Compass Medical files for bankruptcy. Here's what might happen next

QUINCY – Compass Medical's decision to file for bankruptcy will affect a class-action lawsuit filed on behalf of patients and might delay access to their health records, lawyers say.

Compass filed for Chapter 7 bankruptcy Monday, less than a week after abruptly closing its doors and discontinuing services to about 70,000 patients.

The Quincy-based corporation, which also had a branch in Braintree, will have no money available to pay unsecured creditors after administrative expenses are paid, according to the bankruptcy form submitted by Compass President Bruce Weinstein and his attorney, D. Ethan Jeffery.

The bankruptcy filing comes on the heels of a class-action lawsuit filed in Plymouth Superior Court on Friday. The class representative in that case, Richard Callanan, of Abington, is represented by lawyer Jonathan Sweet.

"It's certainly a disappointing legal tactic that they're taking," Sweet said. "It's going to delay things. It's disappointing, but not shocking, that they're hiding behind bankruptcy laws to avoid responsibility for the harm they've caused."

Sweet works for the Milton-based Keches Law Group.

Jeffery could not be immediately reached for comment.

Chapter 7 bankruptcy "provides for liquidation – the sale of a debtor's nonexempt property and the distribution of the proceeds to creditors," according to the government website uscourts.gov.

In October 2022, a Suffolk County Superior Court jury ordered Compass to pay $16 million to its partner, Steward Health Care System, for fraud.

How the bankruptcy might affect the class-action lawsuit against Compass

Sweet, who filed the class-action lawsuit June 2, said Compass' board of directors should have notified patients of the closure long before May 31.

"It's hard for any reasonable patient to believe everything came tumbling down in a day or even a week," Sweet said. "Someone from Compass didn't wake up and say, 'Oh, my God, we have to close.' That's not how this industry operates."

While Sweet said he does not have any internal documents that point to prior knowledge of an inevitable closure, he believes business decisions going back months led to the shutdown.

"The class members deserve to be paid something," Sweet said. "Clearly, they've been wronged."

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Compass' ability to pay is a major question that will be answered through litigation, Sweet said. He said the company may have omissions-and-errors insurance, which protects high-level directors from liability for their business decisions.

In the meantime, Sweet asked the court for an injunction preventing Compass from "transferring, assigning, selling or encumbering any of their assets."

Compass Medical patients left without care

Sweet said his firm has heard from hundreds of former patients since May 31 with "really alarming" stories about disrupted care. For instance, he said a woman was turned away from a mammography she scheduled weeks ago after discovering a lump in her breast. Now she's scrambling to find a new provider, Sweet said.

"She's freaking out. It's all the way back to square one. There were hundreds of people awaiting tests, X-rays, CT scans, bloodwork results. That's all in limbo."

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Sweet described the class representative, Callanan, as a regular guy with a wife and three children, all of whom depended on Compass for primary and specialty care. One member of the family receives prescription medicine that Sweet said is vital to their well-being. That prescription ran out at the end of last week.

"What do you do?" Sweet said. "There's a sign taped to the door and a website that doesn't work. No one's going to write a (prescription) until a patient visit, and the first available appointment's in July. If they had the courtesy of a heads-up, there wouldn't have been this disruption."

What the plaintiffs might win if they prevail in the lawsuit

Sweet said there's no exact science to determine the financial damages. He said his team is looking at fees charged by concierge medical services, which find and schedule needed care, and he believes that could provide a useful analogy for quantifying damages.

He said hundreds of injured workers his firm represents received medical services through Compass, many of whom reached out after the closure.

"We were crushed with calls," he said.

Sweet said that in the coming weeks, the parties will appear before a judge, Callanan will be certified as the class representative and a hearing on the preliminary injunction will be held. After that, the discovery process will answer what Sweet said are the crucial questions: "Why did they close so suddenly? Why didn't they tell anybody?"

Steward Medical Group works to prevent an interruption in its business

Attorneys for Steward Medical Group filed an emergency motion in Suffolk Superior Court on Monday. However, the hearing on the motion was blocked by Compass' filing for bankruptcy minutes before the hearing was scheduled to begin. Seth Robbins, a lawyer representing Steward Medical Group, said the bankruptcy triggered an automatic stay on the case.

The motion sought to prevent Compass from interfering with Steward's operations at facilities where Steward and Compass were co-tenants.

"Compass abandoned (the shared facilities)," Robbins said. "We'd like to turn the lights back on" and "open up practices." Compass and Steward were co-tenants in multiple locations in Southeastern Massachusetts, including Quincy, Middleboro, Easton and East Bridgewater.

He said the facilities served some of the more underprivileged communities and people suffering from serious conditions.

"And as you know, the South Shore is already experiencing a crisis in medical care," Robbins said, referring to hospital closures in Brockton and Norwood. He said the bankruptcy will hurt Steward's ability to ease burdens on local health care systems caused by Compass' closure.

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Steward's motion states that Compass owes the company more than $27 million after interest is added to the $16.4 million in damages awarded to Steward in October.

"Compass' actions in shutting down its operations appears designed to render itself judgment proof," the document reads. It then asks for Compass' assets to be kept available "to satisfy a judgment."

In addition, Compass is the custodian of Steward's medical records.

In an affidavit filed with the motion, Steward Medical Group President Amy Guay wrote: "It is of the utmost importance that Steward Medical Group be granted immediate and unhindered access to the premises formerly occupied by Compass to assess the situation, retrieve medical records and resume patient care. ... This will help mitigate adverse effects experienced by the patients and prevent any further deterioration of their health conditions."

This article originally appeared on The Patriot Ledger: Compass Medical files for bankruptcy: How it affects two new lawsuits