Meridian Behavioral Health Systems LLC, a Tennessee chain with facilities in four states, wants to buy Girard Medical Center from bankrupt North Philadelphia Health System for $10 million, according to an agreement of sale signed Tuesday.
But the Meridian offer, which sets a baseline for a proposed August auction, is laden with tough conditions, including a 6 percent rate increase from Community Behavioral Health, which administers Medicaid funds for mental-health and addiction treatment in the city.
CBH has not agreed to the 6 percent increase. “Given the sensitivities of the discussions pertaining to the proposed sale, the only additional comment we can provide at this time is that we are pleased that Meridian is interested in preserving these essential services for the surrounding community,” a spokesman said Wednesday.
Also sought by Meridian are up to $5 million toward capital improvements from the city and state on a matching basis, new or amended union contracts, and the transfer of 24 psychiatric beds from Norristown State Hospital to the medical center, located at 801 West Girard Avenue. The state is in the process of closing the civil unit in Norristown.
The city has not agreed to any of the conditions, but officials are scheduled to meet with Meridian this week, said Lauren Hitt, spokeswoman for Mayor Kenney.
Because its operations keep losing money, North Philadelphia Health System asked U.S. Bankruptcy Judge Magdeline D. Coleman to approve an expedited hearing on bidding procedures for an auction proposed for Aug. 11. The judge scheduled a July 12 hearing on the proposed schedule. At the auction, bidders could emerge who are interested in the assets as real estate, not for their use as behavioral health facilities.
Girard Medical Center and the associated Goldman Clinic, a methadone clinic, employ 575 and treat more than 1,000 patients daily, including 200 as inpatients, according to a court filing. If Girard were to close, finding treatment spots for that many patients, virtually all of whom receive Medicaid benefits, would force state and city officials to scramble, giving its potential buyers some leverage to make demands.
Girard also has a 20-bed unit designed to help the state fulfill terms of a 2016 settlement with the American Civil Liberties Union to reduce treatment delays for criminal defendants ordered by the courts to receive mental-health care.
NPHS, kept afloat for years through special state subsidies, closed St. Joseph’s Hospital in March 2016 after the Pennsylvania Department of Human Services ended those long-running special payments, which totaled $16 million in 2015. The former St. Joseph’s Hospital, at Sixteenth Street and West Girard Avenue, was sold for $8.1 million to local developers in April. That money went to pay off secured lenders.
The health system owes unsecured creditors $29 million. The largest creditor is Independence Blue Cross, which is owed $10.9 million, slightly more than the Meridian offer.
According to its website, Meridian owns six facilities in Tennessee, South Carolina, Louisiana, and Oklahoma. All but one are focused on youth services. Wes Mason, a veteran of Psychiatric Solutions Inc., is the chief executive of Meridian, which was formed in 2011, according to his LinkedIn profile.