One Wyoming hospital overwhelmed by lawsuits involving an orthopedic surgeon once employed there has determined that the best way to resolve its legal problems and focus on treating patients is to file for Chapter 11 bankruptcy.
The doctor resigned in 2014, several months after he was suspended by Powell Valley Healthcare (PVHC). However, he left in his wake some 20 medical malpractice suits from patients on whom he had operated.
Company Reportedly Otherwise Financially Healthy
A statement by the hospital's board of directors called the Chapter 11 filing "the best available alternative" for dealing with the current and pending lawsuits. The board noted that PVHC has no problems with creditors and does not anticipate any going forward other than from the multiple litigants' bringing claims involving this surgeon. The interim chief executive officer said that PVHC's gross revenue has been increasing over the past two years.
The executives at PVHC have assured the community that they will maintain control over the day-to-day operations of the facility during the reorganization, which they anticipate won't last more than a year. They said that neither patients nor employees should see any negative impact.
The attorney noted that "the volume of claims necessitated that this be managed in a more controllable fashion." He noted that the amount of money and manpower being spent on these claims was distracting PHVC from its regular operations. In addition to dealing with the individual claims, PHVC is being sued by two malpractice insurers that say they have no obligation to pay or defend the claims.
What Happens to the Malpractice Suits?
That depends. The Chapter 11 filing stops the litigation until a judge decides how to handle the current lawsuits. One option is to start a fund for a specific dollar amount to settle the 20 claims. Another option is to allow the plaintiffs to move forward with their suits individually. However, they wouldn't be guaranteed that there would be money available to pay them. The issue of the hospital's malpractice coverage still needs to be resolved as well.
When a company is facing overwhelming litigation, it's worth looking at whether a Chapter 11 reorganization might be the optimal solution. An experienced attorney well-versed in your state's bankruptcy laws can provide guidance to help you make that decision.
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