Bidding war breaks out for Forest Park’s Fort Worth hospital

Forest Park Medical Center Fort Worth will be sold at a bankruptcy auction next month amid signs that a bidding war is breaking out over the financially troubled doctor-owned luxury hospital.

Bidders for the 150,000-square-foot hospital include Arlington-based Texas Health Resources, which already offered $112 million, and Methodist Health System in Dallas, which previously pledged $107 million, along with other considerations. HCA Healthcare has also been mentioned as a possible suitor.

After hearing about strong interest from many healthcare companies with substantial resources, U.S. Bankruptcy Judge Mark Mullin on Friday approved a public auction for May 12. The opening bid will be the $112 million that Texas Health agreed to pay in a deal negotiated earlier in the week.

“Everyone here is trying to maximize the value of the estate,” attorney Melissa Hayward said during Friday’s court hearing. Hayward represents FPMC Fort Worth Realty Partners, which owns the hospital as well as the 80,000-square-foot medical office building and a parking garage next door.

Forest Park Medical Center Fort Worth is a 54-bed facility on 7 acres of the Edwards Ranch property. It was part of a chain of upscale hospitals built to offer patients more pleasant surroundings and more individualized attention. But the business model quickly failed, and several of the hospitals have been closed or sold.

When FPMC Fort Worth Realty filed for Chapter 11 bankruptcy late last year, it listed estimated assets of $100 million to $500 million and liabilities of $50 million to $100 million. Eventually, an appraisal set the property’s value at $122 million. Sabra Texas Holdings, part of the Sabra Health Care REIT of Irvine, Calif., had posted the property for foreclosure after the hospital missed an interest payment on a $66.8 million construction loan.

At the time, Sabra officials said forcing the hospital into bankruptcy with the foreclosure was part of a strategy to allow the debtors to find “real buyers.” It worked.

Several enterprises expressed interest in buying the hospital, and in March, just before one deal was about to be finalized, two other companies offered to purchase the hospital on even better terms, according to attorneys and court documents.

Because the potential purchasers continued to outbid one another, FMPC Fort Worth Realty asked the court to conduct a bankruptcy auction. But it also executed a $112 million purchase agreement with Texas Health Resources on Wednesday, setting a floor price for the property.

While Mullin pushed FMPC Fort Worth Realty into accepting a sales procedure that didn’t make the $112 million offered by Texas Health Resources a requirement for bidding, he also said “it’s going to be a pretty short auction” if the other buyers don’t match that offer.

Jeff Prostok and Robert Forshey, attorneys representing the hospital’s operators, argued for more flexible bidding procedures and said they want to be involved. They talked about Methodist Health Systems’ $107 million bid and mentioned HCA as another bidder.

“We can’t sell our estate independent of their real estate,” Forshey said.

Kristian Gluck and Ryan Manns, attorneys for Methodist Hospitals of Dallas, also advocated in court documents that the bids include cash and noncash considerations, writing that to do otherwise would “chill bidding, therefore handing its assets to THR without an auction.”

Methodist also mentioned that it once thought it had a deal to buy Forest Park Fort Worth — the real estate as well as the operating company’s assets, even offering up a $1 million exclusivity check — only to be rebuffed after Texas Health Resources made a bigger cash offer.

While HCA was continually mentioned as a possible buyer during Friday’s hearing, a representative of the company was not present. Contacted later by the Star-Telegram, the company said it might explore buying Forest Park Fort Worth.

“We’re interested in broadening our geography and are looking for opportunities that make sense for us,” Erol Akdamar, president of HCA North Texas, said in a statement. “We would be interested in things that would complement our geography.”

HCA is not unfamiliar with the problems faced by the Forest Park hospital chain. This month, HCA closed its $96.5 million purchase of the former Forest Park facility in Frisco in bankruptcy court, now called Medical City Frisco. HCA’s other facilities in Tarrant County include Plaza Medical in Fort Worth and Medical Center Arlington.

If Methodist Hospitals of Dallas is the winning bidder, the hospital would become its first Fort Worth facility. Methodist has a hospital in Mansfield.

Texas Health Resources owns 24 hospitals in North Texas including Texas Health Harris Methodist Hospital Fort Worth and Texas Health Harris Methodist Hospital Southwest Fort Worth.

What set the Forest Park chain apart was a business model in which some facilities sought upscale patients using private insurance, and not accepting Medicare or Medicaid coverage under the Affordable Care Act. Ultimately, that was an unsuccessful approach to attracting patients.

Besides selling its Frisco hospital, the Forest Park chain closed its hospital facilities in Dallas and San Antonio. Its Southlake facility also filed for bankruptcy in January and is expected to be sold.

The Fort Worth hospital, however, distinguished itself from the other Forest Park hospitals by being in networks almost from the beginning, accepting all patients that came through its doors.

This story was originally published April 22, 2016 at 5:34 PM with the headline "Bidding war breaks out for Forest Park’s Fort Worth hospital."