Springfield Hospital sues government for access to Paycheck Protection Program

  • Springfield Hospital, one of the Vermont town's largest employers, sits on a hill overlooking the town Friday, March 29, 2019. (Valley News - James M. Patterson) Copyright Valley News. May not be reprinted or used online without permission. Send requests to permission@vnews.com. James M. Patterson

Valley News Staff Writer
Published: 5/5/2020 9:14:48 PM
Modified: 5/5/2020 9:14:41 PM

SPRINGFIELD, Vt. — Springfield Hospital and its parent company have filed separate lawsuits against the administrator of the U.S. Small Business Administration in federal bankruptcy court in Burlington, seeking permission to apply for the Paycheck Protection Program.

Unless it gains access to the $3.64 million it is requesting through PPP, the hospital would be forced to close by early June, “without sufficient funds for an orderly wind-down,” the hospital’s Maine-based attorney, Andrew Helman, wrote in court filings on April 27.

“This would cause irreparable harm to the (hospital),” Helman wrote.

Springfield Medical Care Systems, the nonprofit parent corporation to the hospital, which also oversees federally qualified health care clinics in the Vermont communities of Springfield, Chester, Ludlow, Bellows Falls and Londonderry, and in Charlestown, N.H., is seeking $1.8 million through the PPP.

SMCS, which also could be forced to close if it doesn’t get the funds, filed its own suit against SBA Administrator Jovita Carranza on April 29, seeking the ability to apply for the federal program.

Cash for the two organizations was already tight before the COVID-19 pandemic as they are going through Chapter 11 bankruptcy to deal with a total of about $20 million of debt.

Both Springfield organizations, like most health care providers, have seen steep reductions in revenue as a result of cancellations and postponements of nonessential elective procedures and office visits due to COVID-19.

“These cancellations and deferrals have had — and are expected to continue to have — a negative impact on the Debtor’s cash receipts, SMCS’ Maine-based attorneys Sam Anderson and Adam Prescott wrote in the complaint.

PPP was created as part of the Coronavirus Aid, Relief, and Economic Security Act enacted in late March. The program is intended to provide economic relief to small businesses around the country that have been hard-hit by COVID-19. But the SBA has barred organizations that are going through bankruptcy from participating in the program.

The Springfield-based health care organizations aren’t the only businesses going through bankruptcy who have turned to the courts for assistance in obtaining PPP funds.

The Wall Street Journal reported last week that there were at least a dozen such suits pending around the country.

In their suits, the Springfield organizations asked the bankruptcy court to issue an injunction preventing SBA or any commercial lender from denying their applications under PPP because they are going through bankruptcy.

In their complaints, the organizations said that Section 525(a) of the Bankruptcy Code prevents the federal government from discriminating against a person based on that person’s status as a debtor with respect to a “license, permit, charter, franchise, or other similar grant.”

On Monday, Bankruptcy Court Judge Colleen Brown issued a temporary restraining order barring the SBA or a lender from using the fact that the hospital is going through bankruptcy as a reason for denying its PPP application.

“The Restrained Parties shall consider the application submitted by the Plaintiff and shall fully implement all aspects of the PPP with respect to the Plaintiff without consideration of the involvement of the Plaintiff or any of its owners in any bankruptcy case,” Brown wrote.

Brown set a status hearing in the case for 10 a.m. Thursday.

If the PPP loan goes through, it would not be the only government support the hospital has received in recent months due to COVID-19. Last month, Springfield Hospital received a $1.3 million emergency state loan, VtDigger reported.

Nora Doyle-Burr can be reached at ndoyleburr@vnews.com or 603-727-3213.

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