Interfaith Medical Center, a financially troubled hospital, serving a African-American and Caribbean community, in central Brooklyn, NY filed for Chapter 11 bankruptcy in early December.
The hospital officials told the press New York State tried to force the healthcare provider to close or merge with another institution. The chairman of Interfaith’s board of trustees said to the press a merger with another hospital with no guarantee of state aid would be similar to closing the hospital. The hospital serves Bedford-Stuyvesant and Crown Heights, and has been in financial trouble before. Whether the hospital closes depends on whether it gets state aid. In hard economic times, New York State has not committed to a willingness to continue helping failing hospitals.
According to Crain’s New York Business, the hospital owes millions to the federal government and New York state, plus additional millions to settle medical malpractice judgments against the hospital.
Any closing of the hospital may lead to consumer bankruptcies if hospital workers lose their jobs. In a consumer bankruptcy, after filing the bankruptcy petition, the bankruptcy petitioner may suffer emotional distress and anxiety, as the person’s finances becomes public. The petitioner will be questioned at a court hearing, known as a 341 hearing, with a bankruptcy trustee.
The U.S. Trustee, an officer of the U.S. Department of Justice, responsible for overseeing bankruptcy cases and private trustees, appoints a trustee for the petitioner’s bankruptcy case. Some courts have full-time, while other courts have rotating trustees. Some of the trustees are lawyers or accountants. The trustee reviews the bankruptcy petition for mistakes or inconsistencies and ensures creditors of the bankruptcy estate get paid as much as possible. The trustee is interested in a debtor’s assets and how much the trustee can give to creditors. The trustee gets paid a percentage of the assets recovered from a debtor for creditors, in addition to a flat fee for each case handled.
In 2011, a Brooklyn work group of New York governor’s Medicaid Redesign Team, created to find savings in the hospital and health industry, suggested Interfaith merge with other Brooklyn hospitals, Wyckoff Heights Medical Center and Brooklyn Hospital. Interfaith officials said they had no choice but to file for Chapter 11 bankruptcy reorganization if they did not want to go through with a merger.
The hospital said they had a chance to survive in the long term if the state guaranteed about $20 million in debtor-in-possession financing to underwrite the hospital’s operating costs during reorganization.
In a bankruptcy proceeding, everything a debtor answers needs to be true. Typical questions in court hearings include: Will you receive a tax refund this year? Did you read the petition and sign it prior to its filing? Did you transfer any assets, and if so, to who? Have you transferred any property within the last year if “yes” what was the purchase price and what did you do with the funds received? Do you have a claim against someone or did you file a lawsuit against someone?