Dive Brief:
- On Friday, University General Health System (UGHS) and some of its subsidiaries filed for Chapter 11 bankruptcy in an attempt to reorganize.
- The company, which will continue operations while restructuring, is using the Chapter 11 process to reduce debt and strengthen its balance sheet.
- UGHS has been unable to recover from the recent acquisition of several new entities that never achieved profitability and a series of unfavorable managed-care contracts that resulted in lost revenue.
Dive Insight:
Amy Landry, assistant professor in the Department of Health Services Administration at the University of Alabama Birmingham, told HealthCare Finance that hospitals often have plenty of warning before filing for bankruptcy, but choose to ignore the warning signs (e.g., decreasing patient volumes, reimbursement changes and deteriorating physician relationships).
In a recent study on hospital bankruptcies conducted by Landry, 67% of the hospitals that filed for bankruptcy eventually closed, while only 33% were able to successfully restructure. Whether or not UGHS will be able to successfully reorganize will depend on their payer mix, local competition, patient volume and service lines.