An Important Community Health Care Organization Was on the Verge of Shutting Down — CFGI Helped It Persevere After Bankruptcy

This community health care organization fills a vital health care need for many low-income members of the community. When the hospital faced financial difficulties, it seemed possible that the facility would have to shut its doors. With additional persistence, guidance and support, that didn’t happen.

• A vital health care resource remained available to the community.
• By staying in operation, hundreds of jobs were preserved.
• Substantial support for the hospital from the state continued.

Providing medical care in an underserved community means that many people in the area have to rely on the nearest hospital emergency department instead of going to a primary care physician. Even for individuals who use other outpatient services, but who have limited insurance coverage, the hospital can wind up facing steep costs to provide the necessary level of support. Under this kind of strain, the organization was losing cash rapidly and facing possible closure. With pressure building from the community residents, the state was induced to provide support as CFGI led the hospital through its formal bankruptcy proceeding.

Handling more than 200,000 outpatient clinic visits each year, the medical facility serves a high proportion of people who have limited financial means. The hospital states that about 15% of its outpatient support goes to people who are uninsured and unable to pay, while 60% of paying individuals have Medicaid or managed Medicaid.

Providing care to individuals in need while facing limited reimbursements and mounting expenses

The hospital found that charity care expenses were rising, leading to lower reimbursement rates. Residents who didn’t have insurance or a designated primary care provider often had to use the emergency department for routine health needs — an expensive solution for receiving basic services — and the hospital had to foot the bill. In addition to the costs associated with treating patients who had no insurance, reimbursements from Medicaid were often lower than those received from private insurance companies. According to the hospital, just 2% of the payer mix consisted of individuals who had commercial insurance.

The financial situation was tenuous. The state was one of this health care organization’s main creditors. Costs were rising while political pressure remained to keep the facility operational. Given that there were few medical facilities nearby that possessed the hospital’s capabilities, it filled an essential role in the fabric of the community.

Pending medical malpractice litigation was an additional factor contributing to the organization’s overall financial troubles. The hospital’s fiscal future was looking more challenging as time passed.

To help relieve some of the pressure, CFGI’s restructuring team was asked to evaluate the situation and provide possible solutions.

Preparing new solutions and laying the groundwork for a way through financial distress

When our experts arrived, we helped the health care facility file for Chapter 11. This allowed the hospital to obtain a stay from creditors while working to restructure its existing debt and right-size its cost structure.

During this time, after developing a closure plan, which was met with strong resistance from constituents, CFGI and the community health care facility were able to negotiate for additional funding from the state.

Buoyed by this support, we continued our efforts to help set the hospital up for longer-term sustainability by working with vendors to receive goods and credit. CFGI’s restructuring team also prepared complete financial projection models as well as a comprehensive five-year business plan and 13-week cash flow forecasts. We provided guidance for short-term cash concerns while facilitating a long-term road map for lasting financial viability.

The hospital’s new direction was starting to take shape, and it was becoming clear that there was a future where this facility could move forward confidently with a strong financial foundation.

Exiting bankruptcy, the hospital had the funding and support it needed to keep going

As the organization emerged from Chapter 11, the hospital had a renewed commitment of significant financial support from the state.

Furthermore, medical malpractice claims were settled through the bankruptcy process with the additional assistance of state-provided funds. This meant that financial resources were freed up for providing patient care and more.

By remaining open and continuing to serve the surrounding community, the hospital retained hundreds of jobs while maintaining its presence as a crucial medical provider in an underserved area.

This medical facility continues to provide life-saving health care, psychiatric support and more to the residents in the neighborhood and beyond. After facing the possibility of closure, the hospital has built back stronger, ready to continue treating patients in the community.

Regardless of whether your organization is in the health care space, the retail sector or another industry, CFGI’s restructuring services can help you navigate the troubled waters of financial distress. Our professionals possess a wide variety of specialized subject matter expertise and extensive experience in out-of-court restructuring solutions, as well as Chapter 11 bankruptcy proceedings.

If you’re facing a difficult financial future, we know that the obstacles in your way can sometimes seem insurmountable. We can provide assistance. Reach out to our team today to find out what we can do for you.