Forum gets green light to hire new CEO
By William K. Alcorn
The health-care system’s rising administrative costs concern its unsecured creditors.
YOUNGSTOWN — Forum Health received tentative authority from U.S. Bankruptcy Court to hire a new CEO just in time for him to lead the health-care system through two crucial steps in its reorganization over the next five weeks.
Judge Kay Woods on Tuesday approved Forum hiring Charles W. Neumann as interim chief executive officer and president, subject to her approval of a supplemental filing detailing whether Neumann has potential conflicts of interest with any parties connected to the case.
Neumann would be provided through Baltimore-based FTI Consulting, which Forum would pay $75,000 a month, plus expenses, through Dec. 31 and on a month-to-month basis thereafter.
The key deadlines Neumann would quickly face are Nov. 13, by which Forum must have solicited bids to determine if “one or more” of its hospitals can be sold for enough money to pay all of its debts “in full in cash,” and Nov. 30, by which Forum must reach agreement with its creditors on whether Forum will follow a merger/acquisition or reorganization path.
The deadlines are contained in a new cash-collateral agreement between Forum and its major creditors approved by Judge Woods last week.
Authority to hire Neumann, however, is dependent upon Judge Woods’ approval of the supplemental document, which Forum Atty. Shawn M. Riley said would be filed within a couple of days.
The main objection to Forum hiring an interim CEO was filed by the Official Committee of Unsecured Creditors.
Its attorney, Craig Freeman, said it would be an unnecessary expense. The committee is concerned about administrative costs and what he called the “piling on of consultants.”
An unsecured creditor is an individual or institution that lends money without obtaining specified assets as collateral. This poses a higher risk to the creditor because the individual or institution will have nothing to fall back on should the borrower default on the loan, according to the Web site Investopedia.com
Freeman’s motion, filed Friday in bankruptcy court, said Forum already has hired Huron Consulting Services to find a chief restructuring officer and that the unsecured creditors see no reason to hire FTI Consulting to provide an interim CEO.
Freeman said it is not uncommon in other cases for institutions to hire a combination chief restructuring officer/chief executive officer.
The committee said Huron recently asked the court to approve compensation totaling $783,662 plus expenses of $44,927 for the period of June 1 through Aug. 31, 2009.
“There has to be a more efficient and economical way to deal with the situation. At some point, we submit it [administrative spending] becomes excessive,” Freeman said in court Tuesday.
Riley argued the CRO and CEO have different responsibilities, and both are needed to bring Forum through the bankruptcy process.
Judge Woods, who asked Freeman why he had not filed an objection earlier, criticized the attorneys for being “very cavalier” about submitting information to the court that it needs to make a decision.
“I’m not sure what everybody is doing. This is important,” she said.