Bankrupt Chicago Hospital Gets the Chance to Stay Open With a Sale

Trinity Health Corp. has agreed to sell Chicago’s Mercy Hospital and Medical Center to a Flint, Michigan-based biomedical company that will keep the facility running.

Insight, the potential buyer that intends to operate the facility as a full-service acute care hospital, is filing paperwork for the change of ownership with the Illinois Health Facilities and Services Review Board, according to a statement from the company. The agreement is non-binding and final terms will be negotiated in the coming weeks, according to a statement from Mercy.

Bankrupt Chicago Hospital Gets the Chance to Stay Open With a Sale

“If the acquisition meets state regulatory approval, Insight plans to operate a community-based hospital that will serve patients from Bronzeville, Chicago’s South Side and the city of Chicago,” Jawad Shah, chief executive officer of Insight, said in the company’s statement. “We are committed to a thoughtful community engagement process to ensure access to care for Chicago’s diverse populations while achieving financial solvency.”

The pandemic has exacerbated the financial struggles of many U.S. hospitals, including Mercy. Costs from treating Covid-19 patients have soared, and hospitals had to curtail profitable elective procedures. The proposed sale comes after Mercy Hospital filed for bankruptcy last month and Illinois health officials rejected plans by Mercy’s owner, Trinity, to close the 258-bed medical center and open an outpatient center on Chicago’s South Side.

Mounting Losses

Mercy’s operating losses had accelerated to $7 million per month, according to a Feb. 5 resolution from Trinity’s board of directors that authorized the Chapter 11 filing in U.S. Bankruptcy Court in Chicago. Trinity still plans to open the outpatient center, to be called Mercy Care Center, this year.

Unless the purchase agreement is signed, Mercy plans to discontinue hospital services by May 31.

Insight specializes in seven core areas, including neuro- and orthopedic surgery. Founded in 2008 in a 600,000 square-foot former General Motors building, the group has since expanded and includes a surgical hospital in Warren, Michigan. Insight’s goal is “to create a world-class biomedical technology institute with a neuroscience focus.”

But it’s not part of a large network that allows hospitals to share services and expertise. And the needs of a safety-net hospital are very different, said John Tishler who specializes in transactions involving distressed and bankrupt health-care facilities at Nashville law firm Waller Lansden Dortch & Davis.

Safety Net

“People walk into safety net hospitals with all manner of unique problems,” Tishler said, including tuberculosis and other diseases born of poverty that doctors in a typical family practice wouldn’t see. “These are the least served.” That requires having numerous specialists among other costs, he said.

Illinois Governor J.B. Pritzker’s administration “is hopeful that any potential buyer would provide the necessary services underserved communities need,” Jordan Abudayyeh, a spokesperson for the governor, said in an emailed statement Wednesday. “And we encourage any buyer to meet with community stakeholders and legislators to better assess how they can work together to achieve better health outcomes for the community Mercy hospital serves.”

Illinois State Representative Lamont Robinson Jr., whose district includes Mercy, said his main goals include proper health care for his constituents regardless of the hospital’s owner to avoid a “health care desert” in the community.

“I want to make sure they are going to provide quality health care on the South Side of Chicago,” Robinson said.

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