PVHC proposes $3 million settlement with former Hansen patients

Posted 5/2/17

The tentative deal with the group of patients is one part of a complex plan that PVHC proposed last week to resolve its pending Chapter 11 bankruptcy case. It will ultimately be up to U.S. Bankruptcy Judge Cathleen Parker to decide whether to …

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PVHC proposes $3 million settlement with former Hansen patients

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Powell Valley Healthcare has agreed to pay $3 million to settle complaints from 19 people who say they received poor medical care from Dr. Jeff Hansen, a former surgeon for the organization.

The tentative deal with the group of patients is one part of a complex plan that PVHC proposed last week to resolve its pending Chapter 11 bankruptcy case. It will ultimately be up to U.S. Bankruptcy Judge Cathleen Parker to decide whether to approve the plan, and some parts of the proposal will likely change.

In a Monday court filing, one of the attorneys representing the patients said there are “still several issues regarding the plan documents for which the parties are continuing to negotiate, but [the parties] are working hard to resolve these issues.”

The $3 million from PVHC could wind up being only a fraction of what’s paid to Hansen’s former patients. Part of the deal would allow the 19 patients and their lawyers to go after PVHC’s insurers — where upwards of $25 million might be available — and others.

PVHC has been prohibited from paying some of its debts to vendors and making mortgage payments while the bankruptcy case is pending; those creditors would be paid in full under the proposal.

“In short, the plan will resolve the [suits from the patients] on a consensual basis, provide for payment of trade debt and allow the debtor to emerge from Chapter 11 in a strong position and with the ability to satisfy the medical needs of Powell, Wyoming,” says a draft disclosure statement outlining the plan. It was filed in court on April 24.

Powell Valley Healthcare declared Chapter 11 bankruptcy roughly a year ago because the organization’s leaders felt it was the most effective way to deal with the “flood” of malpractice lawsuits filed by 20 former Hansen patients. The suits — which sought more than $70 million in combined damages — allege that Hansen botched some surgeries, tried performing procedures outside his expertise and did others that were unnecessary. In their suits, a number of patients describe suffering permanent injuries — including continuing pain — and several say they underwent additional procedures to try fixing damage Hansen had done.

Most of the surgeries took place between 2011 and 2013. Hansen was ultimately suspended over “patient safety concerns” in November 2013 and he later resigned. The lawsuits allege that Powell Valley Healthcare leaders were too slow to take action against Hansen.

Hansen and PVHC have denied the allegations. In the recently announced deal, PVHC does not admit any liability, though one of the organization’s bankruptcy attorneys said last year that the patients had “legitimate claims” and “need to be paid.”

Interim PVHC CEO Terry Odom said in an interview last week that the $3 million figure came after “a lot of discussions over the last nine months,” mostly between lawyers representing the different parties. The deal also would involve PVHC absorbing roughly $130,000 worth of medical bills that had not been paid by the patients, Odom said.

The payments will go to a “Personal Injury Trust,” controlled by the patients, over an eight-year period. PVHC would pay $500,000 as soon as the plan is approved, followed by installments of $30,000 a month for five years and $20,000 per month for the three years after that.

PVHC is a nonprofit organization that operates the Powell Valley Hospital, Clinic, Care Center and other facilities, employing the staff and doing all the other day-to-day business.

It leases the actual buildings and infrastructure from the Powell Hospital District. The hospital district is what’s called a “special district,” a government entity that’s supported, in part, by property taxes levied on Powell area residents.

The proposed bankruptcy plan calls on the district to effectively foot the bill for the $3 million settlement. The district would do so by paying PVHC $250,000 upfront and then reducing the organization’s rent over the next eight years.

The district helped draft the plan and supports it.

Although it was PVHC that declared bankruptcy, lawyers for the patients suggested last year that PVHC might simply be an alter-ego of the district — and that they might try to hold the district liable for PVHC’s debts.

PVHC and the district largely have the same people on their boards of directors. Powell area voters elect seven people to lead the district, and those seven people — joined by three doctors — also serve on PVHC’s board.

R.J. Kost, president of the Powell Valley Healthcare board and a trustee on the Powell Hospital District board, said they effectively “negotiated with ourselves” in determining how the district would help with PVHC’s bankruptcy case.

“Basically, the bottom line is the district wanted to find a way to assist so we could guarantee that our hospital is within the community … without it becoming a skeleton,” Kost said.

He said the settlement and reduced rent will not put the district in jeopardy.

“We’ll be able to be just fine,” Kost said, saying the district will be able to keep up with maintenance of the facilities.

“We might have to be a little more conservative on what we’re doing, but that doesn’t mean we have to let things go to pot,” Kost said. “We will be OK.”

Odom said there was due diligence throughout the process to ensure the district had enough money remaining to do capital improvements in the future. She also said that, without the district’s help, PVHC “could not meet this” $3 million obligation.

The organization has spent well over a million dollars just on legal expenses relating to the suits. Some of the suits have been pending since August 2014.

One of the 20 plaintiffs will not be a member of the new personal injury trust, for reasons that Kost and Odom did not know. The attorney for that patient, Collin Hopkins of Riverton, declined to comment.

Part of PVHC’s difficulty in defending itself against the suits was that its insurers refused to provide any coverage related to Hansen’s actions; carriers for two of the years in question, Homeland Insurance and UMIA, asked a federal judge to declare that the allegations weren’t covered by their policies. PVHC countersued, alleging the insurers breached their contracts and acted in bad faith.

As part of the deal reached with the attorneys representing the former Hansen patients, PVHC has agreed to give its rights in the dispute to the patients, basically allowing them to act in PVHC’s place.

PVHC says it believes the insurance companies’ claims are meritless and that the patients, represented by the Personal Injury Trust, will be able to prove the companies are in the wrong. PVHC says the patients could potentially wind up with “more than $25 million” — though the disclosure statement notes they could get nothing if the insurers prevail in court.

While the deal will resolve all of their former Hansen patients’ claims against PVHC and the district, it also allows them to continue pursuing HealthTech Management Services (the private company that helps manage PVHC), former CEO and HealthTech employee Bill Patten and Hansen. Under the plan, PVHC effectively agrees to cooperate with the Personal Injury Trust as it pursues the other parties.

PVHC says in the draft disclosure statement that it expects the plan will draw opposition from HealthTech, Patten and Hansen, but ultimately be approved.

PVHC currently faces a tentative June 24 deadline for obtaining approval of its plan, though that date is likely to change.

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