Request for AG Approval of Sale

Pursuant to California Corporations Code Section 5914 et seq. and California Code of Regulations, Title 11, Chapter 15, Section 999.5, Gardens Regional Hospital and Medical Center, Inc., d/b/a Gardens Regional Hospital and Medical Center and formerly d/b/a Tri City Regional Medical Center, a California nonprofit public benefit corporation (“Gardens”), hereby provides notice and requests the Attorney General’s consent in connection with the proposed sale of substantially all of the assets of Gardens to Strategic Global Management, Inc., a California corporation (“Strategic”).

The proposed sale of substantially all of the assets of Gardens to Strategic is pursuant to the sale order on July 28, 2016 by the United States Bankruptcy Court for the Central District of California, Los Angeles Division (“Bankruptcy Court”). Prior to that, on June 6, 2016, Gardens filed a voluntary petition for relief under Chapter 11 of Title 11 of the United States Bankruptcy Code in the Bankruptcy Court.

The filing by Gardens for bankruptcy protection was the result of the convergence of many factors. A significant contributor was the reduction in disproportionate share hospital payments that Gardens received for serving a large number of Medi-Cal and uninsured individuals. The percentage of Gardens’ resources devoted to care for indigent patients was significant because Gardens largely serves the low-income and depressed communities of Hawaiian Gardens, Artesia, Bellflower and other surrounding cities. Gardens has been and continues to be a vital part of Los Angeles County’s health care safety net, serving some of Los Angeles’ most medically vulnerable residents.

As a small independent hospital operating in a challenging health care environment of mounting cost and consolidation pressure, Gardens has been unsuccessful in its efforts to negotiate significant increases in reimbursement rates from commercial payors. The decline in patient volume and the increasing costs of salaries, wages and benefits have compounded the financial decline of Gardens.

In connection with the bankruptcy process, Gardens completed an auction, selling substantially all of its assets to Strategic, the best and highest bidder. In the absence of the proposed transaction, the closure of Gardens is likely. Closing Gardens would result in substantial health deficits in the communities served. Avoidance of such an outcome is the essence of the public interest in this transaction.

In bidding for Gardens’ assets, Strategic has committed to invest millions of dollars and to leverage its significant resources and experience in hospital operations to help revitalize Gardens. In addition, Strategic has agreed to several non-monetary factors that the Board of Directors (“Board”) of Gardens has set forth in the bidding procedures, including (i) keeping Gardens in operation as a general acute care facility with a fully-functioning Emergency Department, (ii) retaining more than 50% of Gardens’ employees and (iii) maintaining the existing collective bargaining agreement. The proposed transaction with Strategic will enable the Gardens Board to meet one of its foremost goal of finding a successor to preserve health care jobs for Gardens’ current employees, maintain the existing collective bargaining agreement and to continue Gardens’ mission of serving the health care needs of the community.

Consent to the transaction does not only avoid negative impacts. The transaction offers to sustain Gardens by bringing it into a large health enterprise offering better economies of scale, tum-around experience and committed capital. In addition to submitting the highest and best bid of $19.5 million for the Gardens assets, the experience and operational capabilities of Strategic set it apart in comparison to other final bidders. Strategic is affiliated with KPC Global Management, LLC, Dr. Kali P. Chaudhuri and KPC Gardens Medical Center, Inc. (“KPC Gardens”) (collectively, the “Group”). The Group owns, operates and/or manages seven hospitals, three medical groups and independent physician associations, and several ancillary providers (including skilled nursing facilities, sub-acute rehabilitation recovery centers, home health, urgent cares, outpatient radiology centers, and others). Strategic will take Gardens into the Group, with all the support functions and established capabilities such an enterprise brings to the task of stabilizing and sustaining the assets of Gardens. The experience and commitment of Strategic best meet the fiduciary goal that the Gardens Board has set: preserve access to health care services for the community.

Click this link to download the full PDF copy of the request to the California Attorney General for the approval of the sale of Gardens Regional Hospital and Medical Center.

Click this link to download additional material regarding the request to the California Attorney General for the approval of the sale of Gardens Regional Hospital and Medical Center.

Click this link to download additional material regarding the request to the California Attorney General for the approval of the sale of Gardens Regional Hospital and Medical Center. (Supplemental 2)

Click this link to download additional material regarding the request to the California Attorney General for the approval of the sale of Gardens Regional Hospital and Medical Center. (Supplemental 3, Special and Regular Minutes)

Click this link to download additional material regarding the request to the California Attorney General for the approval of the sale of Gardens Regional Hospital and Medical Center. (Response to Wendi Horwitz)