The real estate entity for Forest Park Medical Center’s San Antonio hospital filed a voluntary petition for Chapter 11 bankruptcy protection Tuesday morning.
Texas Capital Bank, the principal lender, posted the property for foreclosure in September and October but it never went to auction. Those two foreclosure notices indicate that FPMC San Antonio Realty Partners, LP—the hospital’s real estate entity—had defaulted on the loan and that Texas Capital Bank was seeking the principal amount of $68,343,307.
Todd Furniss, chairman of the hospital’s management company, said the bank requested that the property be put through a structured sale. Furniss, who is also the CEO of the hospital’s real estate development firm known as the Neal Richards Group, says commercial real estate firm CBRE has been retained as a broker to sell the facility to an outside buyer.
“We’ve already received offers that are in line with the value,” Furniss said.
None of documents currently filed in the United States Bankruptcy Court in the Western District of Texas list a specific amount that the entity owes. According to the petition, there are 29 total creditors and the hospital has assets worth between $100 million and $500 million. Texas Capital Bank declined to comment.
The $98 million, 150,000 square foot hospital has 54 inpatient rooms, 16 family suites, 12 operating rooms, a catheterization lab, and six intensive care rooms. Construction was completed in December 2014 and the hospital opened shortly after.
Forest Park Medical Center is a chain of luxury, physician-owned hospitals in Dallas, Frisco, Southlake, Fort Worth, and San Antonio. An Austin location has yet to open, although Furniss has said that it will be sold and a new management company will operate it.
Forest Park Medical Center at Frisco filed for Chapter 11 bankruptcy last month, citing debts of more than $14 million, $8.5 million of which was owed to the real estate investment trust that serves as landlord, Sabra Texas Holdings.
The hospitals were structured with a business model that charged out-of-network rates for procedures, which resulted in higher reimbursements from the insurance companies. But in recent years, the payers began cutting down on these models and forcing providers to acquire in-network contracts, which has been difficult. In San Antonio, for instance, Furniss says the hospital has contracts with just 50 percent of all the payers in the market. Too, the hospitals are each separate LLCs, which means they don’t have the negotiating power that a system has. So once the hospitals got in-network, the lower reimbursements muted the positive impact that increased volumes could have had.
“All these things are challenging, and we’re rushing as fast as we can to solve the problems,” Furniss said. “This is one of the areas where we were hurt most by the actions of the insurance companies in San Antonio. … They wouldn’t give us an in-network contract; they were intentionally choking us of working capital.”
Ideally, Furniss hopes to retain the management of the hospital after the real estate is sold. But what if a buyer wants to buy the facility and take over operations too?
“We’re certainly looking at all options,” Furniss said. “There’s nothing that’s off the table.”
A creditors’ meeting has been set for Nov. 2, at which point a bankruptcy trustee will ask FPMC San Antonio Realty Partners under oath whether its assets and debts are accurate as listed.