St. Francis Health Center estate closes, seven years later
The St. Francis Medical Center complex at the time of its closing in August 2002.
Children's Hospital now crowns the property of the former St. Francis Medical Center.
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A major health system losing money in the current recession is not necessarily noteworthy. But one local system's deficits -- exceeding more than a half million dollars since 2005 -- might raise a few eyebrows.
Those debts belong to longtime Lawrenceville institution St. Francis Medical Center and its affiliates, which closed in 2002.
It turns out that between paying off creditors, ensuring pension benefits are properly disbursed, settling lawsuits and dealing with any number of unexpected complications, the successful closure of a hospital can be a time-consuming and costly process.
Earlier this month, with little fanfare, Common Pleas Judge Frank Lucchino formally terminated the receivership for St. Francis, writing that "all outstanding claims ... along with any right to repayment said creditors may have, is hereby terminated and forever disallowed."
With that, St. Francis Medical Center officially was no more.
Still, it took longer -- by one month -- to close the books on St. Francis than it did to buy the land, plan and build a new Children's Hospital and then move that operation to the same plot of Lawrenceville property where St. Francis stood.
"In an estate this size, I don't think it's unusual," said John R. McGinley Jr., an attorney at Eckert Seamans Cherin & Mellott, who has overseen the various legal matters for the St. Francis closing.
At the same time, he allowed, "It is interesting that we're closing this up as the new Children's opens."
The process started in August 2002, when the St. Francis Health System petitioned the court to approve a $150 million sale to the UPMC Health System and Jameson Health System in New Castle after years of growing debt.
St. Francis, which had been founded by two nuns 137 years earlier, struggled financially its last years.
Changing demographics in Lawrenceville and the emergence of new hospitals in Pittsburgh suburbs eroded its patient base.
In its final years, fewer than half the hospital's 471 beds were filled on many days, while more and more of its patients were on Medicare or Medicaid.
While its doors were open, though, the Sisters of St. Francis of Millvale made sure no one was ever denied care, regardless of a person's ability to pay, said Tony Ceoffe, executive director of Lawrenceville United, a resident-driven community group.
He remembers fondly a hospital that represented a big part of Lawrenceville's identity. "It was a community-based hospital. From the janitor, to the receptionist, to the anesthesiologist, they all lived in Lawrenceville," said Mr. Ceoffe, 47, who grew up just a few blocks away from the hospital.
They took particular pride that "their" hospital saved Liberace's life in 1963 when the pianist was rushed to St. Francis in kidney failure after inhaling fumes while cleaning one of his trademark costumes.
In gratitude, Liberace became a generous benefactor and, in 1986, the sisters dedicated the hospital lobby in his honor.
Sixteen years later, in its final days, that lobby would be the setting for the sale of hospital furniture, plants and books, as the building was emptied of everything but memories.
Resolving the legal issues associated with the closing, though, would not happen so quickly. Mr. McGinley and his colleagues faced a formidable task in 2002.
Some 13,000 people with a stake in the sale had to be notified: 2,271 employees, 7,095 potential pensioners, 61 tenants, 67 secured creditors and 3,198 potential unsecured creditors, as well as the state attorney general and the Sisters of St. Francis of Millvale.
Still-valid professional contracts with physicians had to be resolved and settled, in one case for less than one-tenth of the contract's value.
Early on, Mr. McGinley said, officials decided to put St. Francis into receivership instead of filing for bankruptcy as the Allegheny Health and Education Research Foundation did in 1998, to keep the proceedings within the state court system. "We felt we could get money to creditors faster than with bankruptcy."
Two major claims had to be addressed early on, Mr. McGinley said, one by bondholders that settled for about $100 million and another by pensioners that paid out more than $8 million. "Until you got these big contingency claims settled, you couldn't pay the others."
A group of former employees in New Castle, Lawrence County, also filed suit, saying they had been wrongfully denied severance payments. That case was eventually settled for about 38 cents on the dollar.
There was the predictable debate among the 839 creditors about who should be paid first, raising the possibility of "litigation gridlock for many years to come," according to one court filing. But that got settled, and the creditors were paid early on, at least those that officials could find, Mr. McGinley said.
The service they hired to find creditors ran into a few dead ends.
Some creditors, including a marketing firm, a photo supply vendor and a data electronics company, had gone out of business. Some had been sold. In a few cases, firms such as an orthopedic service company and an information services vendor, never responded to inquiries.
Not all of the 7,000 pensioners were easy to reach either, and others made claims to pension benefits that needed to be verified. Nearly 40 pension-eligible former employees had died, so the legal heirs needed to be tracked down. As late as this April, one last person was found to be eligible for a pension payment of $953.98.
Attorney fees ranged from $100,000 to $700,000 a year, Mr. McGinley said, but that covered two lawyers working on day-to-day legal matters, eight to 10 others pitching in as special situations arose, plus employment specialists, medical record specialists and two mediators, among others. Eckert Seamans reported just under $80,000 in legal fees in St. Francis' most recent annual tax filing.
The process also involved learning new skills.
Because the New Castle facility didn't close down immediately in 2002, Mr. McGinley joked, "I was operating a hospital for a while."
Actually, he hired some experienced hospital executives to handle day-to-day operations ,but he was regularly meeting with the clinical staff, trying to keep it intact through the transition. "There was a fair amount of resentment" about the sale, he recalled.
Although St. Francis reported losses in its last annual tax forms, money from the sale of its various assets left about $100,000 in the St. Francis account at the time of the final dissolution, money which Mr. McGinley said would be transferred to a community foundation run by the Sisters of St. Francis.
Mr. Ceoffe said Lawrenceville was proud to be home to the new Children's Hospital, with its gleaming towers and national reputation for pediatric care.
But it's not a replacement for St. Francis in the eyes of longtime Lawrenceville residents, he said, even all these years later.
"There are those childhood memories that stick in your mind. These are the things you are familiar with and comfortable with.
Any time a huge piece like that leaves, it takes away from the fiber of the community."
First Published June 24, 2009 12:00 am