Successful Chapter IX Reorganization of a Financially Distressed County-Owned Hospital
Turnaround Management & CRO Services
The board of a county-owned 179-bed general acute-care hospital needed to replace the management of the facility on an emergency basis. HMP was brought in to stabilize and restructure the financial and clinical operations of the hospital and to prepare for the possibility of filing for Chapter 9 bankruptcy.
Issues
- Unsustainable operating costs, especially salaries and benefits. Monthly losses were exceeding $1 million per month in the first quarter of 2008.
- Less than seven days cash on hand.
- Inefficient capital and legal structure.
- Loss of key medical staff in the market.
- Physician contracts in violation of Stark guidelines.
Approach
- Terminated the predecessor national hospital management company which had been in place for more than 14 years.
- Reduced staffing levels by 30% in less than two months.
- Canceled or renegotiated all physician contracts and other vendor contracts, as necessary.
- Negotiated waivers from the bond trustee to enable the hospital to secure a $4.5 million line of credit to fund short term working capital needs.
- Redesigned and modified charge master to optimize revenue capture.
- Developed and executed effective marketing strategy based on the needs of the surrounding community.
- Recruited or replaced ER, radiology, pathology, cardiology, general surgery and orthopedic surgery physicians.
- Successfully used a Chapter IX reorganization to reject contracts and leases and restructure almost $4 million in old trade payables into a three year note.
Results
- Returned hospital to profitable operations in one year.
- Successful Chapter 9 reorganization with all approved claims being settled at par.
- Successful restructuring of a number of physician joint ventures, including two imaging centers and various office facilities.
- Full compliance with Medicare regulations for all physician contracts and relationships.