Court stays proceedings, appoints trustees for Hadassah

Deficit-ridden hospital gains 90-day breathing space from creditors during which employees will receive 90% of their salaries

Workers of Hadassah Hospital Ein Kerem protest outside the Finance Ministry in Jerusalem, on Monday, February 10, 2014. (photo credit: Hadas Parush/Flash90)
Workers of Hadassah Hospital Ein Kerem protest outside the Finance Ministry in Jerusalem, on Monday, February 10, 2014. (photo credit: Hadas Parush/Flash90)

The Jerusalem District Court granted Hadassah hospitals’ request for a stay of proceedings Tuesday, temporarily protecting them from creditors, and appointed two trustees to formulate a rehabilitation plan for the hospitals, which are currently struggling with a deficit of NIS 1.7 billion ($482 million).

The procedure was put in place in order to “prop up the corporation and rebuild it for the benefit of creditors, the workers and the company as a whole and lead to a reasonable and balanced compromise that most creditors can accept,” Judge David Mintz wrote in his decision.

The decision is a victory for the medical centers. For the next 90 days, they will be able to continue operations under their current management, led by Director General Dr. Avigdor Kaplan, but their creditors will not be able to collect on any debts and hospital employees will, on average, make 90 percent of their salaries.

Kaplan said Monday that employees who make less than NIS 10,000 ($2,857) per month will be paid in full.

Meanwhile, the court appointed trustees Lipa Meir, who was hand-picked by Hadassah, and Asher Axelrod, who will have the authority to unilaterally change the collective agreements of employees.

The Israel Medical Association had objected to Meir as a trustee due to his affiliation with Clalit Health Services, one of Hadassah’s biggest creditors. In appointing the trustees, Mintz said that Meir’s familiarity with the company would be an asset, but in order to address a potential conflict of interest, he appointed a second trustee, Axelrod, an attorney, who will have to decide today whether to accept the appointment.

“We are happy that the judge understood that there must be both sides in order to reach an agreement and that Lipa, with all due respect, is not the only trustee in light of the conflict of interest,” the IMA said in a statement.

The trustees are required to notify the court within five days what kind of protection they will offer insured creditors, how they intend to resolve the issues of employee liability and how to pay for malpractice insurance.

Activities at Hadassah’s Mount Scopus and Ein Kerem hospitals have come to an almost complete standstill after hospital staff joined doctors on strike Monday protesting the cash-strapped administration’s failure to pay full January salaries.

All treatments deemed non-urgent — including clinics, overnight hospitalizations that are not oncology-related, and elective procedures and surgeries — have been suspended. With the exception of emergency cases, the hospitals were not accepting new patients until further notice.

Workers from Hadassah also protested outside of Finance Minister Yair Lapid’s house on Monday and the Prime Minister’s Office on Sunday.

In addition, hospital workers nationwide have been joining in solidarity with Haddasah workers by holding symbolic two-hour strikes the last three days, during which they only operated emergency services, such as the maternity ward, intensive care, and emergency room, alongside wards providing critical oncology treatments and emergency dialysis.

Rambam Hospital in Haifa is the only hospital to not participate in the strike.

The Israeli Medical Association warned on its website that if steps were not taken to rehabilitate Hadassah, “further organizational actions will be considered, including sanctions and strikes in all medical institutions, to stop the severe blow to the doctors of Hadassah.”

Prime Minister Benjamin Netanyahu on Monday accused Hadassah management of a “serious failure” in its handling of hospital debts, which the public will now have to pay for.

“There was a serious failure there,” Netanyahu said at the weekly Likud Knesset faction meeting, addressing Hadassah’s financial mess which has all but paralyzed its two Jerusalem medical centers. “When the government is in deficit we handle it immediately. (They) accumulated debt there; it’s unclear why. Perhaps out of the assumption that someone else would pay.”

Netanyahu said Hadassah’s problems would demand attention and resources from the government, specifically the Health and Finance ministries.

“The public will pay,” the prime minister said, “and we must ensure that the deficit will not return.”

Health Minister Yael German said that a stay of proceedings leading to the possible appointment of a trustee requested by the hospitals was a necessary part of the negotiation process, and would provide Hadassah three months’ time to reach agreeable terms with the Finance Ministry. She added, however, that the hospitals’ financial crisis came about as a direct result of inflated manpower, bloated salaries, and the failure of their private medical services to generate substantial revenues.

“There will be cutbacks, no more extravagant wages,” she told Channel 2 News. “Hadassah employees will receive salaries similar to their peers in other government hospitals.”

On Sunday, German announced a NIS 100 million ($28 million) recovery plan to help the medical centers pull out of the red. The sum, which would consist of a NIS 50 million government loan matched by NIS 50 million from the volunteer women’s organization that founded the two hospital campuses, isn’t nearly enough to cover the hospitals’ combined NIS 1.3 billion ($367 million) deficit.

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