Forest Park Medical Center Fort Worth is facing foreclosure, the latest blow against the financially besieged chain of doctor-owned luxury hospitals.
Sabra Texas Holdings, part of the Sabra Health Care REIT of Irvine, Calif., posted the hospital for sale this month after Forest Park Fort Worth missed an interest payment on a $66.8 million construction loan, according to court documents and company officials.
The sale is scheduled for Tuesday unless the owners of Forest Park Medical Center Fort Worth find a way in court to stop or delay it.
The Fort Worth property is the last in a chain of five hospitals linked to Forest Park Medical Center in Dallas to face foreclosure, be sued for loan default or be forced into bankruptcy. Two of the chain’s facilities, one in Dallas and another in San Antonio, have closed.
Forest Park Medical Center Fort Worth officials did not respond to requests for comment from the Star-Telegram. A Sabra Health spokeswoman said they did not want to comment.
Forest Park Medical Center Fort Worth, on the Edwards Ranch property southwest of downtown, celebrated its one-year anniversary last week. The 54-bed hospital sits on 7 acres, and the complex includes an 80,000-square-foot medical office building and parking garage.
Failed business model
Like the other Forest Park facilities, the Fort Worth hospital operated on a business model that promised its patients more pleasant surroundings — natural lighting, interior decor with mood lighting and private rooms — as well as more individualized attention.
But what really set it apart, along with the other hospitals in the chain, was a business model that had the facility seeking more-upscale patients with private insurance and not Medicare or Medicaid medical coverage under the Affordable Care Act.
The hospital complex is valued at $122 million, indicating excess collateral value of approximately $61 million for Sabra Health Care REIT, according to company officials.
The decision to not be “in-network” clearly hurt Forest Park because the healthcare law precluded the physician-owned hospitals from participating in Medicare and Medicaid, said Rick Matros, Sabra’s CEO and chairman.
“And while the physicians were happy not to take Medicare and Medicaid because the reimbursement really isn’t very good, if you look at Forest Park, if they had had the volume that would have been available … that would have given them a lot more cushion,” Matros said during an earnings conference call this month.
Sabra Health Care REIT has invested $284.4 million in the Forest Park approach and is shedding those assets. Matros said that if he were to announce another hospital deal today, “I think people would probably take me out and shoot me.”
For Sabra, however, all may not be lost. A number of things can happen during the foreclosure in Fort Worth to help the investment trust recoup its investment.
The foreclosure could pay off the loan including all interest, penalties and late fees, Sabra Chief Financial Officer Harold Andrews said during the earnings call. But Sabra is also considering a “credit bid” that would allow it to buy the property at an amount just above the highest bidder, giving Sabra a chance to bring in a new tenant or sell it in a fully marketed transaction.
They can’t just come and pay our interest and get current on the interest and stop the foreclosure. It will still continue down that path.
Sabra Chief Financial Officer Harold Andrews
He said a recent appraisal set the value of the property at $122 million, indicating “excess collateral value of approximately $61 million.” Apparently $6 million earmarked for tenant improvements in the office building has not been spent, he said.
The only way Forest Park Medical Center can stop the foreclosure is through the “judicial process” because the agreements they signed with Sabra accelerate the process, allowing for the sale, Andrews said.
“They can’t just come and pay our interest and get current on the interest and stop the foreclosure. It will still continue down that path,” Andrews said. Filing for bankruptcy is the one way Forest Park could slow down but probably not prevent the foreclosure, he said.
Forest Park could also try to negotiate something, especially “given the value in Fort Worth,” Andrews said. “So that’ll play itself out over the next couple of weeks.”
Meanwhile, on the day the Fort Worth facility is scheduled for foreclosure, a similar sale will be held for the Dallas facility. Sabra has a $110 million mortgage on that facility, which closed in October.
Last week, a federal bankruptcy judge said that the Frisco facility, which filed for Chapter 11 reorganization in September, can be sold at auction as “the best way to maximize value.” It has hired Dallas investment bankers Houlihan Lokey in an auction scheduled for February.
The Dallas and San Antonio hospitals have closed, the Frisco facility will be sold at bankruptcy auction and Southlake branch has been sued for defaulting on a loan.
A week earlier, a St. Louis bank sued Forest Park Medical Center Southlake in federal court for defaulting on a $9.4 million loan for medical equipment. The bank says the hospital defaulted because it failed to keep and provide complete financial records and maintain the minimum net worth as required by the loan. The bank says it is owed an outstanding balance of $3.4 million.
In October, Forest Park’s San Antonio hospital closed because it had “ run out of cash” and stopped paying its rent.
Making matters even worse, in May one of the company's co-founders, Dr. Richard Toussaint Jr., a licensed anesthesiologist, was indicted by a Dallas federal grand jury on 17 counts of healthcare fraud. The indictment accuses him of running a scheme to defraud Blue Cross Blue Shield and others by submitting $5 million in fraudulent billings.
Toussaint is accused, among other things, of saying he was present for anesthesia services when he was actually under anesthesia himself and undergoing surgery.
The indictment includes a forfeiture allegation that would require Toussaint to turn over, on conviction, his interest in any private aircraft along with a number of luxury motor cars including two Roll-Royce Ghosts, three Bentleys and two McLarens.
A 2012 Rolls-Royce Ghost, the year model of one of Toussaint’s, had a starting price of about $250,000, according to Kelley Blue Book.