Trios bankruptcy nears end. New owners soon to follow

Trios Health could be in new hands soon.

A judge will consider approving the Kennewick hospital system's plan to exit bankruptcy at a June 20 hearing in federal bankruptcy court in Spokane.

The plan hinges on the sale of Trios to RCCH HealthCare Partners — the same Tennessee company that's also in the process of buying Lourdes Health in Pasco.

Trios officials said the sale could close within about a month of the judge confirming the plan. However, an RCCH spokesman said he didn't want to speculate on a timeline.

"There are numerous state and regulatory issues to address and work through related to this transaction. We will continue to walk through this very complicated process as quickly as appropriate," Jeff Atwood said in a statement.

While RCCH will own and run Trios after the sale, the Kennewick Public Hospital District — the public entity that currently oversees the system — won't dissolve. It will continue to collect taxes and play a role in health care in the community.

The sale will mark the end of a difficult chapter for Trios, in which tight finances brought layoffs, services cuts and, ultimately, the bankruptcy filing.

Lisa Teske, Trios spokeswoman, said employees are feeling hopeful.

"Staff is relieved and excited about the future. There's a strong optimism here," she told the Herald. "People are ready to be moving forward."

Trios Health filed for Chapter 9 bankruptcy protection in June 2017, with debts totaling about $221 million.

Chapter 9 gives municipalities breathing room while they reorganize their debts. The cities of Stockton, Calif., and Detroit, Mich., are recent high-profile examples of municipalities that have taken that route.

Trios Health's financial woes built for years.

The system opened its flagship Southridge hospital in 2014 and an adjoining outpatient center in 2015 — expensive undertakings, but ones that were needed because of growth, mounting competition and an aging and cramped original hospital, officials have said.

A feasibility study projected that revenues would rise enough to make up for the increased costs of the new facilities. However, that didn't end up happening, and instead Trios generated $142.1 million less than forecast between 2011 and 2016.

Two moves by competitor Kadlec Regional Medical Center were particularly hard blows, Trios officials have said — Kadlec's opening of a standalone emergency department in Southridge, and its negotiating to exclude Trios from some Group Health plans.

Trios is anchored by the 74-bed, full-service Southridge hospital, along with the adjoining six-story care center. The system also includes a women's and children's hospital — in Trios' original downtown Kennewick facility — plus a network of clinics.

The public hospital system formed in 1948, and the original hospital opened in 1952.

Trios currently has about 1,100 employees, including more than 80 physicians. It's governed by a seven-member board of commissioners, who are elected by voters in the district.

Trios and RCCH are working on a "community care agreement" that will guide the district's role moving forward. That role could include activities such as outreach.

The district will continue collecting a property tax. This year, the tax will bring in about $1.3 million, with a levy rate of 13 cents per $1,000 of assessed property value.

In order for the sale to go through, the state Department of Health will have to sign off through the Certificate of Need process. An application hasn't yet been filed.

Trios creditors will be able to vote on the bankruptcy plan ahead of the June hearing. Documents are scheduled to be mailed to them soon.

Meanwhile, the sale of Lourdes Health to RCCH is working its way toward state approval.

Public hearings earlier this year largely drew support, although Kadlec later submitted a written objection — which RCCH has challenged.

The state is expected to issue its decision on that sale this summer.

This story was originally published May 19, 2018 at 1:11 PM with the headline "Trios bankruptcy nears end. New owners soon to follow."