The deal to unload much of what’s left of bankrupt True Health Diagnostics is complete, leaving the Texas-based company’s sizable Richmond lab and workforce as collateral damage.
True Health and parent company THG Holdings on Tuesday finalized a bankruptcy court-approved sale of their assets to Cleveland Heartlab, a subsidiary of medical lab giant Quest Diagnostics, for $8.5 million.
The deal did not include True Health’s 100,000-square-foot lab at 737 N. Fifth St., which the company inherited along with hundreds of employees in 2015 when it bought the assets of bankrupt Health Diagnostic Laboratory, a once-thriving Richmond-based firm with a similar blood testing business model.
While HDL was toppled by allegations of paying kickbacks to doctors to use its tests, which was deemed to have led to a defrauding of government health care programs, True Health fell into bankruptcy in July after it said it was cut off for the second time in two years from Medicare reimbursements due to fraud allegations and overpayment from the government of tens of millions of dollars.
Quest said in a recent statement it chose not to acquire True Health’s facilities or staff, “nor will we adopt its policies and business practices.”
True Health had around 300 employees when it filed for Chapter 11 protection. It is now down to around 130, said Cliff Zucker, who was brought on by True Health to handle its bankruptcy as chief restructuring officer.
Zucker said he and the remaining True Health employees will continue to work to find ways to monetize those remaining assets that weren’t included in the sale, made up mostly of equipment and accounts receivables. They’ll use the Richmond facility as a home base for those efforts.
“We’re staying in the lab space for a while until we sell all the equipment,” Zucker said. “Some of the employees have been let go and will be let go, and a number of them we’ll use during the wind-down process. They’ll be kept on an as-needed basis.”
Zucker said he doesn’t expect the company to be fully out of the Jackson Ward facility until at least the end of November.
True Health leases its portion of the building, known as Biotech 8 and owned by Ventas, a Chicago-based publicly traded REIT. Ventas bought the 262,000-square-foot structure in 2017 for $92 million. True Health shares the building with other tenants, including VCU Health.
Zucker said the bankruptcy case is likely headed to a Chapter 11 liquidation, rather than a Chapter 7.
True Health also continues to fight the federal government over the millions of dollars’ worth of Medicare reimbursements from which it was cut off.
Those cases, playing out in Texas and Delaware, could result in money coming back into the bankruptcy estate.