Filing for bankruptcy will not only help Powell Valley Healthcare deal with a slew of malpractice lawsuits brought by former patients of Dr. Jeff Hansen; the bankruptcy process should also help “maximize” the amount of money that those patients will be able to receive in compensation, one of Powell Valley Healthcare’s bankruptcy attorneys said last week.

“We do recognize that these tort claimants have legitimate claims and that they need to be paid,” attorney Brad Hunsicker said of the former patients.

Hunsicker made the remarks at a Wednesday hearing in Cheyenne, where U.S. Bankruptcy Judge Cathleen Parker allowed PVHC to effectively continue to do business as usual for the time being.

Twenty patients are currently suing Powell Valley Healthcare over surgeries performed by Dr. Hansen, an orthopedic surgeon who worked for PVHC from 2006 to early 2014. The Powell hospital suspended Hansen’s privileges to practice medicine in November 2013 over “patient safety concerns” and he resigned in February 2014.

The 20 former patients with the pending lawsuits — plus two others who settled their cases last year — say they were harmed by negligent care from Hansen.

In one of the more sensational claims, a Lovell man alleges he had to have a part of his leg amputated after Hansen made multiple errors during a complex ankle procedure that the surgeon was attempting for the first time. That man, Shane Wilson, says he was never told that Hansen had not done the surgery before.

The lawsuits also claim Powell Valley Healthcare leaders were slow to act on numerous complaints about Hansen’s care — including that he had high infection rates and that he was performing procedures that were risky or outside his expertise.

PVHC officials and Hansen have denied the allegations in court filings.

Defending and responding to the litigation has brought high costs for PVHC. The organization has spent $585,000 in legal fees and other costs just this fiscal year, while compiling information requested in discovery has consumed the time equivalent of 2.5 to three full-time employees, interim PVHC CEO Terry Odom has said.

In filing for Chapter 11 bankruptcy on May 16, PVHC’s board said that was their best option for managing the lawsuits and resolving them in a timely way; Hunsicker, the bankruptcy attorney, said PVHC had been “overwhelmed” with expenses and document requests.

“This issue has been amplified by the fact that Powell Valley Healthcare’s insurance carriers are now denying coverage related to these lawsuits,” he said.

Even if Powell Valley Healthcare is able to get its insurers to cover the claims related to Hansen, it says the absolute maximum that the policies could possibly pay out is $30 million. That’s not enough to cover the upwards of $70 million that the former patients are currently seeking in damages.

“These claims need to be reduced so we can figure out what sort of claims we’re actually dealing with,” Hunsicker said.

He indicated that PVHC will propose a plan of reorganization that will include a process for estimating the fair value of each claim being brought by the former patients. PVHC would then set up a “liquidated trust” for them — an account that will likely include some cash “in an amount that has yet to be determined” while giving the patients the ability to pursue claims against third parties that include the insurance carriers.

Hunsicker said the process should be more fair and result in equal treatment for the former patients. He said many of the parties “have been very receptive to the idea.” If the cases simply proceeded toward a trial, there would likely be a race for PVHC’s assets, where some creditors would be paid in full and others would get nothing, Hunsicker said.

PVHC filed for bankruptcy one day before attorneys for three of the patients were set to begin taking the depositions (or sworn testimony) of some PVHC employees and others about Hansen’s care.

The bankruptcy filing temporarily “stayed” (or paused) the lawsuits; Hunsicker indicated that PVHC thinks the cases don’t need to ever resume.

“We don’t believe the tort claimants should have to continue to litigate these matters any further,” he said, saying it would just drag things out for everyone.

Judge Parker will rule at a later date whether the suits can continue to proceed against the co-defendants named in some of the suits — including the Powell Hospital District, Hansen, former PVHC CEO Bill Patten and HealthTech Management Services, the private firm that helps manage PVHC operations.

At Wednesday’s hearing, Parker did approve a series of motions that will allow PVHC to continue paying its employees, keep using its cash and stick with its current bank accounts and cash management systems.

Getting to use the cash was part of an agreement with First Bank of Wyoming, which PVHC owes around $1.29 million in a loan and line of credit.

Tim Wozniak, an attorney for First Bank of Wyoming, said the bank’s leaders want to see “that this case is a success.”

“The bank is acutely aware of how important the hospital is to the Powell community and wants to do what it can to help bring that about,” Wozniak said at the hearing.

PVHC has said it’s hoping to successfully complete the Chapter 11 bankruptcy process within a year.

“Given the significant amount of revenue generated by PVHC, PVHC is a promising candidate for a successful reorganization, if it has the time and space to resolve the claims asserted against it in the lawsuits,” Hunsicker wrote in a recent motion.

PVHC has said the lawsuits have nothing to do with the current medical staff or the quality of care that the organization is now providing.