Hospital owner’s lawyer walks completely away

By PHYLLIS ZORN

Staff writer

In hope of finding a buyer willing to take over its debt, Hillsboro Community Hospital is seeking protection from its creditors under federal bankruptcy laws.

Kansas City lawyer Bruce Strauss filed a petition for Chapter 11 bankruptcy protection last week on behalf of hospital receiver Cohesive Healthcare Management and Consulting.

If accepted by the court, the petition will give the hospital time to negotiate concessions from creditors and forestall any attempt to collect debts it owes while it reorganizes its finances. The reorganization plan must be accepted by a majority of its creditors, and unless the court rules otherwise, the hospital remains in control of the business and its assets.

A Cohesive receiver’s report filed Friday in district court paints a worsening picture of the hospital’s position. In January, the hospital owed $1,678,840 more than the value of its assets. By February, it owed $2,116,151 more than the value of its assets.

The bankruptcy filing came eight days after district judge Steven Hornbaker granted Cohesive power to oversee the business of hospital owner CAH, including power to place the company into voluntary bankruptcy.

The bankruptcy filing halts CAH’s court of appeals petition earlier filed to fight a Jan. 18 district court ruling appointing Cohesive as receiver. The court of appeals stayed that case Thursday and granted permission for Wichita lawyer Thomas Gilman to withdraw from representing CAH in the appeal case. Hornbaker on March 5 ruled that Gilman, who said he hadn’t been paid, could withdraw from the district court case.

The wrangling in court was triggered by a January petition filed in district court by Bank of Hays seeking mortgage foreclosure. The bankruptcy petition was filed after consultation with the bank, Cohesive’s report shows.

Bank lawyer Nicholas Zluticky, of Kansas City told Hornbaker on March 5 that the goal is to get the hospital stabilized so a buyer could be sought while HCH was still able to provide services and retain its standing as a critical access hospital.

“Our goal is to be able to sell this hospital as a going concern,” Zluticky said.

HAC, once affiliated with hospitals in several states, and EmpowerHMS, the hospital management company affiliated with HAC, have closed several hospitals in their group. HAC abruptly closed Oswego Community Hospital on Feb. 14 and Horton Community Hospital on March 12, leaving HCH the only remaining Kansas hospital formerly operated by the company.