Many people view hospitals as more public service than businesses dedicated to generating a profit. However, the reality is that many hospitals are indeed focused on profits, although of course most recognize that the path toward profitability is offering the best medical care possible. But, the perception of hospitals as a public service remains, and that can make it a shock when a hospital decides to pursue a bankruptcy filing.
According to a recent report, a hospital in one Western state is filing for Chapter 11 bankruptcy after continuously dealing with significant financial problems with no relief. In the bankruptcy filing the hospital listed liabilities in a range of $1 million to $10 million, and assets of only about $50,000.
This type of wide disparity in assets and liabilities can lead to speculation that the Chapter 11 process for this particular company may not lead to a turnaround after simply submitting a plan for debt reorganization. One of the main benefits of a Chapter 11 filing is that debt relief can be achieved, but from the initial financial statements this hospital submitted it is clear that much work would need to be done in order to return the business to a sustainable profit model.
With such precarious footing, it will be interesting to see if this hospital decides to undertake the hard work toward reorganizing the business, or if it will simply shut down. Each company that pursues a business bankruptcy will be faced with some hard choices, which is why it is so crucial to have all of the right information about the available options. Escondido business owners who find themselves contemplating Chapter 11 bankruptcy should keep that in mind.
Source: Becker's Hospital Review, "Gilbert Hospital Files for Chapter 11 Bankruptcy," Bob Herman, Feb. 18, 2014