|Hospital files for bankruptcy|
|Thursday, 25 June 2009 00:00|
According to a news release from the hospital, “This decision will provide the hospital with the ability to continue to operate with no interruption of service, and give the facility time to work with suppliers to achieve financial stability.”
Information contained in a copy of the 150+ page official filing with the bankruptcy court shows that the hospital named three local financial institutions, Regions Bank, First Harrison Bank and Mid-Southern Savings Bank as secured creditors with a total of approximately $7.6 million owed to the banks. In addition, the filing included a “list of creditors holding 20 largest unsecured claims.” The amount owed to those suppliers and organizations totals $1.35 million. The largest of the unsecured debts is for $176,750.73, owed to Amerisource Bergen Drug Corporation of St. Louis and the smallest debt listed is to the American Red Cross of Chicago in the amount of $26,006.39. An Open Records request has been made to the hospital for a complete least of creditors and amounts owed.
Besides the secured and unsecured debts, Interim CEO, Joe Roche, stated that as much as $1 million is owed to Medicare for overstated expenses during 2006 and 2007. That amount is not subject to bankruptcy protection. Roche went on to say that St. Vincent Health does not intend to pay for “the sins of the past.” In addition, if the bankruptcy reliefs the hospital of debt for expenses previously covered by Medicare, then that will, in all likelihood, have to be repaid to the federal agency as well.
The hospital requested the court to allow for post-petition financing or a DIP loan in the amount of at least
$2 million. The purpose of the DIP loan is to act as a financial bridge, allowing the hospital to maintain services during the bankruptcy process. Safescan Imaging Services, LLC, incorporated in Idaho will provide the loan. The loan will be provided at an interest rate of 11 per cent or 18 per cent in the case of default.
Although the bankruptcy of the hospital is a precedent-setting event it is estimated that the target date to emerge from process is somewhere between 60 and 90 days if the court approves the request to enter into Chapter 11.
On Thursday and Friday, June 18 and 19, several creditors, including the three local banks, filed objections with the court to block and/or amend several of the motions contained in the initial filing.
Of special note are two objections:
Objection to paying any further salaries and wages to hospital employees
Objection to excluding the DIP loan money from the list of hospital assets
In addition to the official objections being filed, several creditors has suggested, off the record, that hospital leadership has been planning to seek bankruptcy for several months while at the same time continuing to increase the hospital's debts.
As stated earlier, the process of a county hospital transforming itself from a government entity to a not-for-profit corporation for the purpose of seeking bankruptcy protection has never happened before in the State of Indiana. This case may well drag on longer than anticipated as it works its way through the court system. In addition, according to information from the Indiana Hospital Association between 35 and 40 other county hospitals throughout the state will be watching the Washington County Memorial Hospital's case very closely.
|Last Updated on Thursday, 25 June 2009 09:44|