Astria Health’s emergence from bankruptcy protection was unusual, said Sam Maizel, a Los Angeles-based attorney who represented Astria Health during its bankruptcy. He has represented many hospitals and health systems in bankruptcy over the years.
A hospital bankruptcy generally ends with the hospital or health system being purchased by a larger entity or results in closure.
This third route — a larger health care provider stepping in to lend tens of millions to enable a fellow provider pay off the largest secured creditor — is far from typical.
Just days before a hearing on Astria’s reorganization plan, MultiCare Health System, a Tacoma-based nonprofit health care system with 10 hospitals throughout the state, approached the Sunnyside-based organization about lending it $75 million.
It led to a last-minute deal that was completed in a matter of weeks. Astria Health used the loan, along with several million of its funds, to pay off Lapis Advisers. Lapis was Astria’s largest secure creditor and provided financing while Astria was undergoing the Chapter 11 bankruptcy reorganization process.
The move essentially allows Astria Health to continue operating as a local nonprofit health care organization, albeit a much smaller one than when it filed for bankruptcy in May 2019. The loan also put Astria Health in a better financial place as it implemented its reorganization plan, which was approved by the U.S. Bankruptcy Court in December.
“The idea that these hospitals were able to reorganize and emerge from bankruptcy as standalone hospitals with the assistance of this major hospital chain is a very unusual and positive outcome,” Maizel said.
Astria Health has to repay the loan from MultiCare within three years of its closing date in mid-January. Whether that happens will likely determine whether it can remain intact as a local and independent health care organization.
Regional Health — later renamed Astria Health — was the nonprofit entity created by Sunnyside Community Hospital & Clinics when it purchased Astria Toppenish Hospital and the now-closed Astria Regional Medical Center in Yakima. The two hospitals were under the ownership of two sizeable for-profit health care organizations, Naples, Fla.-based Health Management Associates and Franklin, Tenn.-based Community Health Systems, for nearly 15 years before Astria Health’s purchase in 2017. Sunnyside Community Hospital & Clinics, a critical access hospital, had come off several years of robust growth.
In the year after acquiring the hospitals in Yakima and Sunnyside, Astria Health had its eyes on becoming a much larger health care organization. In late 2017 into 2018, the organization was eyeing other opportunities for expansion, including acquiring Kennewick-based Trios Health, which was in bankruptcy. It also submitted a proposal for an affiliate relationship with Snoqualmie Valley Hospital in Snoqualmie.
Current employees and the unions representing them are watching closely to see whether Astria Health will remain a local organization or eventually be acquired by a larger organization, such as MultiCare.
“We just have to wait and see how things play out. We’re definitely watching for transparency and to see how the pieces change,” said Jayson Dick, associate director of labor advocacy for the Washington State Nurses Association, which represents nurses at the Sunnyside and Toppenish hospitals. “Going into last year, we could never have predicted some of the things we saw last year.”
Outside court documents, Astria Health executives have not been forthcoming on details regarding the organization’s path to remaining financially stable post-bankruptcy.
In the past two years, the executives have granted just one in-person interview to the Yakima Herald-Republic — in May 2019, shortly after Astria filed for bankruptcy. The organization’s executives again declined to be interviewed for these stories, opting instead for emailed responses to some of the Yakima Herald-Republic’s questions.
In an email responding to a Yakima Herald-Republic inquiry on why they would not answer specific questions, an Astria Health spokeswoman wrote, “We answered what we were wanted/needed to answer.”
Smaller and targeted
One thing is clear: Astria Health is now a smaller organization serving fewer people.
In a court document filed in May 2019, Astria Health described itself as “one of the largest employers in the Yakima Valley” with 1,547 employees. The organization said it provides medical treatment to 346,400 patients at its three hospitals and network of clinics annually. The organization also noted it was the sole provider in Yakima County of open-heart surgery, neurosurgery and elective cardiac catheterization.
A financial disclosure filed with Astria Health’s reorganization plan last fall shows a drop in both employees and patients. According to the disclosure, the number of employees had declined by 44.3% to 862 and the number of patients served annually dropped by 32.7%, to 233,000.
Much of that loss came from the January 2020 closure of Astria Regional Medical Center, one of two hospitals in Yakima. At the time, Regional had more than 450 employees.
The hospital’s closure also meant losing critical services not provided anywhere else in the region, such as open-heart surgery.
Other health care systems in the area have expanded services, though not enough to cover the service losses with Astria Regional’s closure.
Yakima Valley Memorial, now the only hospital in Yakima, received state approval to provide elective cardiac catheterization in late 2019.
Astria Health said it could no longer sustain the hospital’s financial losses.
While acknowledging the loss of services and the impact on the community, U.S. Bankruptcy Court Judge Whitman L. Holt said he believed Astria Health made a sound business decision to keep hospitals in Sunnyside and Toppenish operating.
A local investment group purchased the Astria Regional building for $20 million in December, which the organization used to pay down secured debt.
“It’s a terrible outcome,” Maizel said, referring to Regional’s closure. “But in terms of ensuring the financial viability of the other two hospitals, it’s a positive.”
Along with the Astria Regional closure, Astria Health also closed several clinics, including specialty care clinics near the Yakima hospital and several primary care clinics in Yakima, Selah, Terrace Heights and West Valley.
Astria Health’s hospitals and clinics are now concentrated in the Lower Yakima Valley. Its presence in the Yakima area includes an ambulatory surgical center, a home health service and hospice, and a plastic surgery center. Those who live in Yakima and the upper Yakima Valley who were once patients of its clinics now need to travel to the Astria Health Center in Union Gap.
In a disclosure statement filed with its reorganization statement in November, Astria Health referenced being in the “planning stages” of an expansion of Astria Sunnyside Hospital. Before purchasing the Yakima and Toppenish hospitals, officials had plans to build a new hospital on 50 acres off Interstate 82, about 2 miles from the hospital’s current location.
The court document did not indicate when it would resume expansion efforts. Astria Health declined to comment further on the status of the expansion.
Astria Health provided the following response inquiring about its focus on the Lower Yakima Valley and its ability to compete with other health care providers serving the area:
“Astria Health provides exceptional medical services and unique specialties in the Yakima Valley. We will continue to provide those services to our patients and will grow new services to support those existing specialties. We’ve always believed that health care needs to be a local service and providing exceptional and specialized care to our community is paramount in meeting the health care needs of our community.”
There’s one key player who can determine Astria Health’s future: MultiCare Health System.
The Tacoma-based organization had established ties to the Yakima Valley before its lending deal with Astria Health. Since November 2019, the organization has been in a partnership with Pacific Northwest University of Health Services, the medical school in Terrace Heights.
Still, its role with Astria Health is new for MultiCare: In a written statement, a MultiCare spokeswoman said it had not been in a “similar lender position with other health care organizations.”
In a separate written statement, CEO Bill Robertson said Astria Health’s situation caught the organization’s attention and led to the idea of whether Multicare had the means to support the broader health care community in Washington.
“Astria’s two hospitals are crucial to the health and vitality of Central Washington, and we believe that Astria is an organization that is dedicated to effectively meeting the health care needs of their patients and their communities,” Robertson said in his statement. “Our secured loan of $75 million to facilitate their successful exit from bankruptcy was intended to allow them to continue to care for the people and counties they serve.”
MultiCare said for now it is strictly a lender, though it is open to future collaboration.
When asked about MultiCare’s role in the organization, Astria Health gave the following response: “(We are) very pleased with the relationship we have established with MultiCare and are enjoying the collective collaboration opportunities thus far. We could not be more thrilled with the relationship established and look forward to the future growth and collaboration opportunities the future may bring.”
Multicare acquiring Astria Health isn’t out of the question. According to a loan agreement filed with the U.S. Bankruptcy Court, MultiCare has an option to purchase.
The employee view
Dick of the Washington State Nurses Association said he’s noticed some signs of improvement with Astria Health. For example, the Toppenish hospital was transparent about the availability and supply of personal protective equipment.
“When I see something like that, I would like to say, ‘Good job,’” he said. “This is the transparency we need.”
The union will be negotiating new contracts on behalf of nurses in both Toppenish and Sunnyside over the next year. The contract for Sunnyside was set to expire in 2020 but was extended a year. The Toppenish contract expires in March 2022.
If Astria Health retains local ownership, Julie Barcott, an ICU nurse at Astria Toppenish Hospital, wants to see the organization lean into its mission as a local health care organization.
Barcott said she’s encouraged by the organization’s increased engagement in the community — her hospital, for example, has stepped up efforts to serve better the Latino and Native populations in the area. She was also encouraged by the organization’s massive vaccination distribution effort, including recent clinics at Toppenish Middle School and the KDNA radio station. A third vaccination clinic was scheduled today at the Valley Mall in Union Gap.
She said the organization also has made efforts to be more transparent through regular staff meetings and other communication channels.
“We have managers who work the floors,” she said. “(Before) we had a lot of company people, managers, show up in suits and high heels.”
But Barcott believes the organization needs to continue working to regain the trust of the community. She felt the sudden closure of Astria Regional last year alienated staff and residents.
“I know there is still grief and anger with people over how the hospital in Yakima closed,” she said.
The organization can do that by informing the community of its vision, and how it will meet the community’s needs, she said.
“I think they really need to step up and reach out to the community and be willing to get ideas,” she said. “(Ask) ‘What are you missing (with health care) in your community and what would you like to see as we regroup?’”