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CCS Oncology will shrink to 8 doctors, bankruptcy documents say

CCS Oncology and its related practices employed 60 physicians at their peak, but will shrink to just eight physicians within a few weeks as the financially struggling CCS refocuses on treating cancer patients.

The company plans to cut its overall workforce from the 181 employees it had in the months before it filed for bankruptcy protection on Monday to 74 employees in the coming weeks.

Those are two of the notable disclosures included in motions and documents submitted this week by CCS as part of its filing for Chapter 11 reorganizational bankruptcy.

The documents offer new details on CCS' financial struggles that prompted the bankruptcy filing and on how the company plans to successfully emerge from the reorganization process.

In a declaration filed with U.S. Bankruptcy Court in Buffalo, Dr. W. Sam Yi, CCS' chief executive officer, said the company lost about 40 percent of its revenue after Independent Health, the Amherst-based health insurer, dropped CCS Oncology from its network at the end of 2016. He said all of the practice's financial difficulties trace back to that loss of patients.

CCS said after filing for bankruptcy protection on Monday that the practice will continued to offer radiation, chemotherapy and other treatments to cancer patients.

CCS Oncology vows to keep serving patients as it files for bankruptcy protection

The bankruptcy filing by the private cancer practice came less than two weeks after a federal district court judge granted Bank of America the right to seize CCS' assets. Bank of America had sued Yi, his wife and CCS after they defaulted on $16.2 million in loans.

Yi wrote in a document filed with the bankruptcy court that an order to seize CCS' assets would "effectively, immediately shut down the medical practice." To avert that, Yi and CCS filed for Chapter 11 bankruptcy protection.

The filing also follows a raid at CCS' locations by FBI agents, who were seizing and preserving records in an ongoing government investigation into possible billing fraud. No charges have been filed in the three-year-old probe and CCS officials have denied wrongdoing.

Yi's declaration in the bankruptcy filing offers an outline of how CCS grew rapidly through acquisitions as it expanded beyond cancer care into other areas of medicine and, in his view, how its finances faltered.

Dr. W. Sam Yi, the CEO of CCS Oncology, is the subject of a civil lawsuit filed by Bank of America that preceded CCS' bankruptcy filing. (John Hickey/Buffalo News)

Yi purchased CCS Oncology in 2008 and is its sole shareholder.

"CCS Oncology steadily grew and became a very profitable practice," he wrote.

He acquired CCS Medical, which offered medical oncology and other services, in 2012. As of 2016, he said, the practices provided about 30 percent of cancer patient care in the area. CCS also began acquiring other practices to expand into primary care and other, non-cancer specialties, typically agreeing to pay "good will" and a set salary to the physicians who joined CCS.

The Independent Health announcement "was financially devastating to CCS and the direct cause" of CCS' default on the Bank of America loan and of the practice's inability to pay its vendors and state and federal taxing agencies, Yi wrote.

"The large number of physicians" – 60 by this point – "only served to compound the financial problems caused by Independent Health as revenues from their practices declined precipitously," Yi wrote.

The insurer said in 2016 that it dropped CCS because the practice refused to accept a new value-based reimbursement method to replace the existing structure that charged a fee for each service rendered.

CCS sued Independent Health but said it dropped the matter last summer after running out of money to pursue the lawsuit and after the insurance company said it would consider returning the practice to its network. Later, however, according to Yi, Independent Health said 2019 would be the earliest that would happen.

Independent Health spokesman Frank Sava said CCS' decision to drop the lawsuit came after the practice lost an early round in court and after a federal judge found the suit had little chance to succeed on its merits.

“The accusation that Independent Health would consider reinstating CCS if it dropped the lawsuit is false," Sava said in a statement. "As we have stated previously, Independent Health followed all regulatory and contractual requirements for the non-renewal of the CCS oncologists."

Yi said CCS has sought to refinance its debt, bring in outside investors or find someone to buy the practice, but to no avail.

CCS also is shedding large portions of its primary care and non-cancer practices.

"The oncological practices are cost-effective and generate positive cash flow, notwithstanding the loss of Independent Health," Yi wrote.

In another motion, CCS said it has shrunk from 181 employees in the months leading up to the bankruptcy filing to 84 today and will further reduce its payroll to 74 workers within about two weeks, including just eight physicians.

CCS filed motions seeking the bankruptcy court's permission to keep paying the remaining employees and to pay some of its essential vendors.

Bankruptcy Judge Michael J. Kaplan issued an emergency order, over the objections of Bank of America and the Internal Revenue Service, to allow CCS to use $45,000 from its cash collateral to pay McKeeson Corporation and its affiliates for medication.

A hearing on CCS' other requests is set for Thursday and a meeting with creditors is planned for April 26.

CCS also filed a forecast of its cash flow over the next three months. CCS has not yet filed other required paperwork, including a list of its 20 largest unsecured creditors.

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