After emerging from a two-year bankruptcy in January, Lower Bucks immediately ran into cash-flow difficulties because two major suppliers demanded prepayment for goods and others demanded payment on delivery. Suppliers took significant losses in the bankruptcy.
Lower Bucks management had expected a jump in business after the uncertainty of the long bankruptcy ended.
"That didn't happen," at least in part because of broad industry trends toward lower utilization of health care, Mezzaroba told Judge C. Theodore Fritsch Jr., who reviewed the sale because it involves the transfer of charitable assets.
Lower Bucks was founded in 1954, when the area was booming with companies such as Rohm & Haas and U.S. Steel. But the hospital lacked the cushion of an endowment.
Repeated sales efforts failed to generate a deal. There have been off-and-on talks with local nonprofits, plus three separate efforts during bankruptcy.
Arrival in the Philadelphia market of Prime - an Ontario, Calif., company that specializes in taking over distressed hospitals and has sparked controversy in its home state over billing practices - ended that futility.
The deal with Prime, which owns 16 hospitals, is "not only the best, it's the only deal available to Lower Bucks Hospital," testified J. Scott Victor, an investment banker who handled the sale.
Under the deal, Prime will pay liabilities Lower Bucks agreed to in its bankruptcy reorganization plan. Those debts include a $1.2 million note to unsecured creditors, a $2 million mortgage on a surgery center, and $500,000 owed on a $1 million note to Pension Benefit Guaranty Corp.
Prime also has agreed to hire the hospital's 950 employees and maintain union contracts with nurses and maintenance workers. Part of the agreement requires Prime to continue operating Lower Bucks as a full-service hospital for at least five years, officials said.
The deal also calls for Prime to invest $10 million in the hospital within five years. Michael Sarrao, Prime's general counsel, testified he did not think it would take that long to reach the target.
He estimated that since February, Prime had spent $5 million to $7 million to spruce up Roxborough, which also struggled financially for years.
A representative of the state Attorney General's Office asked what Prime could do that Lower Bucks could not do on its own to improve patient volumes. Sarrao offered this example: "The parking lot needs to be repaved."
A few regulatory hurdles remain, but completion of the sale is expected next week.
Contact Harold Brubaker at 215-854-4651 or firstname.lastname@example.org.