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PA Medical Center Files for Chapter 11

April 11, 2012

Margaret Dick Tocknell, for HealthLeaders Media, April 11, 2012

Saint Catherine Medical Center in Ashland, PA filed an emergency petition for Chapter 11 bankruptcy on Monday.

The 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 on surgical services and  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 hospital no longer met the requirements for participation in the federal Medicare program and faces termination of its Medicare agreement.

Liabilities, Assets Unspecified
The financial petition was filed in US Bankruptcy Court in the Middle District of Pennsylvania by John Doran, a Wilkes-Barre, PA attorney with the law firm of Doran & Doran PC. According to attorney Lisa Doran, because of the emergency nature of the filing, information about creditors, liabilities, and assets has not been specified. The law firm hopes to have a creditors list developed by next week.

Doran told HealthLeaders Media that the medical center simply got to the point where it had no patients and could no longer continue to operate.

Saint Catherine Medical Center and Saint Catherine Regional Hospital are operated by Saint Catherine Healthcare, LLC. In March 2012 the three were ordered to pay a $168,760 judgment to Lease Associates. On March 26, PPL Electric Utilities filed a lawsuit against Saint Catherine and five affiliates in county court. No details regarding the claim are available.

Claims for Unpaid Employee Wages
In addition, Philadelphia law firm of Willig Williams & Davidson is representing the American Federation of State, County and Municipal Employees, District Council 89, AFL-CIO in the bankruptcy case. In an e-mail exchange, attorney Amy L Rosenberger explained that the AFSCME represents about 100 employees at the medical center.

Although the investigation is ongoing, Rosenberger said “there are claims for unpaid employee wages, failure to properly disburse funds withheld through employee payroll deduction (including employee contributions toward healthcare, the 401(k) plan, and union dues), as well as failure to comply with federal law governing mass layoffs of employees.” She added that “it appears that the improper use of employee payroll deductions has been going on for some time, without the employees’ knowledge.” The full extent and value of employee claims is not yet known.

Court Appoints Trustee
Doran explained that because the medical center is “no longer in the position to continue the management” of the facility, it requested that the court appoint a Chapter 11 trustee. William G. Schwab, an attorney from Leighton, was named to that position.

Schwab has several options. He can reorganize the medical center's operation, put it into liquidation, or find a buyer for the facility.

Holli Senior, a spokesperson for the DOH, confirmed that “at this point, the Department of Health has not revoked the license” for Saint Catherine to operate as a healthcare facility. She declined to speculate on future actions.

Efforts to reach a spokesperson for Saint Catherine Medical Center were unsuccessful.


Margaret Dick Tocknell is a reporter/editor with HealthLeaders Media. She can be reached at mtocknell@healthleadersmedia.com.
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