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  • Writer's pictureGene Preston

Hospital Closures

Hospitals and bankruptcy are two terms, when used together, that conjure up feelings of anxiety and fear. Unfortunately, our nation will begin to hear these terms together more often as casualties of war from the COVID-19 pandemic. Last October, my firm was engaged to provide interim CEO services for a hospital that had just filed an emergency Chapter 11, bankruptcy petition. The last 7 months has been committed to re-organizing the service offerings and related cost structure to enable the hospital to continue to serve its' community as a going concern.

Interim financing was obtained, operations were streamlined and we were confident we could fix the broken revenue cycle system. Finally after 6 months of intense work, the hospital began to collect current and aged accounts receivable and was spending less in operating expenses than expected net revenue, excluding Chapter 11 bankruptcy expenses of-course.

March Madness of 2020

March of 2020 will clearly live up to the name of "March Madness" and will be a permanent memory in the minds of three generations. For the hospital, it was the end of a 100 years of service to a small community in southern West Virginia. The pandemic's impact on hospital volumes became the tipping point that forced its' closure.

With net revenue decreases of nearly 45% and ER volumes cut in half, the interim financing the hospital obtained would be exhausted two months prematurely, leaving no time to bridge the operations to a neighboring facility also impacted by the pandemic.

This is the first article of a series on Lessons Learned from Bankrupting a Hospital. What we did right, what we did wrong, what we could control and what we couldn't control. We will dive deep into the bankruptcy process and its impact on operations, financing and service offerings.

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