The Fiscal Health of Healthcare Providers

By: Laura Day DelCotto

The American Hospital Association recently reported some statistics that we observe in our practice here in Kentucky.  Nationwide, hospitals have been closing at the rate of about 30 per year.  Bankruptcy tracking statistics mirror the AHA report.  Twenty one hospitals or other health care facilities filed for bankruptcy protection in 2016, twenty seven in 2017, and through mid-year of 2018, there have been nine such health care related filings.   Many that close their doors do not file for bankruptcy, which is a strategic choice to analyze on a case by case basis.  Morgan Stanley analysts recently projected that the next 12 to 18 months will see an increase in shut downs and financial concerns.

One difference in health care bankruptcies is the added cost and added oversight of a “patient care ombudsman” – an individual appointed by the United States Trustee to monitor the court case and to protect the interests of patients.   There are several added protections for patients if the health care provider files for bankruptcy, as opposed to just closing its doors.

While patients who live far from major cities, like many residents of Kentucky, are being left with fewer hospital and medical provider choices, this is not entirely bad news. The rise of tele-medicine and local clinics in grocery and drug stores provide many services.   Mergers and acquisitions continue at a fast pace for some facilities, but the weaker locations struggle to find anyone who will purchase their going concern operations.  Some smaller rural locations are changing from acute care to outpatient emergency clinics, and another reported trend is the rise in “micro-hospitals” – facilities with 10 beds or less.

Chapter 11 is an excellent (albeit costly) option for restructurings or going concern sales, and a “breathing space” to get that accomplished for the benefits of the local community.  While cash flow is still imperative, a rehabilitation process provides more clear guidelines to an organized effort to maximize the situation.   Local leadership should always analyze whether a filing is a feasible and realistic choice or not.

About DelCotto Law Group

DelCotto Law Group is Kentucky’s asset protection law firm known for its commitment to the lifetime success of its clients. With offices located in Lexington, Louisville and Danville, DLG serves Kentuckians with complicated financial matters, especially in the areas of bankruptcy, complex litigation, and estate planning. For more information about filing bankruptcy or DelCotto Law Group, please call (859) 231-5800 or email info@dlgfirm.com.

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