Is Bankruptcy The Cure For Distressed Hospitals?
The financial woes leading to recent bankruptcies and closures of an increasing number of hospitals are attributable to many factors, including insufficient reimbursement from Medicare and Medicaid, insufficient contributions from state charity care programs which require hospitals to provide care to all regardless of the ability to pay, as well as increased competition from physician-owned private ambulatory centers which attract high margin patients. However, hospitals seeking chapter 11 protection face many obstacles which may diminish, rather than augment, a hospital’s chance of survival. The bankruptcy courts which oversee the cases are often hamstrung due to the unique nature of hospital cases. Before seeking chapter 11 protection, a hospital should consider all available options and chapter 11 should truly be the option of last resort.
© 2008 The Metropolitan Corporate Counsel, Inc.