Interfaith trustee: Medical center could have returned to full service

By Caroline Salls

Pittsburgh, Nov. 7 - Interfaith Medical Center, Inc. board of trustees member and certified public accountant Julia L. James said the medical center was still in a position to be restored as a profitable, full-service community hospital as of October, according to a letter filed Thursday with the U.S. Bankruptcy Court for the Eastern District of New York.

With an amendment to an application that would have provided a cash infusion allowing the medical center to sustain operations through Jan. 31, James said there still would have been time to "turn things around and restore faith in Interfaith Medical Center as a functioning hospital."

"While to the outside world, Interfaith may appear to be a financial disaster, the reality is restoring Interfaith was not that complicated," James said in her letter to the court.

"The same way following a disastrous 2010 with Medicaid reimbursement cuts good financial management was able to restore the debtor to profitability in 2011, the same can be done in 2013 to enable the debtor to have a successful operating year in 2014."

According to James' letter, a decrease in census in September and low collection of receivables negatively impacted Interfaith's sustainability and placed the hospital at high risk.

In addition, James said a $5 million reserve for an attorney and advisers "who have made a concerted effort to make sure the hospital closes has crippled the hospital."

Based on her interpretation of the Dormitory Authority of the State of New York's (Dasny) comments at a Nov. 4 hearing, James said Dasny "is only willing to provide financing for closure so that Dasny can assume title to the debtor's real estate" but does not want to provide funding to allow Interfaith to continue to make principal and interest payments.

James also said Interfaith filed bankruptcy when it was faced with future principal payments without making an attempt to refinance or restructure its Dasny debt.

Closure decision

As previously reported, Interfaith Medical Center originally requested court approval in July to implement a plan of closure for its hospitals and some affiliated outpatient clinics and practices.

Interfaith said it believes it presented the New York State Department of Health (DOH) with a viable business restructuring plan on July 9 that would not require post-Chapter 11 state funding and that other aspects of its operations, including behavioral health, could continue without the requirement for greater state funding than likely would be required when those operations are transferred to other operators who also would require state funding.

However, in light of Dasny's refusal to consent to Interfaith's use of cash collateral after July 29 unless it agreed to implement a closure plan, DOH's rejection of the July 9 restructuring plan, DOH's direction to begin implementing a closure plan and Interfaith's lack of alternative funding, the company said it had no choice but to approve a plan of closure.

Interfaith, a Brooklyn, N.Y., multi-site health-care system operator, filed for bankruptcy on Dec. 2, 2012. Its Chapter 11 case number is 12-48226.

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