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bankruptcy
Markey, Warren Sound Alarm Over Private Equity Firm's Deal to Buy Doctors Group
"Selling Massachusetts doctors to another private equity firm could be a disaster," said Sen. Elizabeth Warren. "Regulators must scrutinize this deal."
Aug 13, 2024
Both of Massachusetts' Democratic U.S. senators on Tuesday expressed concern about a private equity firm striking a $245 million deal to buy the nationwide physicians network of the for-profit Steward Health Care, which filed for bankruptcy in May.
The network, Stewardship Health, has about 5,000 employees across nine states and serves around 400,000 patients, according to Steward. It is set to be acquired by Rural Healthcare Group, an affiliate of Kinderhook Industries.
"Steward also operates eight hospitals in Massachusetts," The Boston Globereported Monday. "Last month, it said it will close two of them, Carney Hospital in Dorchester and Nashoba Valley Medical Center in Ayer, by August 31. It's currently in the final stages of negotiations to sell the other six."
Sen. Elizabeth Warren (D-Mass.), a former bankruptcy law professor, noted the planned closures in her social media post urging regulators to review the deal.
"Two Massachusetts hospitals are closing and communities are suffering because of private equity's looting of Steward," she said. "Selling Massachusetts doctors to another private equity firm could be a disaster. We can't make the same mistake again. Regulators must scrutinize this deal."
In March, Steward had confirmed plans for the Optum unit of insurer UnitedHealth to buy the network, but that was never finalized.
"As part of the ongoing Chapter 11 proceedings, following a robust and active bidding process, Steward Health Care is pleased to have reached an agreement with Rural Healthcare Group," Steward Health Care president Mark Rich said in a Monday statement. "Kinderhook has over 20 years of experience investing in mid-sized healthcare businesses that serve the nations' most vulnerable populations."
"Kinderhook's investments are focused on protecting access to high-quality healthcare in communities that are truly underserved," Rich added. "Rural Healthcare Group is a well-respected group of healthcare professionals that specifically focuses on underserved and underinsured areas. We are confident that Stewardship Health will continue its stellar treatment of the patient population as a result of this transaction."
According to the Globe:
In an attachment to an overnight filing with U.S. Bankruptcy Court in Houston, the company listed the purchase price as $245 million in cash.
That price is subject to change, the filing indicated, depending on several factors still to be determined, including whether U.S. Family Plan at Brighton Marine, a Boston health insurance agency, is included in the transaction. The filing listed the buyer as Brady Health Buyer LLC, a company set up by New York-based Kinderhook to purchase Stewardship.
The newspaper noted that "the sale to Rural Healthcare is subject to the approval of U.S. Bankruptcy Judge Christopher Lopez at a Houston hearing scheduled for Friday. It's also subject to regulatory approval in Massachusetts and other states."
As Common Dreamsreported last month, Sen. Bernie Sanders (I-Vt.), chair of the Senate Committee on Health, Education, Labor, and Pensions (HELP), led the panel in bipartisan votes to authorize a probe into the bankruptcy of Steward Health Care (20-1) and subpoena CEO Ralph de la Torre (16-4).
The same day, Sen. Ed Markey (D-Mass.), a committee member, and Rep. Pramila Jayapal (D-Wash.) introduced the Health Over Wealth Act, which would increase the powers of the U.S. Department of Health and Human Services to monitor and block private equity deals in the healthcare industry.
"Private equity firms buying up healthcare systems are simply bad news for patients, leading to worse health outcomes and higher bills," Jayapal said at the time. "We have a duty to protect patients from greedy corporations that are prioritizing their bottom line over patient care."
In response to news of the doctors group deal, Markey said Tuesday that "private equity did to Steward what it will keep doing to hospitals and physician networks across the U.S.—unless we put guardrails on them. We need to pass my Health Over Wealth Act to get corporate greed out of healthcare for good."
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Why Rudy Giuliani Can Declare Bankruptcy While Homeowners Can’t
Bankruptcy was designed so people could start over, but these days, the only ones starting over are those with enough political clout to shape bankruptcy laws to their liking.
Dec 29, 2023
Within days of a nearly $150 million judgment against former New York Mayor Rudy Giuliani for defaming Ruby Freeman and Shaye Moss, the election workers Giuliani falsely claimed stole the 2020 election in Georgia for President Joe Biden, Giuliani filed for bankruptcy.
He thereby shielded himself from having to surrender his assets to fulfill the judgment, at least in the near term.
The long term may be quite long. Freeman and Moss may not see a penny of that judgment for many years, and when they do, it’s likely to be far less than $150 million.
The prevailing myth that America has a “free market” existing outside and apart from government prevents us from understanding that the very rules by which the market runs—including the basic one about what to do when someone can’t or won’t pay what they owe—are made by lawmakers.
One of the most basic of all questions in a market economy is what to do when someone can’t pay what they owe. The U.S. Constitution (Article I, Section 8, Clause 4) authorizes Congress to enact “uniform Laws on the subject of Bankruptcies throughout the United States.”
Congress has done so repeatedly. In the last few decades, Congress’ changes have reflected the demands of the wealthy, giant corporations, and Wall Street banks, which have made it harder for average people to declare bankruptcy but easier for themselves to do it.
Many people are too broke to go bankrupt. Filing for bankruptcy costs money, as does hiring an attorney (which is the best way to make sure you actually get debt relief). Because attorney fees, like other debts, are wiped out in a bankruptcy, most bankruptcy lawyers require clients to pay in full before filing.
In an economy where nearly half of adults say that if they were hit with an emergency expense of $400, they wouldn’t have the cash on hand to cover it, large numbers of people simply can’t afford those upfront costs.
The 2005 bankruptcy bill pushed by Wall Street worsened the problem. To prevent people from cheating their lenders, the bill put new burdens on debtors and their lawyers. The extent of such abuses was questionable, but the new requirements have driven up attorney fees nationwide by about 50%. The result? Even fewer filings.
Bankruptcy was designed so people could start over. But these days, the only ones starting over are those with enough political clout to shape bankruptcy laws to their liking, and enough money to hire bankruptcy lawyers to use those laws to their full advantage.
On the opening day of Trump Plaza in Atlantic City in 1984, Donald Trump stood in a dark topcoat on the casino floor celebrating his new investment as the “finest building in the city and possibly the nation.”
Thirty years later, after the Trump Plaza folded, Trump was on Twitter praising himself for his “great timing” in getting out of the investment. He got a giant tax write-off, too.
But some 1,000 of his former employees were left holding the bag—without jobs, and with homes worth a fraction of what they paid for them. They couldn’t declare bankruptcy. Chapter 13 of the bankruptcy code—whose drafting was largely the work of the financial industry—prevents homeowners from declaring bankruptcy on mortgage loans for their primary residence.
The Granddaddy of all failures to repay occurred in September 2008 when Lehman Brothers went into the largest bankruptcy in history, with more than $691 billion of assets and far more in liabilities.
Some commentators (including yours truly) urged that the rest of Wall Street should be forced to grapple with their problems in bankruptcy, too.
But Lehman’s bankruptcy so shook the street that Henry Paulson Jr., George W. Bush’s outgoing secretary of the treasury (and, before that, head of Goldman Sachs), persuaded Congress to authorize several hundred billion dollars of funding to protect the other big banks from going bankrupt.
Paulson didn’t explicitly state that big banks were too big to fail. They were, rather, too big to be reorganized under bankruptcy—which would, in Paulson’s view, have threatened the entire financial system.
The real burden of Wall Street’s near meltdown fell on homeowners. As home prices plummeted, many found themselves owing more on their mortgages than their homes were worth and unable to refinance.
Some members of Congress tried to amend the bankruptcy law so distressed homeowners could use bankruptcy, which would have helped prevent the banks from foreclosing on their homes. But the financial industry (among the largest donors to both parties) claimed this would greatly increase the cost of home loans (no convincing evidence showed this to be the case), and the bill died.
Subsequently, more than 5 million people lost their homes.
Another group of debtors who can’t use bankruptcy to renegotiate their loans are former students laden with student debt.
Student loans are now about 10% of all debt in the United States, second only to mortgages and higher than auto loans and credit card debt. But the bankruptcy code doesn’t allow student debts to be worked out under its protection.
If graduates don’t meet their payments, the law allows lenders to garnish their paychecks. If they are still behind on student loan payments by the time they retire, lenders can even garnish their Social Security checks.
The only way graduates can reduce their student debt burdens—according to a provision enacted at the behest of the student loan industry—is to prove that repayment would impose an “undue hardship” on them and their dependents.
This is a stricter standard than bankruptcy courts apply to gamblers trying to reduce their gambling debts.
For years, Purdue Pharma, the maker of the prescription painkiller OxyContin, was entangled in civil lawsuits seeking to hold it accountable for its role in the spiraling opioid crisis.
A major settlement reached last year seemed to end thousands of those cases. It exempted members of the billionaire Sackler family, which once controlled the company, from all civil lawsuits in exchange for billions of dollars toward fighting the epidemic (although aware of OxyContin’s risk for abuse, members of the family had continued to aggressively market it).
Under the deal, the Sacklers do not have to personally declare bankruptcy and are insulated from liability even without the consent of all of those who could potentially sue them. (The Supreme Court has taken up the case.)
The prevailing myth that America has a “free market” existing outside and apart from government prevents us from understanding that the very rules by which the market runs—including the basic one about what to do when someone can’t or won’t pay what they owe—are made by lawmakers.
The real question is whose interests those lawmakers are pursuing. Are they working for the vast majority of Americans, or are they beholden to those at the top? The recent history of bankruptcy—right up to Rudy Giuliani’s use of it last week—provides a clear answer.
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Families Rally for Opioid Accountability as Supreme Court Hears Purdue Case
"I don't want their money," one woman who lost a son to the opioid crisis said of the Sackler family. "I want them in prison."
Dec 04, 2023
At the U.S. Supreme Court on Monday, families whose loved ones are among the tens of thousands of Americans who have died of opioid use disorder each year over the past two decades rallied to push the nine justices to reject a proposed bankruptcy plan that would give the former owners of Purdue Pharma legal immunity—with many joining the U.S. Justice Department in arguing that the company should not be released from accountability for the opioid epidemic.
Purdue Pharma filed for bankruptcy in 2019, as the number of Americans killed by opioids hit 50,000 and the OxyContin manufacturer faced thousands of lawsuits alleging its aggressive marketing of the addictive painkiller had fueled the rising death toll.
The company agreed to settle the lawsuits for $10 billion, with the Sackler family—which oversaw Purdue when OxyContin was introduced and flooded communities across the U.S.—contributing $4 billion. In exchange, the Sacklers would be shielded from future lawsuits.
The bankruptcy plan—which now includes $6 billion from the Sacklers following a push from lawsuit plaintiffs—has been approved by state and local governments, tribes, and families and individuals who would be entitled to money.
But the U.S. Trustee Program, a watchdog at the Justice Department, has joined some families in arguing that the Sacklers should not be shielded from liability for the opioid crisis.
"No Sackler immunity at any $$," read one sign held by a woman outside the Supreme Court on Monday, while another said, "My dead son does not release Sacklers."
The issue at hand in the case, Harrington v. Purdue Pharma, is whether it is legal to give a third party—the Sackler family—legal immunity in a bankruptcy case even though they themselves have not declared bankruptcy, also known as nonconsensual third-party release.
A lawyer for groups and individuals told the court that families and governments are highly unlikely to get any more out of Purdue and the Sacklers than the money the company and family have offered as part of the deal.
The plan would include $161 million in a trust set aside for Native American tribes and $700 million to $750 million in a trust for families and individuals who were able to file claims, with payouts expected to range from about $3,500 to $48,000. Governments would use the money to set up addiction treatment centers and other programs to mitigate the opioid crisis.
"Forget a better deal—there is no other deal," lawyer Pratik Shah told the Supreme Court on Monday.
Curtis Gannon, representing the U.S. Trustee Program, noted that the Sackler family already showed that a "better deal" could be possible when it offered $6 billion for the plan instead of $4 billion. The Justice Department is advocating for a new settlement that would not include nonconsensual third-party releases, saying the current bankruptcy deal violates federal law.
"We do hope there is another deal at the end of this," said Gannon.
The justices appeared split on the case, in which a ruling is expected next summer. Justice Ketanji Brown Jackson noted that appeals courts do not allow bankruptcy plans that take away the rights of alleged victims to sue parties that have not declared bankruptcy.
Outside the court, Alexis Pleus, who lost her son to opioid use disorder, told Aneri Pattani of KFF Health News that many families, including hers, will not be entitled to money under the current deal because they are required to provide records such as the original opioid prescription.
Beth Macy, author of the book Dopesick, told CNN Monday morning that while some families "are divided" about whether the bankruptcy plan and payouts should move forward, as the U.S. Trustee Program "has pointed out, only 20% of the families who were eligible to vote on [the proposal], even voted."
"I don't want their money," Jen Trejo, whose son Christopher was prescribed OxyContin at age 15 and died of an overdose when he was 32, told Pattani. "I want them in prison."
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