CCS Oncology, the financially battered private cancer practice that is under federal investigation, has filed for voluntary bankruptcy protection, according to court records.
The company said that the filing positions it to continue to serve its oncology patients with no interruption to the practice's day-to-day operations. CCS said in a statement Monday afternoon it would refocus on its core mission of providing radiation and medical oncology treatments while transitioning away from its CCS Healthcare operations.
"We are now undertaking financial restructuring, through which we expect to achieve long-term financial sustainability and the flexibility to serve the community," the company said in the statement.
CCS Oncology, several related companies and CCS' CEO, Dr. W. Sam Yi, filed for Chapter 11 bankruptcy protection in U.S. Bankruptcy Court in Buffalo on Monday.
The bankruptcy filing raises new questions about the viability of CCS Oncology. The company has lost a number of physicians to other health care providers in the area since 2016, when Independent Health announced it was removing CCS Oncology from its network.
Hundreds of patients have left CCS to follow their oncologists to their new practices, and that movement is likely to continue if more providers of cancer care choose to leave CCS.
But company representatives remain optimistic.
"Our operations are strong, our patients have experienced positive, life changing results and we have an outstanding network of locations and a talented team to support it," the company said in the statement.
The purpose of a Chapter 11 bankruptcy filing is to keep a company alive, allowing it to reorganize and emerge stronger. The process allows a company to restructure its debt so that debt load is lighter and its payments are more affordable.
The company's filing lists liabilities of $10 million to $50 million owed to between 200 and 599 creditors, including a wide range of companies from 1-2-3 Delivery Services of Williamsville to ZirMed Inc. of Chicago. The list includes The Buffalo News. The filing does not say how much CCS, the related companies and Yi owe to each creditor.
Arthur G. Baumeister Jr. of Buffalo, the company's bankruptcy attorney, said the company has about $11 million in assets and about $25 million in liabilities. The filing lists an incorrect figure for CCS' assets.
Baumeister said CCS' primary secured creditors include Bank of America, which filed a lawsuit against CCS; the Internal Revenue Service, which has filed liens against CCS for unpaid federal taxes; and the state Department of Taxation and Finance, which has issued warrants against CCS for unpaid state taxes.
Secured creditors stand at the head of line, in front of unsecured creditors, once a reorganizational plan is approved.
"It's way too early to tell, until they submit a plan, how everybody will be treated," said Paul M. Pochepan, who represents corporations and consumers in bankruptcy cases as an attorney with HoganWillig.
CCS has filed a number of motions seeking the court's permission to support its operations during the restructuring process.
The company said it plans to continue all radiation and chemotherapy services in the interim.
“Our priorities, values and commitments to our loyal patients, community and dedicated staff of professionals will not change," Yi said in the statement.
The filing comes less than two weeks after a federal district judge allowed Bank of America to seize CCS' assets after the bank accused Yi and CCS in court records of defaulting on $16 million in debt.
U.S. District Judge Elizabeth A. Wolford agreed the Yis and the CCS businesses had failed to comply with the terms of their lines of credit, security agreement and other contracts with the bank.
Wolford acknowledged that her seizure order may be "the final nail in the coffin" for the financially struggling practice.
But, she wrote, "Defendants are unable to demonstrate that their circumstances would change over the next several months in the face of mounting debt."
The bankruptcy filing automatically places the Bank of America proceedings on hold, including any attempt by the bank to act on the seizure order.
Pochepan said it's not clear whether the Chapter 11 filing will succeed in giving CCS the chance to overcome its financial woes. He said a number of Chapter 11 filings later convert to Chapter 7 liquidation filings.
"The failure rate is decent," Pochepan said.
Baumeister, the CCS attorney, said he expects the company to succeed in its reorganization once it refocuses on its core mission. He said the company's financial difficulties don't stem from overexpansion but instead trace back to the Independent Health decision.
"The ultimate intention is to scale it back to the oncology practice," Baumeister said.
The bankruptcy filing also comes less than a week after FBI agents raided CCS locations throughout Erie and Niagara counties as part of the government's investigation into the practice. The News reported last June that federal authorities are investigating whether CCS Oncology defrauded taxpayers out of millions of dollars.
CCS officials have denied wrongdoing and no charges have been filed against CCS or its executives.
CCS has practice locations in Amherst, the Town of Tonawanda, Orchard Park, Lockport and Niagara Falls, although some of those are CCS Healthcare sites. The company has allowed the domain name for its CCS Oncology website to lapse, but it continues to control its CCS Healthcare website.
In addition to Yi and CCS Oncology, the filing in U.S. Bankruptcy Court also includes CCS Billing LLC, CCS Equipment LLC, CCS Medical LLC and WSEJ LLC.