Kentuckiana Medical Center, a for-profit, physician-owned hospital in Clarksville, Ind., filed for Chapter 11 protection in U.S. Bankruptcy Court in New Albany, Ind., and then blamed its bank's actions for making that move necessary.
According to a document included in the filing, medical center board members unanimously voted to enter Chapter 11 during a special meeting held via teleconference on Sept. 17. Inability to achieve "a mutually satisfactory agreement" with First Tennessee Bank—which froze the hospital's account on Sept. 8—was cited as the reason. The 34-bed acute-care hospital filed motions to allow the use of its cash collateral to continue operation and to compel utility companies to maintain service to the facility.
Kentuckiana officials declined to comment but issued a news release stating that the actions of First Tennessee were "incredibly destructive" and that filing for bankruptcy was necessary to unfreeze its bank accounts and continue patient care. According to court documents, the hospital has an average daily inpatient census of 22.
When asked to respond, First Tennessee e-mailed a statement saying, "In accordance with our long-standing policy we do not comment on individual client relationships."
The institution's largest unsecured creditors are KMC Real Estate Investors, Louisville, Ky.; Cardiovascular Hospitals of America, Wichita, Kan.; and Cerner Corp., Kansas City, Mo. They are owed $2.7 million, $1.8 million, and almost $897,000, respectively. Cardiovascular Hospitals of America owns 49% of the hospital. According to court documents, another 49% share is owned by 30 local physicians under a company named Kentuckiana Investors, and the remaining 2% is owned by Larry and Leslie Robertson.
The facility opened Aug. 7, 2009, after its investors and developers sued Indiana's Clark and Floyd counties in 2005 on the grounds that moratoriums on new hospital construction represented unlawful restraint of trade. In 2006, the hospital received approval after a federal judge struck down the moratoriums. Court documents state that, when it opened, the hospital didn't have contracts with major insurance companies or a Medicare provider number.
"Their story is not unlike many I've heard," said Molly Sandvig, executive director of Physician Hospitals of America, an advocacy group for doctor-owned hospitals. "Frankly, between the economy and political issues, there are certainly a number of physician-owned hospitals who are having struggles."
Although court documents describe the hospital as having 30 physician investors, a Sept. 20 news release put the number at 33. A spokesman could not provide clarification by deadline.
