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Hospital chooses Chapter 11 to handle malpractice claims

Sometimes the best way for a company to get out from crushing litigation is to file for Chapter 11 bankruptcy. That was the decision made by the Wyoming hospital dealing with some 20 lawsuits. All of the suits involve an orthopedic surgeon who worked there from 2006 to 2014.

The surgeon resigned from Powell Valley Healthcare several months after he was suspended. However, PVHC was left to deal with the medical malpractice claims against him.

The executives at PVHC say that the hospital is in good financial condition aside from the lawsuits, with no other creditor claims. They also say that the gross revenue has increased over the past two years. However, according to their attorney, the money and manpower being spent to deal with this litigation was interfering with PVHC's number one job of caring for its patients. He also explained that "the volume of claims necessitated that this be managed in a more controllable fashion."

Hospital executives assured the community, which it has asked for its support, that daily operations will continue as usual during the reorganization. They say that patient care won't be impacted and that they foresee no layoffs.

It's not yet certain how the claims of the 20 malpractice plaintiffs will be handled. PVHC's insurers have sued the hospital, saying that they aren't obligated to defend or pay the malpractice claims. The Chapter 11 reorganization stops the pending litigation by all claimants for the time being. They could set up a fund to pay specific amounts to the plaintiffs. They could also allow plaintiffs to move forward with their suits. However, there would be no guarantee that PVHC will have enough money to pay everyone.

The board of directors of PVHC has said that Chapter 11 reorganization was "the best available alternative" for handling the malpractice suits. Of course, every situation is different. If you're considering this option, it's best to talk with an experienced Massachusetts bankruptcy attorney.

Source: Powell Tribune, "Powell Valley Healthcare files for Chapter 11 bankruptcy," Ilene Olson, May 16, 2016

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