Hadassah Hospital Files for Bankruptcy After Credit Lines Cut
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Hadassah University Hospital filed a request on Friday for court protection against creditors, after reaching an agreement with the treasury and the Hadassah Women’s Organization to provide it with a total of 100 million shekels ($28.3 million) over the next three months. The injection of funding is meant to enable the financially strapped hospital to meet its payroll and pay suppliers. The arrangement will also allow some breathing space to hash out a long-term recovery plan for the hospital, which has two medical centers in Jerusalem.
The legal action comes in the wake of a move last week by Mizrahi-Tefahot Bank and Bank Leumi to cut off credit lines to the hospital and a doctors strike over a pay dispute.
Hadassah said the court action was taken to head off paralysis of the hospital’s operations, legal action by creditors, a cutoff of the hospital’s revenue stream from medical treatment, donor contributions and government funds, and an actual shutdown of the two medical centers at Ein Karem and Mount Scopus. The legal significance of the stay of proceedings is that it bars creditors, including employees, from seeking to collect debts owed by the hospital. The interim funding will allow the hospital to continue its day-to-day operations. The court filing also calls for changes in the hospital bylaws that would change the composition of the hospital’s board, but not curb the rights of the New York-based Hadassah women’s organization in the hospital. Although a recovery plan for the hospital as currently constituted may be put in place, theoretically the court trustee could recommend transferring the hospital to one of the country’s four health maintenance organizations, divesting the Hadassah women’s organization of all or part of its control. Another less likely option would be to convert Hadassah into a government hospital.
In stay of proceedings cases, the court has wide latitude to make changes to collective labor agreements without consulting the employees who would be affected, but sources at the Finance Ministry and Hadassah hospital say they are not seeking such wide-ranging action. The court trustee in the case will not take over management of the hospital, which will remain with its director general, Avigdor Kaplan, and the other hospital officials. The trustee would have the authority, however, to submit requests to the court on behalf of management to take steps such as disposing of assets and the ratification or rescission of existing agreements.
The most pressing development that drove the hospital to seek court protection from creditors was a cutoff of lines of credit by the two banks, which could have quickly led to financial deterioration of the hospital. In its filing, Hadassah said the legal action was being taken reluctantly. The hospital management singled out the workers’ committee representing Hadassah’s administrative and maintenance staff for what it said was their unwillingness to take the steps to streamline operations through layoffs and salary cuts. But the head of the administrative workers’ union, Amnon Bruchian, said it was hospital management that had failed to work out a recovery plan.
Last week the doctors staged a walkout following disagreement with management over wage concessions. The doctors had agreed to salary reductions, but insisted that they be in the form of a loan to hospital. The hospital administration sought to make them outright salary cuts. For his part, Israel Medical Association chairman Leonid Edelman called the court filing a strong-arm tactic and vowed to fight both the stay of proceedings and the appointment of a court trustee.
This story first appeared on Haaretz.com.
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