A Cook County circuit court judge has ordered current West Suburban Medical Center landlord Rathnaker Reddy Patlola to pay former hospital owner Pipeline Health Systems Holdings $6.5 million for breaching personal guarantees he made regarding a $67 million promissory note.
Judge Jack J. Hagerty granted Pipeline’s motion for summary judgement on June 15, ordering Patlola pay $5 million and attorney’s fees, and $1,492,333 for non-payment of a Transitional Services Agreement between Pipeline and West Suburban CEO Manoj Prasad’s AUM Global Healthcare Management.
Pipeline filed a one count breach of guaranty complaint in December 2024 after the maturity date of the $67 million promissory passed without payment.
Part of that $67 million agreement was a Transitional Services Agreement (TSA) related to Pipeline working with Prasad to provide IT services that included a billing system used to bill for medical services provided to patients.
In October 2023, Patlola personally guaranteed “all amounts due under the TSA,” and amounts due under the promissory note up to $5 million.
When the December 30, 2024 maturity date for the promissory note passed, and no payments had been made, Pipeline filed suit.
Patlola had argued in his defense that Pipeline had breached their agreement by not providing promised services under the agreement.
Pipeline’s “failure to perform its obligations under the TSA including an unreasonable delay in data migration from Pipeline’s IT system to AUM Global has contributed to overall inefficiency of hospital operations, which is likely to affect ongoing refinancing efforts,” Patlola’s defense argued in response to Pipeline’s allegations.
Hagerty disagreed, finding that Patlola had breached his personal guarantee for $5 million of the $67 million note, and the AUM had not paid what was due on the TSA.
The judge rejected Patlola’s allegation that Pipeline had breached its responsibilities under the TSA by not providing the new hospital management under Prasad with the same level of services it had provided previous ownership.
The judge noted that Prasad himself undercut that argument when he testified in the Pipeline lawsuit.
“Dr. Prasad’s testimony catalogues a series of complaints about the hospital’s IT systems,” the judge ruled. “EMR implementation problems, billing disruptions, medication prescription issues, and the like, but when specifically asked under oath whether Pipeline caused those problems, Dr. Prasad could only vaguely speculate about ‘integrated testing’ while admitting he does not know ‘one way or another’ whether any testing ‘was wrongly done.’”
In granting summary judgment on the TSA issue, the judge concluded that “a party cannot defeat summary judgment with lengthy complaints unaccompanied by causation evidence.”
The Pipeline lawsuit had been the focus of questioning by an attorney during a May hearing in Patlola’s separate lawsuit, against Prasad and Resilience Healthcare, in which he sought to have a receiver appointed for West Suburban Hospital.
Patlola testified as to his understanding of the Pipeline lawsuit against him, saying “The lawsuit is for two reasons.”
“They claimed that we didn’t pay the TSA, transition services agreement,” Patlola said. “We are to pay monthly $600,000. I’m not sure. They claimed that we didn’t pay. That’s No. 1.”
“And, No. 2, the loan went into default because we couldn’t get the lenders because the hospital was losing money. So they — I gave a personal guarantee of $5 million for closing a loan after 2024 and also paying for TSA services.”
“You disagree that you owe the $5 million guarantee to Pipeline, right?” Patlola was asked.
“I disagree, yes,” Patlola replied, alleging that Pipeline failed to perform its obligations under the TSA, and that that failure significantly hindered AUM’s ability to generate income.
At that same May hearing Prasad was asked why he agreed to allow Resilience to be a borrower on the promissory note Ramco signed with Pipeline. Prasad testified that without Resilience’s participation, they would not have been able to acquire the hospitals.
“We actually should not have been part of it, but the fact is without this, RAMCO could not have acquired the facilities,” Prasad testified, “and we already had discussions and agreement and understanding that the hospitals will essentially have time to recover and operate rent free.”
“So that’s the reason I was asked to sign on behalf of Resilience.”