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Shuttered this week, Sacred Heart Hospital had buyer interested in keeping the doors open

Updated: July 3, 2013 7:29PM

An offer that might have kept Sacred Heart Hospital from closing was turned down by the now former CEO, who is facing federal charges in an alleged kickback and health care fraud scheme.

A letter of intent had been submitted by Paul R. Tunt on June 28 to acquire the hospital and two other facilities that were tied to the hospital, attorney Edward Green, a partner in the Chicago office of Foley & Lardner LLP, which represents Mr. Tuft.

“We were told that the proposed transactions were approved by the independent board of directors last Friday afternoon; but that said board action was rejected by current ownership on Friday evening,” Green said.

Edward Novak, 58, of Park Ridge, was the CEO and owner of the Sacred Heart Hospital when the deal was being debated. He and four doctors were charged in a kickback and healthcare fraud scheme in which unnecessary medical services were performed to collect fees from Medicare and Medicaid insured patients.

Six weeks later, the hospital, at 3240 W. Franklin Boulevard, was abruptly closed.

In a letter to the Illinois Department of Public Health on Tuesday, the hospital said it had to close because of the loss of Medicare payments due to the allegations of fraud, lack of a buyer and the inability to obtain financing to continue operations.

If the deal with Tunt had gone through, he had agreed to lend enough money to the 119-bed, West Side hospital to keep it running until the sale was completed. Green declined to give the amount Tunt had offered to buy the hospital.

Tunt, founder of Scottsdale, Ariz.-based Southwest Healthcare Services LLC, was involved with Lincoln Park Hospital, which was eventually sold and then closed in 2008. He was also owner and president of Michael Reese Hospital, which closed in 2009.

There’s a possibility that Tuft may still be in the running to buy the hospital, now that it’s under new management.

“The situation remains fluid, and Mr. Tuft has no further comment at this point,” Green said.

Novak, through his attorney, declined to discuss the deal. So did Robert Wild, an attorney in the Chicago office of law firm Krieg DeVault LLP, which represents the hospital.

Meanwhile, Sacred Heart Hospital filed a Chapter 11 bankruptcy protection in U.S. Bankruptcy Court in Chicago on Tuesday.

Sacred Heart had to temporarily close because they couldn’t continue operating until the hospital was protected under the Chapter 11 bankruptcy code, a letter from Karen Davis, the acting CEO of Sacred Heart Hospital, said.

Chapter 11 is a section of the U.S. Bankruptcy Code that allows a business to reorganize and refinance under court supervision.

“Under Chapter 11, the corporation will continue to engage in negotiations to sell the hospital to a purchaser that will be approved by the bankruptcy and by the state to operate the hospital,” Wild said.

The hospital said it had to close because of the loss of Medicare payments due to the allegations of fraud, among other things.

Meanwhile, the Illinois Department of Public Health has said it intended to revoke Sacred Heart’s license for failure to provide the department with 90 days of notifying that it would close.

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