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FILE—Samuel Maizel, bankruptcy attorney with Dentons’ Restructuring, Insolvency and Bankruptcy Group, center, walks toward the U.S. Bankruptcy Court for the Eastern District of Washington on Thursday, June 13, 2019, in Yakima. Maizel and his team represent Astria Health.

Pending approval from the U.S. Bankruptcy Court, Astria Health and the Washington State Nurses Association have settled a complaint over the closure of Regional hospital.

Earlier this year, WSNA filed a complaint against Astria Health, stating that it violated several state and federal laws when it closed Astria Regional Medical Center in Yakima in January.

Astria filed for Chapter 11 bankruptcy protection in May 2019.

In April, Judge Whitman L. Holt agreed to proceed with part of the complaint related to whether Astria Health had violated the federal WARN Act by not abiding by the 60-day notice the law requires. The labor law requires employers with 100 or more employees to provide 60 days advance notice about plant closings and mass layoffs.

Holt dismissed the part of the complaint where WSNA asserted that Astria violated the Washington State Payment and Collection Act and the Washington Wage Rebate Act by not quickly paying the nurses for paid time off.

In the joint motion filed late last month, WSNA and Astria Health wrote that all parties agreed it was best to settle rather than go through a lengthy and costly process in court.

Under the agreement, former Astria Regional Medical Center nurses represented by WSNA would receive a share of a settlement payment from Astria Health. The two parties declined to reveal the exact amount of the payment.

Former employees who are not working for any Astria Health facility can also file an unsecured claim for any remaining unused paid time off at the time of the hospital’s closure. Those who were rehired at other Astria Health facilities will have those hours transferred.

A hearing on the settlement is scheduled Tuesday, though it might be rescheduled.

Bankruptcy update

Meanwhile, Astria Health is moving forward on its bankruptcy reorganization plan.

In a status hearing before the U.S. Bankruptcy Court Wednesday, Astria Health attorney Sam Maizel said he believes a draft version of the plan and disclosure statement addresses the objections of the U.S. Trustee.

Maizel said that Astria Health had started discussions with the Unsecured Creditors Committee to address their concerns. Maizel said proposals have been exchanged.

“I am optimistic that a settlement can be reached,” he said.

Astria Health filed a joint reorganization plan in early July with Lapis Advisers, its largest creditor. At the end of last year, Lapis Advisers also served as the lender for its debtor-in-possession financing. Astria Health previously said it aims to emerge out of bankruptcy by the end of next month.

Astria Health operates hospitals in Toppenish and Sunnyside and several primary and specialty care clinics. So far this year, the organization has closed Regional hospital and several clinics to improve its financial position.

Both the U.S. Trustee and Unsecured Creditors Committee filed objections to the disclosure statement, a document filed alongside the reorganization plan that addresses assets, liabilities and other business affairs.

Both also took issue that Astria did not fully disclose why it would reorganize its assets in a way that would limit payments to unsecured creditors while satisfying secured creditors in full. The U.S. Trustee requested that the plan and disclosure statement provide more detail, such as who would manage the reorganized entity.

Maizel, the Astria Health attorney, said the organization has started revising the disclosure statement and expects to make “significant revisions” under any settlement with the Unsecured Creditors Committee.

A court hearing on the disclosure statement is scheduled for Sept. 2.

Coronavirus relief funding

A U.S. Bankruptcy Court hearing is scheduled Tuesday about a dispute between Astria Health and the U.S. Small Business Administration. The dispute is over whether Astria Toppenish Hospital and Astria Home Health qualified for funds from the Paycheck Protection Program, which provides forgivable loans for those who continue to employ workers during the COVID-19 pandemic.

The two health care entities had filed applications with Banner Bank. The bank denied the applications due to the Small Business Administration’s assertion that the entities did not qualify due to Astria Health’s bankruptcy. That prompted Astria Health to file a complaint against the federal agency with the U.S. Bankruptcy Court.

The court ultimately granted Astria Health’s request for a preliminary injunction that allowed Astria Health to file the PPP applications. In late June, Banner Bank approved applications for loans to Astria Home Health and Astria Toppenish of $471,975 and just over $2.82 million, respectively. However, SBA filed an appeal with U.S. District Court, which is still ongoing.

Reach Mai Hoang at maihoang@yakimaherald.com or Twitter @maiphoang