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Indiana Hospital Files for Chapter 11

Margaret Dick Tocknell, for HealthLeaders Media, June 26, 2012

Court documents state that the between May 2011 and April 2012, the hospital, which has around 280 employees, posted a net operating loss of $1.3 million.

The Chapter 11 filing is the latest in a series of court petitions that bear some relationship to the two hospitals.

In May, Merlyn Knapp, the current CEO of the Indiana facility and former CEO of the Pennsylvania facility, was named a co-defendant in a suit filed by the Chapter 7 trustee. The suit charges Knapp and the hospital’s management company, Specialty Health LLC, with "breach of fiduciary duty of care."

A transfer of $300,000 from the Pennsylvania medical center to the Indiana hospital has come under scrutiny. The suit contends that Knapp, who is employed by Specialty Health, "knew or reasonably should have known" that the medical center was "insolvent or on the verge of insolvency."

The lawsuit asks for several claims of relief suggesting that Knapp "acted with a purpose other than advancing" the (Pennsylvania) medical center's best interests. "In fact, Knapp's actions were for the benefit of the Indiana hospital" and "operated to the detriment" of the Pennsylvania medical center, the suit alleges.

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