NEW YORK NURSE: September 2008
by Mark Genovese
A slowing national economy could mean trouble for hospitals that have been struggling to stay in the black.
Long Island College Hospital, for example, plans to close its obstetrics and pediatric departments to help reduce its $170-million debt, threatening nearly 80 RN positions. Meanwhile, the healthcare industry is warning that budget cuts and higher fees proposed by Gov. David Paterson could push many facilities into bankruptcy.
NYSNA Labor Representative Ilyssa DeCasperis played a major role in protecting NYSNA members’ rights during the 2005-2007 bankruptcy proceeding involving the St. Vincent’s Catholic Medical Center network. “If your hospital is facing bankruptcy,” she advised, “it’s important that you understand what’s going on so you can be better prepared to make decisions that could affect your career and livelihood.”
Bankruptcy is the court-sanctioned inability of a person or corporation to pay its creditors. “The U.S. Bankruptcy Code is designed to encourage businesses to reorganize under Chapter 11 rather than liquidate under Chapter 7,” DeCasperis said. By filing for reorganization, your hospital can continue to operate under close supervision by a bankruptcy-court trustee while getting its finances in order.
Bankruptcy law determines which creditors have priority. The largest creditors – such as taxing entities, medical equipment companies, unions and mortgage holders – may petition the court to become members of a creditors’ committee. The creditors’ committee has the authority to hire accountants, review the hospital’s finances, and approve the terms of the reorganization plan. The committee cannot prevent management from closing a facility, but it does have oversight in any deal to sell it.
Although the outcome of a bankruptcy is ultimately in the hands of the court, there are several factors that are within NYSNA’s control. In these cases, NYSNA will hire an attorney specializing in bankruptcies to petition for a seat on the creditors’ committee and file a motion for payment of any funds nurses are owed.
NYSNA usually gets a seat on the committee because claims on behalf of its members typically total in the millions. The claims include unpaid salary and wages, payments to the Pension and Benefits Fund, vacation pay, and grievance and arbitration awards. Individual claims for wages of more than $10,000 or wages earned more than 90 days before the filing, however, are considered “unsecured,” which means they may only be paid at cents on the dollar, if at all.
During the St. Vincent’s network bankruptcy, NYSNA spearheaded a community outreach to keep the facilities open, coordinating petition and letter-writing drives, and holding neighborhood forums to make sure elected local public officials were aware of the potential impact.
Throughout the process, NYSNA kept watch over the proceedings and met with nurses on-site to provide accurate information, address rumors, ensure that pension payments were kept current, and help the RNs file their own claims.
The bankruptcy code prevents the hospital from unilaterally modifying or terminating a union contract. Before the court will permit a contract to be changed or rejected, the hospital must first prove it attempted to negotiate with the union or that liquidation is likely if the contract remains in place. The same principle applies to retirement benefits. Contracts negotiated during a bankruptcy proceeding must be approved by the creditors’ committee.
Once the hospital has developed a reorganization plan, creditors are allowed to vote on it. If the creditors approve the plan, the court holds hearings to consider whether it complies with bankruptcy code. If the court approves the plan, the company can emerge from bankruptcy.
“There’s no question that bankruptcy is a difficult time,” DeCasperis said, “but a little knowledge can go a long way toward protecting nurses’ rights.”