Bankrupt hospital faces lawsuits from trustee, ex-workers

Following patient safety violations, Pennsylvania's Saint Catherine Medical Center pursued Chapter 7 rather than Chapter 11 bankruptcy. Now, that Chapter 7 trustee is suing creditors for money they received from the medical center, reported the Republican & Herald.

William G. Schwab filed seven complaints Tuesday, alleging the medical center and its chief executive breached fiduciary duty of care and allowed the facility to incur more debt.

The suit claims CEO Milton Knapp transferred $300,000 from the Pennsylvania medical center to Saint Catherine Hospital of Indiana last fall. "Knapp acted with a purpose other than that of advancing (Saint Catherine's) best interests," the suit alleges.  

The lawsuit also cites as much as 900 pounds of supplies shipped from Saint Catherine Medical Center to the Indiana hospital only days before the Pennsylvania medical center filed for bankruptcy, according to HealthLeaders Media. The medical center was not reimbursed for the shipment.

The suit also asks that any money Schwab recoups--minus attorney fees, costs and expenses--go into the medical center's bankruptcy estate, where it would be available to creditors, compliant with federal law, noted the Republican & Herald.

Meanwhile, two former medical center employees are suing ex-presidents Daniel A. Colon and Merlyn Knapp for allegedly diverting money from their health plans, according to another Republican & Herald article. The plaintiffs are among roughly 150 Saint Catherine employees laid off after the medical center filed for bankruptcy last month.

"[Merlyn] Knapp and Colon took no steps to prevent, discourage or report (the hospital's) misappropriation of funds," the lawsuit claims.

The two employees also asked the court to certify the lawsuit as a class-action for the more than 100 ex-hospital employees who participated in the health plans, the article noted.

To learn more:
- read the Republican & Herald article on the debt and the article on the former employees
- here's the HealthLeaders article