PA Hospital CEO Breached Fiduciary Duty, Suit Alleges

Saint Catherine Hospital of Pennsylvania LLC (dba Saint Catherine Medical Center) filed for Chapter 11 bankruptcy on April 9, but changed to Chapter 7 on April 18 claiming it had $45,000 on hand and debt in excess of $5.8 million.

Knapp, who is identified as an employee of Specialty Health, served as president, CEO, and CFO of the Pennsylvania facility, and the lawsuit claims that he "knew or reasonably should have known" that Saint Catherine Medical Center was "insolvent or on the verge of insolvency."

The lawsuit alleges "abuse of the powers" delegated to Specialty Health under its management contract. Specialty Health "used it powers and authority under the management agreement for the improper purpose of diverting" account receivables away from the medical center.

In addition to the $300,000, the lawsuit also cites $1.7 million in "take backs" used by Capital Blue Cross to offset the amounts owed the Indiana and Pennsylvania hospitals, as well as Specialty Health, for employee health benefits against what the insurer owed Saint Catherine Medical Center for services rendered.

Although the "take backs" were "made for the benefit of the Indiana hospital and Specialty Health" neither have made any reimbursements to the medical center, the suit charges.