Legal costs approach $1 million

Though he had hoped to see a resolution to Powell Valley Healthcare’s bankruptcy process by January or February, PVHC Board President R.J. Kost said he still has no idea when a final reorganization plan will be approved.

“Until we can get them (attorneys for plaintiffs in malpractice lawsuits) to approve it and get out from under it, we’re still shackled,” Kost said Monday. “We’re stuck in the middle of no-man’s land and can’t do a dang thing.”

But, he added, “I’m not finding fault; I’m finding frustration.”

Powell Valley Healthcare filed for Chapter 11 bankruptcy in May to help the organization deal with 21 lawsuits from former patients of Dr. Jeffrey Hansen, an orthopedic surgeon who was employed by PVHC at the time.

The patients allege they were injured by poor and sometimes risky operations from Hansen between 2010 and 2013 — and they say PVHC leaders were too slow in responding to complaints about the doctor. Hansen’s privileges were ultimately suspended over “patient safety concerns” in November 2013 and he later resigned.

Shortly after declaring bankruptcy, one of PVHC’s bankruptcy attorneys, Brad Hunsicker of Cheyenne, said the organization recognizes that the patients “have legitimate claims and that they need to be paid.”

The patients’ suits sought roughly $80 million in damages. Making things considerably more complicated, PVHC’s malpractice insurers have generally refused to cover any of the claims relating to Hansen’s care.

Along with PVHC leaders, the patients have said they don’t want the case to stall out in federal court, either.

“(M)any of the tort plaintiffs are struggling with serious personal injuries. Unnecessary delay is simply not an option for the tort plaintiffs,” one of the patients’ attorneys, Randy Royal of Greybull, wrote in October.

Though the date could be pushed back, PVHC currently faces a Friday deadline for submitting a plan of reorganization. The nonprofit organization’s attorneys told the bankruptcy court last month that “all but a few key provisions of the plan are agreed upon.”

Kost said attorneys for PVHC and the plaintiffs are trying to devise a plan that will work for both sides.

The patients’ attorneys “are making sure they can get everything they can for their clients, so they are being very methodical and prescriptive about what they are doing,” Kost said. “If I were on the other side, I’d want that, too.”

But the process is slow, tedious and difficult to navigate, he said.

From the filing of bankruptcy in mid-May to the end of December, PVHC incurred more than $993,000 worth of legal and professional fees, according to an operating report submitted to the court. PVHC is not only having to pay for its own bankruptcy attorneys, but also for attorneys to represent the patients in the bankruptcy process through the “Official Committee of Unsecured Creditors.”

In September, for example, four attorneys from the firm Markus Williams Young & Zimmermann racked up $46,000 worth of fees in 145 hours of work on PVHC’s behalf; in addition, the organization was responsible for paying three attorneys with the firm Spencer Fane, who spent roughly 110 billable hours working for the creditors’ committee and submitted $44,300 worth of invoices.

The seven attorneys on the two sides worked at rates ranging from $295 to $425 an hour; in a couple instances, PVHC was billed $29.50 for a six-minute email, the invoices show.

The expenses aren’t limited to attorneys, either: PVHC spent at least $50,000 on a financial adviser, Hammond Hanlon Camp (H2C), for help in coming up with a reorganization plan.

Though PVHC objected, the creditors committee sought to hire its own adviser, too.

“Not to belabor the point, but the debtor voluntarily filed this case, and the consequences of it and costs associated with it are an unfortunate reality of a complex Chapter 11 case,” Jamie Cotter, one of the attorneys who represents the patients on the creditors committee, argued in a November filing in support of the additional adviser.

First Bank of Wyoming, which is owed around $1.29 million in a loan and line of credit to PVHC, had objected to the committee’s request for its own adviser, citing “significant concerns that this (bankruptcy) case could ultimately fail because of the financial burdens of keeping it alive.”

“These concerns are very real when considering the hundreds of thousands of dollars already spent on professional fees in this case by a debtor with very finite resources,” wrote attorney Timothy Woznick of Cheyenne. “With each passing week, these concerns intensify.”

The dispute over whether the committee representing the patients can get a second adviser has been temporarily shelved — along with several other disputes in the case — while the parties work on creating a reorganization plan that everyone will accept.

A recently completed audit of Powell Valley Healthcare indicates the bankruptcy process could threaten Powell Valley Healthcare’s ability to continue to operate (see related story).

PVHC board president Kost said the report makes the situation sound worse than it actually is.

“From the auditor’s point of view, they have to look at just what they see right there, and not what we’re trying to put together,” he said. “It makes you wonder, ‘Is this gloom and doom as bad as it sounds?’ Because it really doesn’t sound that great.”

The audit is saying, “if things were to continue the way they appear right now, you’d be in trouble,” he said.

“But it won’t be; we’re going to be done with it, and it’s going to be OK. I honestly believe it’s going to be fine. We’ve just got to get through this. ... I don’t think any judge would knowingly agree to any kind of a bankruptcy plan knowing it would destroy something.”

Meanwhile, Kost said he has heard all kinds of stories about Powell Valley Healthcare being sold to Billings Clinic, or to St. Vincent Healthcare, along with other rumors.

“There has been no conversations of that,” he said Monday.

Part of H2C’s work is to appraise PVHC’s value.

However, Kost stressed that the appraisal was on the value of Powell Valley Healthcare, and it had nothing to do with the hospital, clinic or other facilities or the PVHC campus, which are owned by the Powell Hospital District.

“With the bankruptcy, you have to show the value (of the organization) so the lawyers on the other side know what the value is,” Kost said. “There’s a ... committee that hears the values and hears both sides on how much money they want, how much money they have, and all kinds of decisions for bankruptcy proceedings.

“They have to know the value before they can act,” he said.

The appraisal did not indicate a plan or desire to sell Powell Valley Healthcare or any of the buildings, Kost said, though rumors to that effect persist.

“There will not be a sale, there is no sale, there has been no talk of a sale,” Kost said last fall. “There has been no bids; there has been no offers; there has been nothing — and you can print that until the cows come home.

“Powell hospital is here to stay,” he said Monday.