Health Diagnostic Laboratory Inc. is looking for additional financing, a buyer or a business partner to help the company stay on its feet and make a turnaround under bankruptcy court protection, the Richmond Times-Dispatch reported today. The clinical laboratory company filed for chapter 11 protection on Sunday after a tumultuous year that included a now-settled federal investigation, the resignation of its top executive, and ongoing legal battles with its former sales contractor and two health insurers. Bankruptcy Judge Kevin R. Huennekens yesterday granted 13 first-day motions to help the company continue to operate during the bankruptcy proceedings, including a motion allowing the company to maintain wages, salaries and benefits for employees.
A bankruptcy judge on Thursday strongly indicated that he'll order El Paso Children's Hospital and University Medical Center of El Paso back to mediation, The El Paso Times reported yesterday. In a dispute that was compared to conjoined twins threatening each other, the two El Paso hospitals made their first appearance in bankruptcy court on Thursday. Children's Hospital filed for chapter 11 protection on Tuesday after a round of negotiations over a significant debt between it and UMC broke down. Bankruptcy Judge H. Christopher Mott issued temporary orders to ensure that employees will continue to be paid and that the hospital will have enough cash to pay its bills and care for its patients. A series of subsequent hearings was scheduled for the next two months in Austin and El Paso. UMC has said that Children's Hospital owes it more than $90 million, which Children's Hospital disputes. Children's Hospital owes lesser amounts to about 50 other creditors. The relationship between the hospitals' governing boards is increasingly bitter and resignations on the Children's Hospital Board of Directors is leading some officials to say a settlement is key. County Judge Veronica Escobar fears that a protracted bankruptcy could end by eliminating debt and selling the hospital — which was built with a $120 million taxpayer-funded bond. Judge Mott said that it's important for the community to be able to follow proceedings. So in addition to the June 11 hearing, a hearing July 14 was scheduled for El Paso. Hearings for June 26 and July 30 have also been scheduled in Austin.
El Paso Children's Hospital CEO Mark Herbers announced that the hospital has filed for bankruptcy protection, KFOX14 reported yesterday. Texas-based EPCH has been mediating with University Medical Center for months over an approximately $90 million debt that UMC claims the hospital owes. The decision from EPCH comes one day after UMC approved a final deal it hoped that EPCH would take. In this deal, UMC offered to forgive a $90 million debt that it said the hospital owed since the beginning of last year. In exchange, UMC would have final approval of EPCH’s Board. Herbers said that the hospital was "left with no choice" but to seek bankruptcy protection, calling it the "most sustainable option,” but added that the amount of money that UMC claimed EPCH owed was inaccurate. Herbers also claimed that UMC had changed original terms and submitted a completely different term sheet to EPCH. According to the EPCH's bankruptcy filing, it owes money to more than 20 unsecured creditors and it added up to $11.4 million. Its board authorized bankruptcy as early as Feb. 11, 2015, and the first hearing is set for May 21.
The now-defunct pharmacy behind a deadly 2012 meningitis outbreak that killed at least 64 people will pay out $200 million to its victims and creditors under an approved bankruptcy reorganization plan, Reuters reported yesterday. The New England Compounding Center (NECC) also sickened about 750 people across the U.S. three years ago by shipping steroids typically used to treat back pain despite being aware that the drugs were contaminated with fungal meningitis. The payout will include about $18 million seized from the Framingham, Mass.-based company's founders and its chief pharmacist, one of two people charged in December with second-degree murder for his role in the scheme. NECC shut down in October 2012 and declared chapter 11 bankruptcy two months later. The case led to strict new U.S. regulations on compounding pharmacies, which mix drugs but had previously been treated with a lighter hand than registered drug manufacturers. Deaths of patients occurred in Florida, Indiana, Maryland, Michigan, North Carolina, Tennessee and Virginia, and 14 people associated with the company now face criminal charges.
The companies that own Hollywood Pavilion hospital, whose former CEO is currently in prison for Medicare fraud, filed for Chapter 11 reorganization to stay a foreclosure lawsuit, the South Florida Business Journal reported yesterday. Former Hollywood Pavilion CEO Karen Kallen-Zury was sentenced to 25 years in prison in 2013 after being convicted of more than $39 million in fraudulent billing by bribing patients to receive phony care at its facility. She has appealed her conviction. Later that year, the 58,189-square-foot hospital and rehab facility was hit with a foreclosure lawsuit. Subsequent to the lawsuit being filed, an entity related to South Miami, Fla.-based Larkin Community Hospital bought the distressed mortgage and took over management of both the 50-bed hospital and the 152-bed rehabilitation facility under a receivership court order. The foreclosure lawsuit is pending. http://www.bizjournals.com/southflorida/news/2015/04/09/hollywood-hospital-files-chapter-11-as-former-ceo.html?ana=twt
Bankrupt Hutcheson Medical Center promised last week to eventually pay Walker County, Ga., millions, but legal experts say that promise is worthless, the Chattanooga (Tenn.) Times Free Press reported today. With almost 800 creditors waiting for about $80 million from Hutcheson, the bankrupt hospital's governing body issued a promissory note on March 25 pledging $4.6 million to Walker County. Floating in chapter 11 bankruptcy, Hutcheson cannot promise to make a new payment like this one. But Bobby Guy, former co-chair of ABI’s Health Care Committee, said that the note is legal because it's not coming from the hospital; it's coming from the Hospital Authority of Walker, Catoosa and Dade Counties. The hospital authority is Hutcheson's governing body, and technically, it's not in bankruptcy. To pay off the note, the authority would need money from the hospital. Jessica Dawn Gabel, a Georgia State law professor, said that other hospital creditors lined up ahead of Walker County would likely object in court.
Houston's University General Health System Inc. on Friday filed for chapter 11 protection, the victim of unprofitable acquisitions, bad managed care agreements and an alleged overestimate of its financial condition, Dow Jones Daily Bankruptcy Review reported today. In a petition filed with U.S. Bankruptcy Court in Houston, the company and eight affiliates listed assets between $1 million and $10 million and liabilities of between $10 million and $50 million. Finances at University General have quickly deteriorated in recent months. The company's top secured lender, MidCap Financial Trust, late last year forced senior management to sign personal guarantees that University General "would only pay items approved by MidCap," and temporarily not pay its restructuring advisers, the hospital company said in its declaration filed with the court. It said that top hospital officers actually had to pay for some medical supplies out of their own pockets. Read more. (Subscription required.)
A California nursing home fined by the state for substandard care and facing multiple lawsuits by patients and their families has taken the extreme measure of filing for bankruptcy protection in the face of millions of dollars in potential payouts, the New York Times reported today. The action, taken by North American Health Care, which operates more than 30 homes in California and other Western states, is being derided by plaintiffs’ lawyers as a legal maneuver to avoid what could be catastrophic legal verdicts, while defenders of the strategy say that they are facing mounting lawsuits from overly aggressive trial lawyers. Last year, another California chain filed for bankruptcy for similar reasons and in Florida, a bankruptcy judge forced Medicaid officials to continue paying a nursing home while it was under bankruptcy protection. North American’s step comes at a time of rising bankruptcies in the health care industry. Filings were up by 38 percent between 2010 and 2014, according to indexes maintained by the law firm Frost Brown Todd, which tracks such data. Overall filings for chapter 11 bankruptcy protection, by contrast, fell by about 60 percent over the same period. Bobby Guy, who oversees the bankruptcy data for Frost Brown Todd, said the increase in filings among health care providers — like hospitals, nursing homes, surgical centers and home health agencies — reflected broader turmoil in the industry, including changes in the competitive landscape and the impact of the new health care law. The threat of major litigation is a common reason health care companies file for bankruptcy, Guy said, albeit an extreme one.
For further analysis of issues surrounding health care insolvencies, be sure to pick up a copy of ABI’s Health Care Insolvency Manual, Third Edition, from the ABI Bookstore. Mr. Guy was a major contributor to the book and one of its four primary editors.
