Bankruptcy filings in the healthcare industry for 2024 have been on pace to record significantly fewer filings than in 2023.
About 58 healthcare companies with $10 million or more in liabilities were heading for bankruptcy filings by the end of 2024 for a 27% decline compared to 2023, which recorded 79 such cases, healthcare restructuring advisory firm Gibbins Advisors reported in its Interim 2024 Report in August.
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Healthcare companies will likely conduct out-of-court restructurings and bankruptcy case volume could increase later in the year, Gibbins said in a report.
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The largest U.S. private hospital operator Steward Health Care, which operated 31 hospitals in eight states, in May filed for bankruptcy to sell its assets to reduce its $9 billion in debt. In September the debtor sold six hospitals in Massachusetts for $343 million.
In addition to the largest hospital chain, much smaller healthcare facility operators are also struggling and need to file for bankruptcy protection.
Hospital operator CarePoint files for Chapter 11 bankruptcy
Hospitals and health center operator CarePoint Health Systems, whose facilities operate as safety nets for a large underprivileged community, on Nov. 4 filed for Chapter 11 protection in the U.S. Bankruptcy Court for the District of Delaware to reorganize its unsustainable debt.
The New Jersey-based debtor claimed in court papers that it faced financial and liquidity challenges resulting from unreimbursed Covid-19 expenditures and inadequate state government funding to cover a disproportionately large number of uninsured and undocumented patients who are admitted through its emergency rooms.
CarePoint operates Bayonne Medical Center, Christ Hospital in Jersey City, N.J., and Hoboken University Medical Center in Hudson County, N.J., with a mission to treat patients with compassion and improve the health of the communities they serve.
Related: Another distressed retail chain files for Chapter 11 bankruptcy
The amount of free and inadequately reimbursed services provided to these patients, however, is the main reason for CarePoint's financial distress, the debtor's Chief Financial Officer Shamiq Syed said in a declaration.
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The debtor listed $100,000 to $500,000 in assets and $50 million and $100 million in liabilities in its petition, including $165 million in unsecured trade debt that it has been unable to pay and has resulted in 53 pending lawsuits.
All litigation is subject to an automatic stay while the bankruptcy case proceeds.
The debtor's top unsecured creditors include CarePoint Health Captive Assurance, owed $18.9 million in insurance payments; Internal Revenue Service, owed $16.5 million in taxes; and County of Hudson, N.J., owed $15.7 million in taxes. The debtor also listed over $107.1 million in prepetition secured obligations.
CarePoint reached an agreement with Hudson Regional Hospital to provide $25 million in debtor-in-possession financing of which it will seek approval from the bankruptcy court.
Hudson Regional Hospital reached a prepetition agreement with CarePoint affiliate IJKG Opco LLC to transfer Bayonne Medical Center to Hudson. IJKG is listed as the entity that owns Bayonne.
An affiliate of Hudson is the landlord of Bayonne, whose lease is in default and was terminated, according to court papers. The bankruptcy court would need to approve a transfer, according to court papers.
IJKG is currently not part of the Chapter 11 case, since it has not received consent for the bankruptcy from a 9.9% minority shareholder. IJKG has submitted a motion with the bankruptcy court for up to $42 million in DIP financing from Hudson Regional Hospital once it is included in the bankruptcy case.
Bayonne is a 278-bed acute care facility, Christ Hospital is a 349-bed acute care facility, and Hoboken University Medical Center is a 348-bed acute care facility.
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