The trustee for Saint Catherine Medical Center does not believe that "a Chapter 11 reorganization is possible" due to debt and undercapitalization and has requested that the medical center be placed in Chapter 7 bankruptcy instead. That means assets will be liquidated to pay off debts.
A hearing on the request is scheduled for Wednesday, April 18.
The move comes just a week after attorneys for the Ashland, PA facility filed emergency Chapter 11 bankruptcy papers on behalf of the 67-bed medical center.
Attorney William G. Schwab serves as trustee. On Monday he filed the Chapter 7 papers in the US Bankruptcy Court for the Middle District of Pennsylvania. According to the trustee report filed with the Chapter 7 request, Saint Catherine Hospital of Pennsylvania LLC (dba Saint Catherine Medical Center) has $45,000 on hand and debt in excess of $5.8 million.
According to the trustee report, the medical center:
- Rents its facility on a month-to-month basis but hasn’t paid the rent in three years
- Is in default on the leases for numerous pieces of medical equipment
- Owes at least $1.1 million in trust fund taxes
- Owes at least $30,000 for past due 401(k) payments
In addition, Schwab reports that he has been notified by attorneys representing the American Federation of State, County and Municipal Employees, District Council 89, AFL-CIO that "many of the employees have not received wages for five weeks, and payroll has not been made, and there will also be WARN Act claims." The Worker Adjustment and Retraining Notification Act (WARN) requires most employers with 100 or more employees to provide at least 60 days notice of plant closings and mass layoffs.
Chance for Sale Bleak
The report notes that the trustee contacted four large regional hospital groups to gauge interest in a possible purchase of the medical center, but "because of the area of surrounding hospital systems, (the medical center’s) demographics and insurance mix, none have been interested in looking at the financials."
The report concludes that "the trustee does not believe that this corporation is capable of being reorganized." If the request to convert to Chapter 7 bankruptcy is granted, Schwab asks for "limited operating ability for the trustee to take care of billing, medical records, return leased
equipment, and to sell those assets as possible through a specialized auctioneer."
This latest action follows a tumultuous couple of weeks for the medical center. In March an unannounced survey visit by the state Department of Health uncovered serious deficiencies and violations that placed patient health and safety in immediate jeopardy.
As a result the DOH imposed a ban on new admissions, as well as surgical services, emergency and outpatient procedures at the 67-bed hospital. In an April 3 letter the medical center was notified by the Philadelphia office of the Centers for Medicare & Medicaid Services that because of the deficiencies the medical center faced termination of its Medicare agreement.
Efforts to reach the trustee or the attorneys handling the bankruptcy for Saint Catherine Medical Center were not successful.
According to a Pennsylvania Department of Health spokesperson Saint Catherine officials "have volunteered to surrender the license and send it back" to the DOH. "To date, we have not yet received the license."
See Also:
PA Hospital's Deficiencies Detailed in CAP
PA Hospital's Financial Woes Trigger Harsh Repercussions
Margaret Dick Tocknell is a reporter/editor with HealthLeaders Media.
