- Pipeline Health System, operator of seven safety net hospitals in California, Texas and Illinois, filed for Chapter 11 bankruptcy protection Monday in the Southern District of Texas, citing soaring costs for labor and supplies, aging facilities, government funding cuts and failure to close on a deal to sell its two Chicago area hospitals that would have brought in $92 million.
- El Segundo, California-based Pipeline said in court documents that large financial losses at the two facilities, Weiss Memorial Hospital in Chicago and West Suburban Medical Center in Oak Park, meant the system's California and Texas operations were subsidizing its Illinois operations.
- The two Chicago area hospitals lost $69.7 million in the 12 months ended in August, according to a statement from Pipeline Chief Transformation Officer Russell Perry filed with the court. Perry was appointed to the position at Pipeline on Aug. 24 and is also a senior managing director of Ankura Consulting Group.
The deteriorating financial health of many health systems in 2022 has prompted a series of warnings from sector experts and leaders about the ability for facilities with weak liquidity to remain solvent. More than half of U.S. hospitals could end the year with negative margins, according to a projection last month prepared for the American Hospital Association by Kaufman Hall.
Dramatic increases in costs for labor, drugs, supplies and equipment are putting enormous strains on providers, the AHA has warned. A study published in the journal Health Affairs this summer also cautioned that hospitals with a higher share of Medicare patients were more likely to close or be acquired.
In the case of Pipeline, costs for nurses, contract labor and medical supplies have skyrocketed, the filing said, adding that its aging facilities require extensive capital expenditures to maintain.
In addition, two-thirds of Pipeline's patients rely on Medicare, Medicaid or other government programs for health coverage. Pipeline has recently experienced a number of "material funding delays" in connection with government health programs that have put the system under significant financial strain, the filing said.
Since the deal to sell its Illinois hospitals by Aug. 30 fell through, Pipeline's cash position has continued to decline, the court document said. The Chapter 11 process will give Pipeline the resources to keep its hospitals open and care for patients, the system said in a press release.
Pipeline said it has secured financial commitments to ensure its hospitals continue to operate during the Chapter 11 process. The system has held further discussions on a possible sale of the Illinois properties to Resilience Health. If a deal cannot be reached, Pipeline said it plans to undertake a process to identify other potential buyers.
In addition to the Illinois facilities, Pipeline owns White Rock Medical Center in Dallas and Memorial Hospital of Gardena, Coast Plaza Hospital, Community Hospital of Huntington Park, and East Los Angeles Doctors Hospital in the Los Angeles area.