SSG Capital Advisors acted as the investment banker to North Philadelphia Health System (NPHS) in the sale of substantially all of its assets to an affiliate of Iron Stone Partners, a result of NPHS’ on-going Chapter 11 process in the U.S. Bankruptcy Court for the Eastern District of Pennsylvania. The transaction closed in November 2017, with a plan to reorganize NPHS.
NPHS provides mental health and substance addiction treatment services and special programs for patients with behavioral medical disorders and/or extended acute medical conditions. Services include outpatient counseling for alcohol and drug use, a detoxification and rehabilitation unit and several specialized inpatient programs. In addition, NPHS operates the Goldman Clinic, which provides methadone treatment to up to 700 individuals daily.
The hospital is heavily dependent on Pennsylvania Medicaid reimbursements. Supplemental funding ceased at the end of 2015 and NPHS was forced to close its St. Joseph’s Hospital facility in March 2016. In addition to being burdened with overhead that previously supported a larger organization, the hospital had seen general cost increases over the years that were not accompanied by matching per diem reimbursement rates. With its large debt load, constrained liquidity from the St. Joseph’s closing costs and ongoing operational losses, the hospital filed for Chapter 11 protection at the end of December 2016 to preserve its operations.
NPHS retained SSG as investment banker in April 2017 to pursue strategic alternatives including a sale of the hospital. SSG’s sale process ultimately resulted in a competitive auction process, where a bid from an Iron Stone affiliate was determined to be the highest and best offer for the hospital’s assets. Iron Stone partnered with Community Behavioral Health and the City of Philadelphia under a new lease to continue operations at the hospital with NPHS as the operator. As a result, NPHS will continue to operate its Girard facility.
Iron Stone Partners is a real estate private equity firm located in Philadelphia.