- As lawsuits over MRSA outbreak piled up, Tri-State Pain Institute, owner Joseph Thomas, M.D., filed for bankruptcy in 2020
- Clinic and Thomas have submitted Chapter 11 reorganization plans, which explain how they will pay creditors
- Clinic remains in business, and is expected to continue to operate during bankruptcy
A well-known Erie pain specialist is making sweeping changes to his practice and personal holdings as he continues to deal with the financial aftermath of a large-scale MRSA outbreak at his clinic three years ago.
Another highly infectious disease — COVID-19 — is also to blame, according to newly filed bankruptcy records.
Joseph M. Thomas, M.D., founder and owner of the Tri-State Pain Institute, is selling his 31,784-square-foot office building in Millcreek Township, moving his clinic to a much smaller location in the township and preparing to sell many of his personal assets, including his million-dollar home on South Shore Drive in Erie and an art collection worth an estimated $300,000.
The planned liquidations are key elements of the Chapter 11 bankruptcy reorganization plans for Thomas personally and the Tri-State Pain Institute, which remains in business. Lawyers filed the plans in U.S. Bankruptcy Court in Erie on Thursday.
The clinic’s current site is 2374 Village Common Drive, off Zuck Road and north of Interchange Road. The building is expected to sell for at least $3.15 million, according to the new bankruptcy filings. The proposed sale was announced in a legal advertisement in the Erie Times-News on Monday.
Tri-State by April 15 plans to move to leased space at 5442 Peach St., a 4,680-square-foot building that once housed Rose Floral, according to the bankruptcy filings.
Tri-State in January 2020 filed for Chapter 11 bankruptcy, which allows a business to reorganize its debts and pay back creditors over time. Thomas followed in May.
Thomas bankruptcy:Doctor facing MRSA lawsuits files for bankruptcy
The reorganization plans, including the sale of the office building and Thomas’ personal assets, are part of “a comprehensive approach” to settling Thomas’ personal and business bankruptcy cases in a way that is “the most effective” for all parties, including creditors, said Guy Fustine, the lawyer who represents the committee of unsecured creditors in the Tri-State case.
Fustine said he expects Tri-State to stay in business under the terms of the bankruptcy reorganization plans for Thomas and Tri-State.
“On behalf of the unsecured creditors,” Fustine said, “following the reorganization, we believe that this will continue to be a viable business institution.”
Tri-State and Thomas filed for bankruptcy in response to mounting financial difficulties, partly due to a slew of lawsuits the clinic faced over an outbreak of MRSA at Tri-State in 2017. The bankruptcy filings paused the MRSA litigation in Erie County Court, though U.S. Bankruptcy Judge Thomas P. Agresti in March 2020 ordered the MRSA cases into mediation in the Tri-State bankruptcy.
That process produced a $4.5 million settlement that Agresti approved in July. A total of 11 plaintiffs with MRSA-related legal claims received a portion of the $4.5 million, the amount that insurers agreed to pay.
The pain institute’s bankruptcy petition revealed deep financial troubles, including $6 million alone owed to the bank Wells Fargo for equipment and inventory.
The costs of the MRSA-related litigation caused “a significant strain” on Tri-State’s business, the clinic’s bankruptcy lawyer, Gary Skiba, said in a document, called a disclosure statement, filed on Thursday. The statement details the bankruptcy reorganization plan that Tri-State also submitted on Thursday. The plan includes the sale of assets, including the office building.
Tri-State’s financial woes also stemmed from lower reimbursements from Medicare, Medicaid and insurers, Skiba said in the disclosure statement. He said the COVID-19 pandemic added to the problems and “has necessitated a downsizing, including moving to a new location.”
The disclosure statement in Thomas’ personal bankruptcy listed the same difficulties as well as additional challenges.
Thomas and Tri-State, “while being successful in their industry, were faced with severe cash-flow issues caused, in part, by Tri-State’s previously poor management, for which those responsible have since been removed,” according to that disclosure statement. The lawyer in Thomas’ personal bankruptcy, Michael Kruszewski, filed it on Thursday.
Judge Agresti still must approve the reorganization plans, though the sale of the office building — the centerpiece of the proposals — is on its way to happening. The building is scheduled to be sold at auction on April 28, according to Monday’s legal ad.
The auction, to be conducted via videoconference in the courtroom of Agresti, also includes the sale of a 2.5-acre vacant lot that Thomas owns next to the office building, which sits on 2 acres.
The prospective buyer, according to the bankruptcy records, is Joseph C. Kramer, who owns warehouses and other properties in the Erie area. Kramer has agreed to pay a total of $3.15 million for the Tri-State building and the vacant lot, though other parties can bid at the auction on April 28.
The owner of the real estate is 2374 Village Common Drive LLC, of which Thomas is the sole member. It filed for Chapter 11 bankruptcy on March 5.
Thomas is also the majority owner of Greater Erie Surgery Center LLC, which operates out of the same building as Tri-State, according to the bankruptcy records. The surgery center has not filed for bankruptcy.
Thomas’ personal bankruptcy is intertwined with the Tri-State bankruptcy. Thomas is liquidating personal assets to help pay Tri-State’s debts partly because his “present and anticipated compensation” — money he could use to pay creditors — has become “very uncertain” due to “probable changes to his current business model,” according to the disclosure statement filed in Thomas’ personal bankruptcy case.
Thomas in November sold a house and 57 acres on Wattsburg Road in Greene Township for $300,000 to help pay the debt to Wells Fargo, according to the bankruptcy filings.
Thomas has also arranged to sell his residence on South Shore Drive in Erie for $1.065 million, according to the filings.
And, with Agresti’s approval, Thomas is ready to hire an auction house to sell his art and antiques collection, including paintings. The total value of the collection is $300,000, according to the bankruptcy records, which do not itemize the holdings.
Thomas, according to a filing regarding his art and antiques collection, “has determined that the best interests of the bankruptcy estate and creditors will be served by a sale of the Property.”