During the bankruptcy protection process, Astria Health has paid back about $100 million in debt, including loans from its secured creditors, said Sam Maizel, the Los Angeles-based attorney who represented Astria Health.
Maizel said Astria Health’s bankruptcy process achieved objectives, including implementing a reorganization plan and paying off a considerable amount of debt.
“We ended up with a great result,” he said. “I’m really proud of how this case turned out.”
Astria Health bankruptcy case will remain active as it addresses claims from unsecured creditors and works to resolve a dispute with Cerner Corp., its former revenue cycle vendor.
Paying off debt
When Astria Health filed for bankruptcy in May 2019, it owed around $45 million to Lapis Advisers. Most of that amount — more than $35 million — was bonds for Astria Health’s purchase Yakima Regional Medical and Cardiac Center and Toppenish Community Hospital. Lapis lent an additional $10 million at the start of 2019, when the organization experienced cash flow issues.
Astria Health was able to pay off two secured lenders, MidCap Financial Trust and Banner Bank, when it secured $36 million in debtor-in-possession financing from JMB Capital Partners Lending. Astria Health used much of that financing to pay off the more than $20 million it owed to the two lenders.
Lapis Advisers took over as its debtor-in-possession lender at the end of 2019. The U.S. Bankruptcy Court approved Astria Health’s motion to borrow up to $43.1 million, enough to pay off JMB Capital Partners Lending, as well as provide $700,000 to cover operating expenses early in 2020.
When Astria Health sold the shuttered Astria Regional Medical Center building to a local investor group in November, it used most of the $20 million in sale proceeds to pay down secured debt.
The remainder of the Lapis Advisers debt was paid off on Jan. 15, when Astria Health finalized a $75 million loan from Tacoma-based MultiCare Health System. Astria Health used that loan and $5 million of its funds to pay off what it owed Lapis Advisers. Documents filed with the U.S. Bankruptcy Court showed the loan from MultiCare had a more favorable interest rate — 9.5% — compared to the ones for the Lapis Advisers loans, which ranged from 10% to 13.5%.
Now, Astria Health will go through the process of prioritizing and paying off unsecured creditors. Under the reorganization plan, the organization has a trust to fund payments to unsecured creditors. The trust currently has $5 million, but additional funds may come from monetary awards in “various pieces of litigation,” Maizel said.
One critical matter in the bankruptcy case is a dispute with Cerner Corp., which provided revenue cycle services. Astria Health cited issues with Cerner, namely the inability to collect millions of dollars of revenue during the last part of 2018 into early 2019, for the cash flow issues that led to its bankruptcy filing in May 2019.
Cerner and Astria have resolved some issues. Cerner will continue providing electronic health record services, but Astria Health officially terminated an agreement for revenue cycle services.
A separate legal case that seeks to resolve claims from both Astria and Cerner is expected to proceed under U.S. Bankruptcy Court Judge Whitman L. Holt, said Jim Day, Astria Health’s attorney for the Cerner Corp. case. Astria Health has until March 22 to file for an adversary proceeding with the U.S. Bankruptcy Court.
“All the claims between the parties (will be) included in this adversary proceeding,” Day said.
While Day wouldn’t specify which claims would be addressed in the proceeding, Astria Health previously claimed that issues with the revenue cycle under Cerner Corp.’s watch led to the organization’s inability to collect revenue cause upward of $150 million in damages.
Meanwhile, Cerner has claimed that Astria Health owes it millions of dollars for services both before and after the organization filed for bankruptcy in May 2019.
Paid time off for employees
One issue among Astria Health employees, especially those impacted by the Astria Regional closure, was the fate of paid time off that was in question during the bankruptcy process.
Maizel said current employees, including former Astria Regional employees who moved to other facilities, should have retained whatever PTO was earned.
“The PTO just stayed on the books,” Maizel said. “Whatever PTO they had, they just kept.”
For former employees, some may have secured some of their PTO through two settlements with employee unions, the Washington State Nurses Association and SEIU Healthcare 1199NW. Others may be able to get a PTO payment through the unsecured creditor claim process.
“It would be dealt in a case-by-case basis,” Maizel said.