The nonprofit Nevada Cancer Institute is running out of cash and quickly needs to emerge from bankruptcy, one of its attorneys told a judge Tuesday.
U.S. Bankruptcy Judge Mike Nakagawa in Las Vegas, recognizing the urgency of the situation, agreed during a hearing to put the case on the fast track as he set hearings for Jan. 11 and 12 on the institute’s plan to be sold to the University of California, San Diego Health System.
Nakagawa also approved generally routine “first day” motions allowing the institute to pay its 150 employees, maintain existing bank accounts and make arrangements with utilities for uninterrupted service.
The institute filed for Chapter 11 bankruptcy protection and reorganization last week as it revealed the sales plan.
One issue that wasn’t routine in the bankruptcy was whether Nakagawa should appoint a health care ombudsman to ensure the interests of patients aren’t jeopardized by the institute’s financial problems.
The provision for such an ombudsman is provided for in the bankruptcy code for bankruptcies of medical care providers.
The Cancer Institute asked Nakagawa for an exemption to that requirement and it was granted after Cancer Institute attorneys assured the judge that the patient care center in Summerlin has adequate safeguards to protect patients and that there are no malpractice claims pending.
Nakagawa’s rulings on Tuesday set in place a procedure in which key Cancer Institute assets are to be sold to the UC San Diego system for $18 million and the Cancer Institute has agreed to raise $20.8 million over five years to support the continued philanthropic mission of the center under UC San Diego’s ownership.
Secured creditors, including banks owed about $95.2 million, are expected to see about $60 million of their claims extinguished through the bankruptcy process, Nakagawa was told.
With its debt totaling $99.8 million, it’s unknown if any of the Institute’s creditors will object to the reorganization plan.
While any other interested party will have the opportunity to bid on the institute’s assets, institute attorney Michael Tuchin told Nakagawa on Tuesday that’s unlikely because the institute is limited to being a nonprofit operation — and even as a nonprofit its patient care operations are limited to outpatient services.
Bankruptcy court records show that’s because as the institute was launched in 2002 and 2003, it obtained land from the developer of Summerlin and with the land came restrictions imposed for the benefit of Summerlin Hospital.
The restrictions say the land can only be used for a nonprofit cancer treatment and research center, and it’s the position of the parent company of Summerlin Hospital that “it may not be used for in-patient care.”
“We don’t anticipate there will be other bidders,” said Tuchin, who explained the process is on the fast track because the institute is running out of cash.
Court records show the center lost about $23.4 million in 2010.
Restricted donations, grants and investment income in 2010 of about $2.9 million were down from $4.8 million in 2009 and $20 million in 2008 as the economy slowed down, the records show.