FORUM HEALTH | Compensation total
U.S. Bankruptcy Judge Kay Woods is set to rule Oct. 25 on the appropriateness of some $29.5 million in compensation requested by major professional firms that worked on the Forum Health bankruptcy and sale. Not all professional payouts are listed nor are Forum’s internal costs associated with the bankruptcy. Compensation consists of professional fees and expenses tied to the case.
McDonald Hopkins LLC, attorneys for Forum Health, fees, $7,419,317; expenses, $184,104, from March 16, 2009 to Aug. 17, 2011.
Houlihan Lokey Howard & Sukin, investment banker that sought bidders for Forum Health, fees, $7,108,606 which includes $2,250,000 in monthly fees and $4,858,606 in transaction fees; expenses, $186,169, from July 13, 2009, to Oct. 12, 2010.
Huron Consulting Group, financial advisers to Forum Health, fees, $6,342,802; expenses, $343,304, from March 16, 2009, to Aug. 17, 2011.
Ardent Health Services, stalking horse for the sale of Forum Health, a total of $2,354,778 in fees and expenses. Ardent put in the initial bid for Forum.
Grant Thornton LLP, financial adviser to the Official Committee of Unsecured Creditors of Forum Health, fees, $2,083,656; expenses, $39,214, from April 1, 2009, to Aug. 16, 2011.
Alston & Bird LLP, counsel for the Official Committee of Unsecured Creditors of Forum Health, fees, $1,814,761; expenses, $72,084, from March 25, 2009, to Jan. 31, 2011.
Ernst & Young LLP, tax consultants to Forum Health, fees, $671,243; expenses, $34,707, from Aug. 21, 2009, to Aug. 17, 2011.
Nadler, Nadler & Burdman, attorney for Forum Health, fees, $442,847; expenses, $18,395, from March 16, 2009 to Aug. 17, 2011.
Thompson Hine LLP, special counsel to Forum Health, fees, $277,535; expenses, $5,785 from April 26, 2010, to Sept. 16, 2011.
Crowe Horwath LLP, consultants to Forum Health, fees, $104,897; expenses, $873; total, $105,770; for Nov. 1, 2010 to Aug. 17, 2011.
TOTAL FEES, EXPENSES: $29,505,077
Source: U.S. Bankruptcy Court documents
By WIlliam K. Alcorn
The first-year accomplishments of Community Health Services have ranged from fresh investments in facilities to job eliminations.
Now comes the revelation of the massive costs associated with Forum Health’s bankruptcy and sale.
According to court documents, the cost of Forum’s bankruptcy for professional fees alone is in excess of $29.5 million, all of which must be paid by Forum if approved by U.S. Bankruptcy Judge Kay Woods.
The professional fees did not end when Community Health Services purchased Forum Health for $120 million on Oct. 1, 2010, changing Forum’s name to ValleyCare Health System of Ohio. Changed, too, was its status, from nonprofit to for profit.
The bankruptcy fees continued to mount for 10 more months until the case was wrapped up in August.
The outlay of cash during Forum’s prolonged bankruptcy particularly galls Walter “Buzz” Pishkur, former Forum chief executive officer and president.
Pishkur said one of his priorities when he took over as CEO was to stop the bleeding of millions of dollars in professional fees for restructuring efforts before the hospital system filed for bankruptcy on March 16, 2009.
“The bankruptcy process was taking operating funds out of the hospital and money out of the community, and we were assured we would be out of bankruptcy by the end of 2009,” Pishkur said.
The top three beneficiaries in professional fees from the bankruptcy process are McDonald Hopkins LLC, lead attorneys for Forum Health, which is seeking $7.6 million in fees and expenses; Houlihan Lokey Howard & Sukin, investment banker that sought bidders for Forum Health, $7.2 million in fees and expenses; and Huron Consulting Group, financial advisers to Forum Health, $6.6 million in fees and expenses.
“Getting out of bankruptcy quickly was one of the key components in the actions I took, and when it didn’t happened I was very angry,” Pishkur said. “There was never a doubt in my mind that the hospital system would remain viable. We just needed to get out of the grips of bankruptcy and being billed by outsiders.
“With all the money leaving the community, we were not able to buy equipment and pay employees adequately. We lost the ability of the hospital [system] to function the way everybody wanted it to,” he said.
Atty. Shawn Riley of the McDonald Hopkins firm in Cleveland, lead attorneys for Forum Health, does not think the $7.6 million in professional fees sought by his firm was misspent.
During that nearly 28 months of the bankruptcy, Forum’s financial advisers, attorneys and management team took three hospitals through a very difficult time including a threat of closure by their bond holders, Riley said.
“We negotiated an operational turnaround, a successful sale, and with Forum’s unsecured creditors, that resulted in a significant amount of money remaining in the Western Reserve and Trumbull Memorial foundations that remains in the community,” he said.
Judge Woods ruled the foundations’ assets, made up of private donations, off limits to all creditors, but eventually awarded $1 million of their combined $12 million in assets as the foundations’ share to unsecured creditors.
From Riley’s perspective, the whole process was a “huge success. The hospitals remained open and continue to operate.”
Not all the money spent over the last year has gone out of the Mahoning Valley.
The ValleyCare properties in Mahoning and Trumbull counties remain Northside Medical Center in Youngstown, Trumbull Memorial Hospital in Warren and Hillside Rehabilitation Hospital in Howland,
In addition, ValleyCare has outpatient clinics and various other facilities in the two counties.
ValleyCare said it has invested more than $35 million on medical equipment upgrades such as the therapeutic hypothermia unit at TMH and new emergency department technology at Northside.
ValleyCare has also invested in much-needed facility upgrades to the hospital buildings, such as fire-alarm systems.
At Northside, a patient-care area is being renovated. Some $2 million went for basic equipment and supplies for nurses and physicians to do their work, said David Fikse, chief executive officer of Northside and of the entire former Forum Health system, in an interview last January.
When CHS purchased Forum Health, it pledged to spend at least $80 million over the next five years to upgrade ValleyCare hospital facilities, medical equipment, technology and services.
Other investments include medical-equipment upgrades to provide our clinicians with advanced tools they need to deliver high quality-care, such as IV pumps and diagnostic imaging equipment and an MRI upgrade at the Austintown and Elm Road facilities.