Successful Chapter XI Reorganization of a Bankrupt Two-Campus Not-for-Profit Hospital
Turnaround Management & CRO Services
A sole community provider in central Mississippi filed for Chapter 11 protection three months prior to HMP being engaged. HMP was appointed as CRO by the court as the hospital was facing eminent closure.
Issues
- Due to extensive Medicaid fraud, the bankrupt facility was facing almost certain liquidation.
- Financial malfeasance and insider dealings within the management company bred a corrupt management culture.
- Overbuilt physical plant resulted in over-leveraged and unsustainable capital structure.
- Poor physician relations had resulted in the loss of key medical staff.
Approach
- Terminated predecessor management company.
- Eliminated programs with negative contribution margins.
- Recruited replacement ER, OB/GYN and hospitalist physicians.
- Conducted a complete forensic audit to support multi-million dollar claims against the former management company.
- Negotiated settlement with Medicaid for the forgiveness of more than $25 million liabilities due from the hospital.
Results
- $15 million reduction in operating expenses.
- Obtained releases from Medicaid to extinguish prepetition overpayment liabilities, necessary to enable the hospital to be sold as an operating entity.
- EBITDA improvement of $8million in the first two years and patient volumes restored to pre-bankruptcy levels.
- Restored respect within the medical community.
- Convinced local disenfranchised quality physicians to bid on the hospital with a joint venture partner.
- Conducted a successful Section 363 sale of the hospital.