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Creditors thrash Forum Health
Photo
Walter "Buzz" Pishkur
YOUNGSTOWN — Forum Health’s creditors oppose Forum’s request for a four-month extension to file a bankruptcy reorganization plan.
In a scathing court filing, the creditors said they have lost confidence in Forum’s management, and they’re alarmed by current financial trends at the health-care system.
The creditors responded this week to Forum’s June 15 request for the extension, which Forum said is “realistic and necessary in light of the issues to be resolved,” which Forum described as “large and complex.”
In their filing in U.S. Bankruptcy Court, the creditors opposed Forum’s request to extend its exclusive time to file a plan from July 14 to Nov. 11.
Forum Health operates Northside Medical Center in Youngstown, Trumbull Memorial Hospital in Warren and Hillside Rehabilitation Hospital in Howland. Forum filed for Chapter 11 reorganization bankruptcy on March 16. The case is before U.S. Bankruptcy Court Judge Kay Woods.
A hearing on Forum’s request for the extension will be 9:30 a.m. July 14 in the Nathaniel R. Jones Federal Building and U.S. Courthouse, 10 E. Commerce St.
Atty. Melissa Macejko, a Youngstown lawyer whose practice is primarily devoted to bankruptcy cases, said it’s common in a Chapter 11 case for the debtor to ask for such an extension, but “it’s rather unusual” for creditors to oppose the first extension request as they’ve done here.
“There appears to be a tremendous amount of lender fatigue,” in the Forum case, Macejko said.
Forum’s bankruptcy is complicated by its needs to reorganize or restructure itself and its 18 subsidiaries or affiliates that provide hospital, laboratory, pharmacy, rehabilitation, home health care and other services, she noted.
“It’s extremely large and complex,” she said of Forum, adding that its request for the four-month extension appears “necessary and reasonable.”
According to the creditors’ filing, they “have significant concerns regarding the direction of these cases, the lack of urgency with which the debtor’s board and management seem to be proceeding and the continuing deterioration of the debtor’s cash position.”
The creditors who filed the objection are MBIA Insurance Corp., the bond insurer; U.S. Bank National Association, the master trustee and bond trustee; J.P. Morgan Chase Bank and Fifth Third Bank.
The creditors said Forum lost almost $100 million of the creditors’ collateral during the four years before the bankruptcy filing and has lost about $2.5 million since then.
Further, they said Forum has suffered from diminishing cash levels and declining admissions at Trumbull Memorial.
Forum’s budget, filed June 12, shows cash levels dropping “alarmingly,” as low as about $17.5 million over the next three months, partly due to plans for about $3 million in additional capital investments at Northside and TMH, the creditors said.
“Debtors anticipate a net cash burn of approximately $7 million over the next three months,” the creditors said. “At best, the debtors anticipate they will barely break even on an operational basis during this time period.”
The creditors added they “have lost confidence in the ability of the debtor’s board and management, as presently constituted and as presently conducting the debtor’s affairs, to recognize and address the debtor’s serious issues in the time frame available to them.”
In its request for an extension of time, Forum’s management said it has spent the bulk of its time and effort “implementing the business and operational changes necessary for their turnaround,” including cost-saving measures, such as renegotiated union contracts.
Forum said it saved more than $600,000 by renegotiating physician contracts, realized a $14 million improvement in actual v. budgeted cash and improved admissions levels over what it set out in its business plan.
Forum either has contracts or tentative agreements with all of its union groups, except 700 members of Service Employees International Union District 1199 at Northside.
The 300-member SEIU unit at TMH recently ratified a concessionary contract the union said would save Forum $1 million annually.
Walter Pishkur, Forum’s president and chief executive officer, has said he won’t hesitate to ask Judge Woods to invalidate Forum’s contract with the SEIU at Northside if a concessionary contract agreement isn’t reached soon.
In a prepared statement it issued Wednesday, Forum said it “has identified inaccuracies” in the creditors’ filing and will file a rebuttal “to clarify the record and document our current progress.” Forum’s statement, however, did not specify what was inaccurate.
“Forum has remained steadfast in its reorganization and restructuring process,” the hospital system’s statement said, adding that Forum hopes to exit bankruptcy by Dec. 16.
Forum “has significantly improved the performance” of Northside Medical Center and has “already begun developing post-bankruptcy business plans” for Hillside and TMH, the statement said without being specific and without mentioning any post-bankruptcy business plan for Northside.
“They [Forum] need to be looking at cutting additional expenses. They should be bringing in a turnaround or restructuring specialist to determine which of these businesses are profitable and which aren’t,” Majecko said.
“I think they’re going to have to downsize this organization if it hopes to return to profitability,” she added.
milliken@vindy.com
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