SUNNYSIDE — Astria Health, parent company to Astria Sunnyside and Astria Toppenish hospitals, as well as several area clinics, filed for Chapter 11 bankruptcy Monday morning, May 6.
In a press release, the company said the bankruptcy was filed in U.S. Bankruptcy Court for the Eastern District of Washington in Yakima.
The bankruptcy protection will allow the organization to restructure finances, replace its existing corporate billing office company and enter a plan of reorganization with creditors.
“We believe it will protect and sustain the three hospitals for the future. All three hospitals are key community assets badly needed by patients and local communities and are vital to the health and well-being of the towns and cities located throughout the Valley,” said John Gallagher, Astria Health President and Chief Executive Officer.
Astria Sunnyside Hospital staff were “flabbergasted by the news” on Monday.
That’s when they heard that Astria Health has declared Chapter 11, said one long-time employee, who asked not to be named.
“It was alarming. We’ve been told not to worry, and that business of caring for patients will continue as usual,” the source said.
But there have been rumors floating about the community that supplies at the hospital were low.
“We knew the cash flow situation was not good,” the unnamed source admitted, “… but we have to believe that it will be resolved.”
She said that so far there had been no word of any layoffs, “… at least I haven’t heard of any.”
“The administration has also told staff that the new hospital construction is on indefinite hold,” the source said.
“Although the situation makes us feel a little uncertain,” said another unnamed Astria Sunnyside hospital employee, “I think we are feeling okay.”
Florida-based HealthmarkIT Consulting owner, Mark Fangman was one of three companies working with at Astria Sunnyside Hospital’s new computer system implementation that was scheduled to go live in September 2018.
Since the completion of the contracted work last year, he has been in constant contact with Astria Sunnyside Hospital officials for non-payment.
Fangman had contacted the Sunnyside Sun in late April with concerns about the cash flow issues at Astria Sunnyside Hospital, saying he was seeking a resolution to an outstanding bill of $36,319.19 owed his company.
“I met and talked with CEO Brian Gibbons in reference a long overdue bill on numerous occasions. He repeatedly gave me assurances he would look into it,” Fangman said.
The business owner wrote to the newspaper, saying he felt blindsided by the hospital.
He reported Astria was very slow about paying their invoices on this project, and he hoped the hospital “will right the wrong.”
Fangman learned of the Chapter 11 filing when the Sunnyside Sun reached out Tuesday morning for a comment.
“It’s news to me,” Fangman said.
His small company was in Sunnyside from August 2017 through September 2018 to assist them with a new computer system implementation.
Astria cites a conversion to a new electronic health record system last year can be attributed to the bankruptcy woes. That conversion was after the purchase of Toppenish Community Hospital and Yakima Regional Medical Center, currently Astria Toppenish Hospital and Astria Regional Hospital.
“It was not my system; we were just hired as a consulting resource,” Fangman emphasized.
The acquisitions by the not-for-profit Sunnyside Community Hospital Association took place in September 2017 at the cost of about $45 million, and the organization changed its name to Astria Health a month later.
The acquisitions were just part of a series of clinic purchases having taken place the year prior, when the organization had been renamed Regional Health System.
Gallagher, who’d been CEO of Sunnyside Community Hospital since May 2012, was named CEO of Regional Health System and remained in that role with the name change to Astria Health.
At the time of the acquisitions of the Toppenish and Yakima hospitals, Astria Health also contracted with a company to manage the revenue cycle, including business office billing, claims processing and collecting, officials said this past Monday.
The firm has handled those processes since last August and promised accounts receivables would return to pre-transition levels quickly, but the agreement for specific guarantees for accounts receivables and collections was not met.
“Astria Health has realized considerable positive performance at all three hospitals since purchasing the two new hospitals in September 2017,” officials said.
However, there has been a large amount of accounts receivables not processed. This has resulted in a shortfall of the organization’s cashflow.
“This delay in cash collections has now become severe enough to potentially disrupt the organization’s ability to pay for crucial items in a timely manner,” officials said.
The Chapter 11 will allow the hospitals and clinics, which employs 1,547 people, to continue operations, while providing a pause with creditors, officials said.
Astria hopes to emerge from Chapter 11 by the end of the year.
“As one of the largest healthcare providers and employers in the Yakima Valley, we believe this step was necessary in order to protect the valley’s hospitals and its local economies,” Gallagher communicated.