PA Hospital CEO Breached Fiduciary Duty, Suit Alleges

Margaret Dick Tocknell, May 11, 2012

The CEO of troubled Saint Catherine Medical Center in Ashland, PA has been named as a co-defendant in a suit filed by the facility's Chapter 7 trustee. Filed in the US Bankruptcy Court for the Middle District of Pennsylvania, the suit alleges a "breach of fiduciary duty of care."

Filed on May 8, the suit, which stems from a management agreement between the medical center and Specialty Health LLC, the hospital's management company, names Specialty Health as the other defendant.

According to court documents, Saint Catherine's CEO, Merlyn Knapp, authorized a transfer of $300,000 from Saint Catherine Medical Center to Saint Catherine Hospital of Indiana LLC (dba Saint Catherine's Regional Hospital) to cover operating expenses. The Indiana hospital and the Pennsylvania medical center are part of Saint Catherine Health.

The date of the transfer is not included in the lawsuit, but the court documents note that as of the bankruptcy petition date (April 9) "a substantial portion of that amount is still due and owing" to the Pennsylvania facility.

Earlier this year, federal and state officials uncovered serious deficiencies and violations that put patient health and safety in immediate jeopardy at Saint Catherine Medical Center. The Pennsylvania Department of Health imposed a ban on new admissions. On April 3, federal officials sent a letter to Knapp threatening to terminate the facility's  Medicare agreement.

Margaret Dick Tocknell Margaret Dick Tocknell is a reporter/editor with HealthLeaders Media.
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