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Proposed Logan General Hospital Reorganization Includes Up To $16 Million For New Healthcare Foundation

September 29, 2003
Michael Pollard, West Virginia University,
(304) 792-8692
Scott Benbow, Consumers Union,
(415) 431-6747
Carl Patten, Community Catalyst,
(617) 275-2910

Bankruptcy judge expected to confirm distribution plan in coming weeks.

CHARLESTON, WV – Southern District of West Virginia Bankruptcy Judge Ronald Pearson took under advisement the reorganization and distribution plan of Logan General Hospital on September 23, 2003. The plan is expected to pay creditors 100% of the amount owed and provide between $15 and $16 million of funding for the first conversion foundation in the country created from a hospital bankruptcy. The submission of the landmark plan is the final step in a lengthy process, spanning nearly 5 years since Logan General Hospital filed for Chapter 11 protection.
“We are delighted by this result. The new Logan Healthcare Foundation will help address the important healthcare issues facing the residents of Southern West Virginia,” said Mike Pollard, West Virginia University County Extension Agent. Thomas Tolliver, President of the Logan County Family Resource Network added, “Now we must turn our attention to the new Logan Healthcare Foundation, the creation of the Community Advisory Committee and the selection of the foundation’s Executive Director. These decisions will play a pivotal role not only in the foundation’s beginning but in its future in determining how responsive the foundation will be to the community’s healthcare needs.”
“This is far-reaching, precedent-setting, and a tremendous victory for communities around the country,” said Nathalie Martin, Bankruptcy Professor at the University of New Mexico, who has written extensively about bankruptcy cases in which the public and the community have an interest. “Both the judge and the community worked diligently to balance the health and other needs of this community with the needs of creditors. Everyone involved should be very pleased with this outcome.”
In April 2002 Judge Pearson permitted the Logan County Family Resource Network, Consumers Union and Community Catalyst to participate as amici or “friends of the court” in the case. Since then, the groups have filed numerous motions and attended many public hearings, providing substantial resources toward a positive resolution of the bankruptcy. At last week’s court hearing, Judge Pearson acknowledged the significant contributions made by the community. “The active interest by the citizenry has been very positive. Across the country, there usually is no oversight in situations like this, when a nonprofit’s assets are sold. The community participation and contributions played an important role.”
The foundation is expected to be funded with approximately $8.2 million in November 2003, $3.5 million as a result of the distribution plan and $4.7 million of funds originally owed by Logan General to the West Virginia Healthcare Authority. The Healthcare Authority penalized Logan General $5.8 million for its inappropriate overcharging of patients. The Healthcare Authority decided instead to assign the full amount to the foundation. With its resources, the foundation is expected to support smoking cessation programs, substance abuse prevention and treatment programs, vaccination services, women’s health services, and health and wellness activities.
At the hearing, Judge Pearson expressed interest in the governance and accountability of the foundation. Carl Patten, Staff Attorney at Community Catalyst said “We are pleased that Judge Pearson is interested in these components of the foundation and we are continuing to work with the Board of Directors to develop principles to ensure that it engages in philanthropy responsive to the needs of the community.” Scott Benbow, Staff Attorney at Consumers Union added “These principles are a model for improving foundation accountability across the country and we look forward to working with the Community Advisory Committee and the Board of Directors to ensure that the foundation is living up to its mission and purpose.”
New York Law School Bankruptcy Professor Karen Gross, author of “Failure and Forgiveness – Rebalancing the Bankruptcy System,” an examination of how the current bankruptcy system should more effectively balance the interest of debtors, creditors and communities, commented, “The Logan General Hospital case should be a signal to all community groups out there that they can have an impact on a bankruptcy case and that their voice will not only be heard but taken seriously.” Gross urges community groups to not be silent, “Your involvement can change outcomes.”