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Chapter 9: A Tool for Ailing Healthcare Districts

First few Article Sentences

Healthcare districts, like many quasi-government organizations, continue to face serious financial challenges that have resulted in hospital closures, affiliation with other entities, or a downsizing from a full-service facility to a strictly outpatient focused organization. Some of the "red flags" of potential serious financial distress include: failure to meet debt coverage covenants; late or limited financial statements; large swings in contractual allowances and bad debts; the need for accelerated property tax receipts; declining days of cash on hand, along with large increases in accounts payable.

Sometimes, despite the red flags, filing for protection under the federal bankruptcy section Chapter 9 may be the only way to buy the time to avoid financial ruin. Chapter 9 often has a very negative connotation. In reality, however, it is useful for a health care district to think of it as merely a tool, or a "timeout," to afford time to implement cost efficiencies, revenue improvement initiatives, affiliation with another organization, or a combination of these efforts. This is often done when attempts to negotiate terms with vendors have been unsuccessful. Chapter 9 may also provide an opportunity to keep or reject contracts, preferably with the advice of legal counsel.

Haskins, Sandy


HFS Consultants

Chapter 9

June 17, 2015

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