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A durable medical equipment and supply company with a long history in the Tri-Cities has filed for chapter 11 protection, the Tri-City Business Journal reported. But Washington Medical Supplies Inc., known as Densow’s Medical Supplies, remains open for business and in fact has tripled its revenue in recent years, its co-owner said. “I’m hopeful for the future. I have an amazing team and we work as hard as we can every single day to ensure the success of the business,” co-owner Lisa Lewis said. “I’m looking forward to, in the next year, this being in the rear view. It will be a little blip as we move forward.” Lewis said that she and her business partner filed for bankruptcy as costs piled up dealing with billing errors made by the business’ former owners as well as ongoing litigation with those former owners. The COVID-19 pandemic also played a role, she said. Lewis and Paul Protzman bought Densow’s Medical Supplies at 1019 Wright Ave. in Richland in 2018. In making the purchase, “we brought some money to the table for the initial closing,” she said. In a move typical with those types of deals, “we did a holdback because we knew there were going to be some invoices that should have been paid by them that we’d have to pay on their behalf, and things like that. So then, at the one-year mark, we would work out what the difference is,” she said. But then they discovered billing errors, including patients without prescriptions on file, Lewis said. They hired auditors and had to pay back “tens of thousands” of dollars to Medicare, she said. In 2019, former owners Jonathan and Joelle Reynolds sued Lewis and Protzman in Benton County Superior Court, saying they still were owed $90,160 for the business, plus a 5% late fee and interest. They eventually were awarded more than $488,000 including those costs and attorney fees. Lewis and Protzman filed their own suit in 2022, alleging breach of contract, negligent misrepresentation and fraud. That case was dismissed; Lewis said it was because of legal errors, and they plan to re-file. In that case, the Reynoldses were awarded about $39,000 in attorney fees and interest.

A health clinic in a Montana town plagued by deadly asbestos contamination has filed for bankruptcy protection after a judge ordered it to pay the government almost $6 million in penalties and damages for submitting false medical claims, the Associated Press reported. The federal bankruptcy filing, submitted Tuesday, will allow the Center for Asbestos Related Disease clinic in the small town of Libby, Mont. to continue operating while it appeals last month's judgment, said clinic director Tracy McNew. A seven-person jury in June found the clinic submitted 337 false claims that made patients eligible for Medicare and other benefits they shouldn't have received. The federally-funded clinic has been at the forefront of the medical response to deadly pollution from mining near Libby that left the town and the surrounding area contaminated with toxic asbestos dust. The $6 million judgment against it came in a federal case filed by BNSF Railway under the False Claims Act, which allows private parties to sue on the government's behalf. The clinic has denied any intentional wrongdoing and its attorneys have appealed the jury's verdict to the U.S. Court of Appeals for the Ninth Circuit.

The University of Iowa has revealed plans to acquire Mercy Hospital on the heels of the organization's recent bankruptcy filing, the Iowa City Press-Citizen reported. Mercy "voluntarily" filed a bankruptcy petition, the company announced in a press release Monday morning. The 194-bed facility has served area residents since 1873. “Mercy Iowa City believes this plan is the best path forward to preserve our hospital operations,” said Tom Clancy, Chairman of the Board and CEO of Mercy Iowa City in a press release. “As we implement this plan, our dedicated Mercy Iowa City staff remain steadfast in their commitment to provide compassionate care to our community.” The State of Iowa Board of Regents will consider the university's proposed $20 million acquisition of Mercy's facilities and business operations at Tuesday morning's special session.
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The financially troubled healthcare sector will be the focus of the ABI Healthcare Program, September 18-19, 2023, in Nashville, Tenn. For more information and to register, click here.

An Eastern Carolina hospital is closed and will file for bankruptcy, WITN.com reported. Quorum Health, which operates Martin General Hospital, said that it was forced to “suspend operations today and to file for bankruptcy.” The company has a lease with Martin County to operate the hospital until 2029. Quorum said that they proposed reverting the hospital back to the county, but according to a news release, Martin County “chose not to respond to our proposal.” The hospital says it has faced financial challenges due to a declining population and more people in the county going to other hospitals. It said in 2022, Martin General lost $13 million. Martin General said it reached out to eight organizations, including several local and regional health systems and none were willing to purchase or assume operation of the hospital. Martin County Commissioner Joe Ayers says that he was notified that the hospital diverted all EMS calls at 10 a.m. They are taking no new patients at this time, Ayers said. Read more..

The financially troubled healthcare sector will be the focus of the ABI Healthcare Program, September 18-19, 2023, in Nashville, Tenn. For more information and to register, click here.

Teva Pharmaceutical Industries Ltd has agreed to pay up to $126 million to U.S. hospitals over 18 years to settle claims that its marketing of opioid drugs raised the hospitals' operating costs, Reuters reported. As part of the proposed settlement, disclosed in Teva's quarterly earnings statement Wednesday, the Israel-based drugmaker also agreed to supply $49 million of the anti-overdose drug naloxone. Teva said that it had been sued by about 500 U.S. hospitals and other health care providers over opioids, and that the settlement would only be finalized if the company was satisfied that enough hospitals agreed to take part. Litigation against drugmakers, pharmacies and distributors over opioids, mostly brought by state, local and Native American tribal governments, has already resulted in more than $50 billion in total settlements, including a $4.35 billion settlement Teva reached last year.

Beverly Hospital near Los Angeles tried and failed for years to sell itself. It turned the corner when it filed for bankruptcy, WSJ Pro Bankruptcy reported. The chapter 11 filing in April gave the hospital operator some leverage against the state’s attorney general, who has the authority to mandate prospective buyers to maintain costly services such as emergency and charity care, and to accept patients covered by government-backed healthcare programs. Such requirements had stunted Beverly’s earlier sale attempts. As its finances worsened, the hospital faced the rising possibility of shutting down, leaving tens of thousands of low-income patients in the city of Montebello without healthcare services. About two months after Beverly filed for bankruptcy, North Carolina-based American Healthcare Systems Foundation agreed to buy the nonprofit hospital for $100 million, keeping the 202-bed facility open. And unlike previous would-be buyers, AHS was able to swiftly negotiate terms of conditions with the attorney general. Read more.

The financially troubled healthcare sector will be the focus of the ABI Healthcare Program, September 18-19, 2023, in Nashville, Tenn. For more information and to register, click here.

A Florida doctor accused of taking kickbacks from Insys Therapeutics to prescribe its fentanyl spray should face a civil trial despite his recent bankruptcy, federal prosecutors are arguing, even as a judge delayed it from going forward, Reuters reported. In a filing Wednesday in Tampa federal court, lawyers for the Middle District of Florida U.S. Attorney's Office said their civil lawsuit against Edward Lubin stems from the government's "police or regulatory power," and so was not automatically paused like most legal claims against a newly bankrupt debtor. They noted that federal appeals courts in other cases have ruled that lawsuits brought by the government under the federal False Claims Act, like the one against Lubin, are examples of police or regulatory power. Lubin had notified the court of his chapter 11 bankruptcy earlier on Wednesday, saying it should halt the case. His lawyer did not immediately respond to a request for comment. U.S. District Judge Thomas Barber, who is presiding over the case, said in an order on Thursday that he would wait for the bankruptcy court to decide whether the trial can go forward. For now, he put the Aug. 2 trial date on hold.

Healthcare private equity deal activity continues to lag other sectors, defying narratives of the industry's counter cyclicality, according to a July 23 report from capital market company PitchBook, Becker's Hospital Review reported. In the second quarter 14.4 percent of U.S. private equity deals were in healthcare, down 1.8 percentage points from the five-year average, according to the report. Cost inflation, particularly for labor, was the main story in healthcare in 2022, according to Pitchbook. This year, however, there have been signs of the labor market cooling — albeit incrementally — because of efficiency gains at the company level and reduced turnover in the labor pool. Many other healthcare platforms have seen growth slow significantly because debt service — combined with margin erosion — is eating into free cash flow, according to the report. Analysts expect the Federal Reserve to raise rates another 50 basis points, which will provide opportunities for conservatively-leveraged platforms to grow market share.