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Special report: When bottom lines flatline

by Glenda Fauntleroy, DOTmed News | October 07, 2011
From the October 2011 issue of HealthCare Business News magazine

Many hospitals across the country are struggling to stay solvent in the face of today's economic challenges. For others though, the battle has been fought and lost with tough times leading to a final chapter—filing for bankruptcy.

“There are many reasons why hospitals are so hard hit, some of which are interrelated,” says Stephanie Wickouski, a partner at Bryan Cave LLP, a leading business and litigation firm where she counsels clients on all aspects of bankruptcy and insolvency.

Wickouski notes that some of the main reasons for hospital bankruptcies are because insurance reimbursement rates, especially from government Medicare and Medicaid, have decreased in recent years and third-party payment from private insurance companies has significant delays and is complicated to process.

“There are also a larger number of uninsured or under-insured patients, for which the hospital often does not get paid at all for their services,” says Wickouski. With the country’s high unemployment rates, many more Americans are seeking health care without health insurance coverage. When a sick or injured patient shows up to an emergency room, they aren’t turned away.

Hospitals also lose patients if they don’t have the state-of-the-art technology and equipment that other hospitals have—and equipment is expensive, adds Wickouski.

Add to that the number of high salaries and pensions hospitals must pay, and many are left unable to manage their debts and must seek refuge in Chapter 11 bankruptcy. But is this the only option?

“Federal bankruptcy law is often the only way to restructure debt when there are multiple creditors, such as vendors, employees, bondholders and the federal and state governments,” explains Wickouski.

It seems no region of the country is immune. Since last year, hospitals as small as the 34-bed Kentuckiana Medical Center in Clarksville, Ind., to Massachusetts’ 284-bed Quincy Medical Center have declared Chapter 11. In Southern California, Victor Valley Community Hospital filed last September claiming $20 million worth of debt, and Doctors’ Hospital of Slidell in New Orleans went bankrupt this February.

New Jersey and New York have been hit hard as well. Peninsula Hospital in Queens began bankruptcy proceedings in August, following the path of St. Vincent’s Hospital in New York and Hoboken University Hospital in New Jersey. St. Vincent’s and Hoboken’s bankruptcy filings have been mired in controversy and claims of fraud, however. News leaked that Hoboken University Hospital filed bankruptcy on August 1, naming 5,000 creditors at the same time its CEO received a $600,000 payout upon resigning.

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