Distressed Health Care

Distressed Health Care

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"I wanted to express, as I've done in previous hearings, my admiration for the attorneys who have participated in the case. I think that when this case first came on board, I was concerned that it would be a difficult matter for the Court… and as it's turned out, it's not been such a matter. The reason for that is the extreme professionalism of all of the counsel who've been involved in the case. Counsel for the creditors, committee counsel for the principal creditors in the case, and particularly in the counsel for the debtors [Dentons], have all exhibited a high degree of professionalism and competency. The Court never went into a hearing without all of the information it needed for the hearing and with all the briefing it needed for the hearing. That's not always the case. And so, I want to say that on the record."

~ Judge Kurtz, Astria Health Hearing (October 2019)

With more than 25 years’ experience representing health care industry stakeholders in complex transactions and high-stakes disputes, Dentons' dedicated, multidisciplinary Distressed Health Care group brings unparalleled experience to the handling of matters involving financially distressed clients and transactions, in and outside of formal bankruptcy proceedings. Our client representation includes multistate health systems, academic medical centers and independent standalone hospitals, for-profit and not-for-profit, in the US and abroad, as well as leading health insurers, pharmaceutical and medical device companies, lenders and investors, and governmental and NGO participants.

We have represented individual hospitals and medical systems (general, specialized and teaching); skilled nursing facilities, continuing care retirement centers and ambulatory surgery centers; medical provider groups; medical equipment and supply companies; and health plans and healthcare districts before US federal and state regulators and in bankruptcy proceedings (as debtors, creditors and asset buyers) on issues ranging from provider agreement transfers to facility sales. Members of our team also regularly publish and present on cutting-edge healthcare restructuring topics. So whatever distressed health care issue you are wrestling with, it is likely that our lawyers have thought about it, written on it or litigated it.

Our lawyers are knowledgeable and experienced in all aspects of bankruptcy, insolvency and restructuring, from creditors’ rights and remedies, including fraudulent transfer lawsuits, to the sale and purchase of entire operating companies, corporate spin-offs, or individual assets through a bankruptcy court auction. Our lawyers are equally at home with an out-of-court workout scenario and a Chapter 11, 9 or 7 case, and regularly advise debtors and potential debtors, secured and unsecured creditors, and investors, bondholders and lenders on the pros and cons of each.

Our practice is as collaborative in approach as it is comprehensive in scope. A core team of restructuring, insolvency and bankruptcy lawyers regularly tap colleagues in the Firm who concentrate on capital markets and structured finance, tax, environmental law, real estate, labor and employment law, pensions and benefits, intellectual property, and other areas. If a health care regulatory issue arises, Dentons’ dedicated Health Care team of 30 sector-focused lawyers and professionals includes former senior staff in the US Department of Health and Human Services (DHS), the Centers for Medicare and Medicaid Services (CMS) and the US Department of Justice (DOJ), and our Healthcare Finance subpractice has experience in the full range of bank and capital markets options, and attendant regulations, available to private, nonprofit and municipal entities.

Our areas of experience include:

Chapters 11, 9 and 7 of the Bankruptcy Code, including the representation of debtors, creditors’ committees and buyers
Administrations, as an alternative or precursor to liquidation
Acquisitions and dispositions of distressed health care organizations and pharmaceutical companies, and related assets
Resolution of government program overpayment issues
Enforcement of non-compete and non-solicitation agreements
Restrictive covenant amendments, waivers and forbearance agreements
Financing and sales of receivables
Receiverships, conservatorships and interactions with regulatory authorities
Certificates of need, licensure and accreditation, and related issues
Facility closures and operator transitions

Experience

Verity Health System of California, Inc.: Represented of Verity Health System of California, Inc., and 16 related entities (collectively, “Verity”), including 6 acute care operating hospitals, in their chapter 11 cases—the second largest nonprofit hospital bankruptcy case in American history with more than $1.4 billion of debt. During the cases, the Court approved the sale of Verity’s hospitals and senior living facility, and confirmed the joint plan of liquidation, which resolved complex litigation and created a liquidating trust for the benefit of creditors. The sale of Verity Health’s nonprofit assets raised unique issues related to the transfer of healthcare assets in bankruptcy, including the scope of the powers of the Attorney General and the transfer of medical provider agreements, which led to groundbreaking decisions. During the cases, Verity also collaborated with the Attorneys for the California Governor’s Office of Emergency Services to reopen St. Vincent Medical Center in Los Angeles, and to set aside beds at Seton Medical Center in the Bay Area to treat COVID-19 patients.
Astria Health System: Represented Astria Health System in the recently completed 13 related chapter 11 bankruptcy cases in Yakima, Washington. Astria is a non-profit health system which included three operating acute care hospitals and various clinics. The team secured several victories including: (a) overcoming vigorous opposition from a secured creditor to obtain authorization for $28 million in debtor in possession financing ensuring that Astria would have sufficient liquidity to continue to operate; (b) securing a ruling from the court enforcing the automatic stay and requiring a health staffing company to provide intensive care unit nurses, as specified in its contract with Astria, so that Astria can continue to provide essential healthcare services to the community; (c) obtained replacement debtor in possession financing from its major secured creditor to allow it to formulate a plan of reorganization; (d) restructuring operations including closing one hospital, replacing management and restructuring operations; and (e) secured a ruling from the Bankruptcy Court obtaining a loan under the Paycheck Protection Program over the vigorous objection of the Small Business Administration. Finally, the team secured confirmation of a joint plan of reorganization which provided for a partnership with the Multicare Health System, and reduced Astria’s obligations by over $100 million.
Springfield Hospital, Inc.: Acting as lead counsel representing Springfield Hospital, Inc., in its successful chapter 11 case. The company recently confirmed a chapter 11 plan of reorganization and is now engaged in post-confirmation litigation to collect a pool of preference claims. During the case, we led the team that obtained a permanent injunction against the U.S. Small Business Administration due to the agency’s improper exclusion of debtors from participating in the Paycheck Protection Program.
Penobscot Valley Hospital: Serves as lead counsel for Penobscot Valley Hospital, which recently confirmed a chapter 11 plan that has restructured the company’s balance sheet, after operational improvements, which together has positioned the company to continue to provide health care services for years to come.
Gardens Regional Hospital and Medical Center, Inc.: Advised Gardens Regional Hospital and Medical Center Inc. (""Gardens""), a non-profit, safety net hospital with more than 130 beds in Southern California, in multiple issues arising from its ongoing Chapter 11 case in the Central District of California. Integral to the bankruptcy case was the sale of the Debtor's assets via auction for approximately $19.5 million. After a four-day, 13-round auction, Dentons, assisted by the Debtor's financial advisors, secured a price that more than doubled the initial $8.5 million stalking-horse bid. When this sale failed to close because of financial conditions imposed by the California Attorney General, Dentons sold the closed hospital for $6.5 million over the vigorous objection of the California Attorney General. Dentons then obtained a dismissal of the Attorney General’s appeal and confirmed a chapter 11 plan of reorganization that provided a distribution to creditors.
Air Force Village West, Inc. dba Altavita: Represented the nonprofit operator of a continuing care retirement center (“CCRC”) in Southern California in its Chapter 11 case in the Central District of California, we secured bankruptcy court approval of the sale of the CCRC for approximately $60 million.
West Contra Costa Healthcare District: Represented this quasi-governmental owner- operator of a major hospital in San Pablo, CA, in its Chapter 9 bankruptcy proceeding in Oakland, CA. Our work included negotiating with bondholders over the district's use of cash collateral, selling a seven-story hospital building and dealing with reported liabilities of over $100 million.
Nuo Therapeutics, Inc.: Represented publicly traded, Gaithersburg, MD, biomedical wound care company in its Chapter 11 proceedings, resulting in confirmation of a plan of reorganization.
American Hospice Management Holdings, LLC: Represented the end-of-life care provider and related entities in their Chapter 11 proceedings in Delaware, including a successful auction (the purchase price was 60 percent higher than the stalking horse bid); approval of three asset-sale transactions across six states generating US$9 million; and settlement of Medicare claims totaling US$5.5 million, avoiding successor liability issues and the specter of having to operate under a corporate integrity agreement. We also assisted the client in securing debtor-in-possession funding pending the closing.
New York University and NYU School of Medicine: Represented the university and its medical school on several in- and out-of-court non-judicial restructurings and litigation.
Allegheny Health, Education and Research Foundation (AHERF): Representing the Commonwealth of Pennsylvania in the largest bankruptcy case of a distressed nonprofit hospital system in US history.
Gordian Medical, Inc., dba American Medical Technologies: Represented debtor and debtor in possession, a privately owned, durable medical supplier in Irvine, California, which provides wound-care dressings and supplies to more than 4,000 nursing homes, hospices, and other facilities in 49 states. Gordian was compelled to file for bankruptcy protection after a complete suspension of Medicare payments, and to deal with over $75 million in Medicare debts and to resolve over 14 years of tax liabilities asserted by the IRS. The bankruptcy court confirmed a plan of reorganization funded by a new-value contribution The company successfully reorganized, resolving all its pending disputes with Medicare, leaving equity in control of the company, and significantly reducing its obligations to Medicare, the IRS and state taxing authorities.
Greater Southeast Community Healthcare Corp. and Doctors Community Healthcare: Served as counsel to the Official Committee of Unsecured Creditors in this Chapter 11 hospital and nursing home case. The case, which has resulted in a large distribution to unsecured creditors, included the sale of several facilities and the waiver by the Department of Health and Human Services on several large federal claims.
MedPartners Provider Network, Inc.: Represented a takeover of management by a conservator appointed by the California Department of Corporations and a Chapter 11 filing that same day. MedPartners had more than 1.3 million covered lives at the time of the filing. Lawyers from our New York office represented the conservator for the company.
The Clare at Water Tower: Represented the Official Committee of Unsecured Creditors in this continuing retirement community facility case. The Committee consists of five residents and two trade creditors, who played an active role in the going-concern sales process and auction for this facility, as well as the confirmation of the related Chapter 11 plan and other aspects of the case. In a successful conclusion, the residents’ deposits and other arrangements were assumed, and the trade creditors received a recovery in the case.
United Healthcare System: Representing Medline Industries, Inc., a major trade creditor in the Chapter 11 bankruptcy of United Healthcare in Newark, NJ. Prior to its closure, the debtor, which owned and operated the principal acute care hospital for children in New Jersey, was one of the nation’s premier nonprofit inner-city safety net health care systems.