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NantWorks acquires majority stake in Integrity Healthcare, will take over 6 California hospitals

Company run by California billionaire physician Patrick Soon-Shiong will operate hospitals; deal could mean millions in upgrades, expanded services.

Beth Jones Sanborn, Managing Editor

Photo of Patrick Soon-Shiong courtesy NHS Confederation

Billionaire physician Patrick Soon-Shiong's company NantWorks has acquired a majority stake in Integrity Healthcare, the company that manages nonprofit Verity Health System. Terms of the deal were not disclosed, but the transaction puts Soon-Shiong's company in place as the new operator of Verity's six California hospitals.

Verity Health employs more than 6,000 staff statewide. Their hospitals include 1,650 inpatient beds, six active emergency rooms, a trauma center and medical specialties including tertiary and quaternary care.

The system's Southern California hospitals include St. Francis Medical Center in Lynwood and St. Vincent Medical Center in Los Angeles. Their Northern California facilities are O'Connor Hospital in San Jose, St. Louise Regional Hospital in Gilroy, Seton Medical Center in Daly City and Seton Coastside in Moss Beach, Verity said in a statement.

New York hedge fund BlueMountain Capital Management formed Integrity Healthcare and is their former majority owner. They, along with NantWorks have committed to continue investing in Verity's revitalization efforts. BlueMountain is making additional funds available for that effort, and will maintain a minority interest in Integrity, Verity said.

Soon-Shiong will join Verity's Board of Investors.

The collaboration between Integrity and NantWorks is expected to yield will include major technological improvements for the hospitals such as diagnostic and imaging services and next generation stem cell therapy. Expanded oncology, cardiac, orthopedic, neurology, urology, transplant and pediatric services are also forecasted, Verity said.

However, the billionaire doctor's activities, including his philanthropic efforts, have been under a cloud of suspicion.

Soon-Shiong and two other pharma executives are being sued by attorneys Boyden Gray and Adam Waldman of Washington, D.C., for allegedly attempting to acquire Altor Bioscience through a sweetheart deal. Altor is a 15-year-old immunotherapy company, with 12 ongoing human clinical trials.

The lawsuit, filed June 21, asserts the deal in place benefits Soon-Shiong, Hing C. Wong and Fred Middleton – all board members of Altor Bioscience. The deal comes at the expense of the minority shareholders, which breaches their fiduciary duty.

The connections between his philanthropic efforts and his for-profit businesses have also been under scrutiny after STAT News and Politico investigations.

Both news outlets pointed to possible improprieties stemming from a $12 million dollar donation to the University of Utah made by Soon-Shiong's research foundation, the Chan Soon-Shiong NantHealth Foundation.

Politico's investigation found that the foundation contributed $3 million out of the  $12 million donated by Soon-Shiong-controlled businesses to a university program to that sought to map the genomes of 1,000 state residents.

"University officials say they let Soon-Shiong's entities write the grant specifications. The specifications gave a major advantage to his for-profit firms, which got the $10 million gene-mapping contract," Politico said.

The investigation also showed that a large portion of the Foundation's expenditures from 2010 to 2015 went to Soon-Shiong-affiliated nonprofits and for-profits, as well as companies that do business with his for-profit entities.

Also, the investigation said six employees of Soon-Shiong's for-profit businesses were paid with Foundation money, which raises questions about the flow of money between the entities.

Soon-Shiong denied any wrongdoing to Politico and STAT.

U.S. House Speaker Paul Ryan appointed the biotech mogul to the Health IT Advisory Committee. The 25-member committee, established through the 21st Century Cures Act, will advise the president and his administration on health IT policy.

Bill Siwicki contributed to this report.

Twitter: @BethJSanborn