Hospital Bankruptcies: Why You Should Take A Closer Look

Are any hospitals going bankrupt in your community?

Karen M. Cheung, editor of FierceHealthcare, suggests in a recent story that you might want to dig deeply into their reasons for doing so:

It may be a desperate measure, but hospitals' filing bankruptcy may be the latest strategy to avoid lawsuits and payments, compensate top execs, or sell the hospital to another company. Hospitals that have recently filed for Chapter 11 are under the watchful eye of the public, who speculate on the reasons for filing bankruptcy papers.

Cheung highlights three hospitals now drawing scrutiny over their bankruptcy motivations, including a New Jersey hospital whose Chapter 11 filing means it won't have to pay $2 million in taxes to the city of Hoboken. The hospital's attorney counters that "the city's leaders held back millions in contractual payments so that the facility appeared to be in financial distress," she noted in a September 15 update.

This isn't just a boring health care finance story. Hospitals filing for bankruptcy could conceivably renege on expensive malpractice settlements, pay executives exorbitant bonuses, raid pension funds, close outpatient clinics or emergency rooms, lay off workers or renegotiate union contracts with less favorable terms for health workers.

Or, they could simply shut down altogether and sell their land holdings to luxury real estate developers, as St. Vincent's Hospital in New York is accused of doing.

If this is a trend, it's certainly worth following, especially as hospitals nationwide reevaluate their business models in the wake of health reform. What's happening in your region?

Reporting Resources:

Special report: Financially sick hospital syndrome, DotMed News

Covering Safety-Net Hospitals: Health Reform, Local Budget Cuts: Veteran journalist Karl Stark offers tips for investigating safety net hospital finance.

Digging Into Hospital Finances: Five key documents and recent trends: more tips from Karl Stark.