How hospitals bounce back from bankruptcy

Most healthcare providers think bankruptcy signals the end of the road, but struggling hospitals can use bankruptcy to begin to rehabilitate themselves. Filing for Chapter 11 bankruptcy gives hospitals a chance to reemerge, whereas Chapter 7 bankruptcy turns them over for liquidation and shuts them down, concludes a special report from DOTmed News. It usually takes a hospital 12 to 18 months to come out of bankruptcy.

For New York-based Auburn Memorial Hospital, its first step toward financial recovery was filing Chapter 11 in April 2007, CFO John Baran told DOTmed. "Four years later and we're still in business, and business is better than ever," he said.

Physicians are crucial to maintaining revenue amid hospital bankruptcy, Richard Gundling, vice president of the Healthcare Financial Management Association, told DOTmed. "At the end of the day, the hospital's customer is the physician," noted Baran. "Physicians admit patients, but you have to have physicians there to treat [patients] in the first place."

Regardless of whether a hospital files for Chapter 11 or Chapter 7 bankruptcy, the healthcare provider must repay creditors, lenders and vendors. Hospitals that are closing their doors often hold an auction--onsite or online-- to bring in funds, notes DOTmed. Hospitals also financially reorganize by cutting administrative costs, staffing and/or services.

So far in 2010, nine hospitals have filed for bankruptcy. Seven hospitals filed for bankruptcy in 2009, according to Bankruptcy Creditors' Service data.

Of the six New Jersey hospitals that filed since 2007, two have reemerged--St. Mary's Hospital and Bayonne Medical Center--notes DOTmed.

For more:
- read the DOTmed News article

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