Two hospitals sued after filing bankruptcy

Saint Catherine Regional Hospital in Indiana last week filed for Chapter 11 bankruptcy, Health Leaders Media reported. Saint Catherine Regional is a sister hospital to Saint Catherine Medical Center in Pennsylvania, which also filed for bankruptcy (Chapter 7) in April. Saint Catherine Regional Hospital owes in excess of $8 million in unsecured claims and has reported a net loss of $1.3 million over the past year.  

The Chapter 7 trustee is suing Specialty Health LLC, which manages the hospitals, suggesting that the bankruptcy for both hospitals were related. Court documents also named Saint Catherine Regional CEO Merlyn Knapp as a codefendant in the suit, alleging she breached fiduciary duty by putting Indiana's financial needs above the needs of its sister hospital, according to another HealthLeaders article. The suit suggests that Knapp should have known the facility was in danger of insolvency and is seeking to recover a $300,000 transfer from Saint Catherine Medical to Saint Catherine Regional.

Saint Catherine Regional Hospital will continue to operate, despite filing for Chapter 11 and reports of potential offers to buy the facility. Article