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Eastern Niagara Hospital files for Chapter 11 bankruptcy protection

Eastern Niagara Hospital announced Thursday it has filed for Chapter 11 bankruptcy protection because it is unable to pay millions of dollars in accumulated debt.

The 134-bed Lockport hospital said it will continue to offer all the services it does now, but those services have been steadily reduced because of the hospital's financial problems.

The hospital closed its maternity unit June 30, and in late August Eastern Niagara announced it would close and sell the former Inter-Community Memorial Hospital in Newfane, which had been reduced to an urgent care facility.

In all, Eastern Niagara will now offer services only at its Lockport hospital and at its Town of Lockport outpatient surgery site. At one time, it had five other service locations, all of which will be history by the end of the year, along with a psychiatric unit for children at the hospital itself.

The hospital announced it will hold a community forum on its future at a date and time to be announced, at which President and CEO Anne E. McCaffrey will answer questions.

"Prior debt and loan covenant obligations that were committed to years ago are negatively impacting the hospital," the hospital's news release said. "Cash flow is insufficient. This debt must be reorganized. Maintaining services with low volume at multiple sites across the region have resulted in major losses over the past decade."

In an interview earlier this year, McCaffrey told The Buffalo News that the hospital had accumulated $8 million in debt, including a 5-year-old bank loan, some pension expenses and the costs of its outpatient surgery center and new mammography equipment.

All those moves were made by McCaffrey's predecessor, Clare A. Haar.

The hospital sought a state bailout earlier this year, applying for an $8 million grant to pay off the debt, but the state Health Department has not approved that.

Eastern Niagara had been counting on an affiliation with Kaleida Health System to help steady itself, but Kaleida said in late August it had not completed the deal because of the Lockport facility's financial woes.

A year ago, the hospital announced plans to build a $9.8 million emergency department, but that hasn't happened, either.

A spokeswoman said Eastern Niagara is "still committed to the new ED project. The restructuring may create a slight delay."

"When I assumed this role just over a year ago, I was faced with the realization that the hospital had incredible financial challenges and there were no plans in place to address the operational deficit and mounting debt," said McCaffrey, who resigned as mayor of Lockport to take over the hospital, in a news release.

But she has concluded Eastern Niagara cannot get out of the red simply by cutting costs, even though this year's reductions have improved the situation, according to the hospital's announcement.

"We can no longer continue operating without the protection of a Chapter 11 filing. We must take this opportunity to address the legacy debt obligations that have escalated over the past six years," McCaffrey said.

In all, the equivalent of 90 full-time employees had been laid off this year, and another 50 vacant jobs were simply abolished.

The hospital's news release Thursday specifically pointed to Transitions, the child behavioral health unit, as a drain on its finances. Its closure by year's end will throw another 20 employees out of work.

"Volume has been inconsistent and the unit is losing approximately $800,000 per year. Many steps were taken to secure additional funding to maintain this service, but it is no longer sustainable and is impacting the fiscal health of the entire organization," the news release said.

"It is imperative that the community understand that the hospital will continue to offer essential hospital services," McCaffrey said in a statement. "We have a responsibility to the community and the organization to be sustainable well into the future. The hospital needs to restructure its debt and cease providing services that are no longer financially viable. It is unfortunate, yet like many other businesses, the decision to restructure cannot be avoided."

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