The Kennewick Public Hospital District (KPHD) has filed its voluntary petition for relief under Chapter 9 with the United States Bankruptcy Court for the Eastern Division of Washington state. The filing number is 17-02025-9. Chapter 9 specifically provides for the reorganization of municipalities, providing a grace period of sorts within which to propose a plan for the adjustment of the municipality's debts to third parties.
Trios Health, which operates two hospitals (111 licensed beds) and multiple outpatient care centers throughout Kennewick, will continue to operate as normal as it works to reorganize its debt, which totals about $221 million. The organization has reported losses over the past three years and its cash is depleted.
“We have arrived to a point that we must restructure our debt so that we can sustain our operations and services to the Tri-Cities,” said Marv Kinney, president of the KPHD Board of Commissioners. “We have endeavored to avoid this process by working with our creditors. Unfortunately, a few are not amenable to negotiation so we needed to file so patient care can continue unhindered.”
“That stated, we intend to honor our commitment to providing excellent healthcare and do our very best by those who have supported our business. The Board is proud of the administrative team, providers, and staff. They are focused and dedicated, and they continue to excel in providing compassionate, high-quality care,” he added.
The next step in the Chapter 9 process will be filing a plan of adjustment and disclosure statement with the court outlining Trios Health’s plan for repayments. The plan of adjustment and disclosure statement will be filed with the court when the structure of the plan has been finalized. The court will then assign a date for presentation of the plan and disclosure statement. Depending on the judge’s decision, the next steps in the process can vary.
Craig Cudworth, the organization’s chief executive officer, said the details of the debt reorganization plan are not finalized but that Trios Health will continue to take deliberate steps to return to financial health as soon as possible. The administrative team and leadership are following the recommendations presented by Quorum Health Resources, a management consultant firm hired by the KPHD board last year. Quorum delivered a 401-page report in December 2016 describing the perfect storm for the organization following the construction of a much-needed new hospital and outpatient facility when industry-wide realities and local competition collided.
“What is important right now is that our team remains focused on moving forward and staying our course,” Cudworth said. “Over the last few months, we have significantly reduced our expenses throughout the organization and adjusted our workforce to match our patient volumes, which continue to exceed years past. It’s not too late for us to fix the financial challenges and we have every reason to be successful in doing so.”
Cudworth acknowledged there will be concerns among creditors.
“It’s important that our vendors and partners understand that we sought to avoid this,” Cudworth said. “We have tried to work out payment plans that would give us some room, but that was not agreeable to all. In the interest of continuing patient services, this is what we must do.”
Creditors and interested parties may follow the proceedings and review information on a website set up by Trios Health’s legal counsel for the Chapter 9 filing. The site is located at: http://cases.gardencitygroup.com/kphd/.