life care.

“I went up there some time ago and took the memorial walk, and you can’t help but recognize how important that facility is to people who have lost loved ones and family members there,” Van Gorder said. “It’s a very special facility that needs to be sustained for the community. That’s why we entered the process, and ultimately made the acquisition.”

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