Yonkers cancer treatment center and 59 affiliates file for $1 billion bankruptcy
A Yonkers radiation practice, along with 59 affiliates around the country that comprise the largest network of cancer treatment centers in the world, has filed for Chapter 11 bankruptcy protection in White Plains.
The parent entity, 21st Century Oncology Holdings, based in Fort Myers, Florida, claims liabilities of more than $1 billion in its petition, which also was filed in White Plains on May 25.
Its local affiliate is New York Radiation Therapy Management Services LLC, 970 N. Broadway, Yonkers.
The business is fundamentally strong and profitable, according to a declaration by interim CEO Paul Rundell. But it has been hurt by reimbursement practices by insurance programs and by government regulatory actions.
The company has taken on more than $1.1 billion in long-term debt and has annual debt service obligations of more than $100 million.
It has proposed a restructuring agreement that would reduce debt by $500 million and provide capital for operations.
The company was founded in 1983 by a group of physicians who wanted to provide “academic-level, quality radiation at the community level,” the declaration states.
A private equity firm that is not identified acquired the company in 2008.
21st Century operates 179 treatment centers in 17 states and seven Latin American countries. All but seven of its 66 domestic subsidiaries filed for bankruptcy.
As of Sept. 30, the company posted $1.4 billion in liabilities and $1.1 billion in assets, according to a financial statement filed with the Securities and Exchange Commission.
Most of the debt, according to the declaration, is held by Vestar Capital Partners and the Canada Pension Plan Investment Board.
On Nov. 1, 21st Century failed to make an interest payment. A month later, having failed to remedy the shortfall, it defaulted on the debt, according to an SEC filing, which in turn triggered defaults on other debt obligations.
Joseph Biscardi, the senior vice president and principal accounting officer, resigned in November and LeAnne M. Stewart assumed his duties temporarily. In January, Daniel E. Dosoretz, a member of the board of directors, resigned but continued as the company”™s senior physician. In February, Stewart and CEO William Spalding resigned.
Rundell, a managing director of Alvarez & Marsal Healthcare Industry Group LLC, a firm that specializes in restructuring companies, was named interim CEO. Doug Staut, also from Alvarez & Marsal, was named interim chief financial officer. Their firm is being paid $300,000 a month for their services, according to an SEC filing.
Rundell says in his bankruptcy declaration that the company philosophy and business structure has allowed it to lead in most of its markets. But recent developments have left it with “unsustainable debt service obligations, which require a deleveraging of their balance sheet.”
As the population has aged and health insurance has changed, Rundell stated, there has been more denial of coverage and lower reimbursement rates, decreasing cash flow by $33.2 million last year.
“Additionally, a changing political landscape has injected uncertainty into the health insurance market.”
The company also has incurred costs to settle lawsuits and regulatory actions. In 2015, it paid $19.75 million to the federal government to settle a case, which included questions about the medical necessity of certain laboratory services. Last year it paid the federal government $34.7 million to settle allegations that it had billed for services that were not medically necessary.
Currently, it is under investigation by the Department of Justice and by state attorneys general over a data breach concerning 2.2 million patients in 2015. The Department of Justice is also investigating possible criminal antitrust violations, as well as allegations under the False Claims Act and the Social Security Act.
Rundell said the company is fully cooperating with the government inquiries.