Becker's Hospital Review

15 CFO / FINANCE 29 hospital bankruptcies in 2020 By Ayla Ellison F rom reimbursement landscape chal- lenges to dwindling patient volumes, many factors lead hospitals to file for bankruptcy. At least 29 hospitals across the U.S. had filed for bankruptcy as of June 3, and the financial challenges caused by the COVID-19 pandemic may force more hospi- tals to enter bankruptcy in the future. COVID-19 has created a cash crunch for many hospitals across the nation. ey're estimated to lose $200 billion between March 1 and June 30, according to a report from the American Hospital Association. More than $161 billion of the expected revenue losses will come from canceled services, including nonelective sur- geries and outpatient treatment. Moody's In- vestors Service said the sharp declines in reve- nue and cash flow caused by the suspension of elective procedures could cause more hospitals to default on their credit agreements this year than in 2019. e hospitals that have filed for bankruptcy this year, which are part of the health systems listed below, have not cited the pandemic as a factor that pushed them into bankruptcy. ough most of the hospitals are operating as normal throughout the bankruptcy process, at least two of the hospitals that entered bank- ruptcy this year have shut down. Quorum Health Brentwood, Tenn.-based Quorum Health and its 23 hospitals filed for Chapter 11 bankrupt- cy April 7. e company, a spinoff of Franklin, Tenn.-based Community Health Systems, said the bankruptcy filing is part of a plan to recapi- talize the business and reduce its debt load. Randolph Health Randolph Health, a single-hospital system based in Asheboro, N.C., filed for Chapter 11 bankruptcy March 6. Randolph Health lead- ers have taken several steps in recent years to improve the health system's financial pic- ture, and they've made progress toward that goal. Entering Chapter 11 bankruptcy will al- low Randolph Health to restructure its debt, which officials said is necessary to ensure the health system continues to provide care for many more years. Faith Community Health System Faith Community Health System, a single-hos- pital system based in Jacksboro, Texas, filed for bankruptcy protection Feb. 29. e health sys- tem, part of the Jack County (Texas) Hospital District, entered Chapter 9 bankruptcy — a bankruptcy proceeding that offers distressed municipalities protection from creditors while a repayment plan is negotiated. Pinnacle Healthcare System Overland Park, Kan.-based Pinnacle Health- care System and its hospitals in Missouri and Kansas filed for Chapter 11 bankruptcy on Feb. 12. Pinnacle Regional Hospital in Boon- ville, Mo., formerly known as Cooper Coun- ty Memorial Hospital, entered bankruptcy about a month aer it abruptly shut down. Pinnacle Regional Hospital in Overland Park, formerly called Blue Valley Hospital, closed about two months aer entering bankruptcy. Thomas Health South Charleston, W.Va.-based omas Health and its two hospitals filed for Chapter 11 bankruptcy Jan. 10. In an affidavit filed in the bankruptcy case, omas Health Pres- ident and CEO Daniel Lauffer cited several reasons the health system is facing financial challenges, including reduced reimburse- ment rates and patient outmigration. e health system said the bankruptcy process will help it address its long-term debt and pursue strategic opportunities. n New IRS rules target nonprofit hospital exec pay By Ayla Ellison T he Internal Revenue Service on June 5 issued guidance that implements a change in the 2017 tax overhaul that imposed a 21 percent excise tax on compensation paid to executives at some nonprofit organizations, according to Bloomberg Tax. Under the 2017 law, there's a tax on a nonprofit orga- nization's five highest-paid employees earning at least $1 million. The tax, paid by the organization, has been in effect since 2018, but the new guidance provides details on how to calculate employee wages and other compensation to determine if the tax applies, accord- ing to the report. Under the proposed rule, any deferred compensation or retirement bonus not vested before the first taxable year beginning after Dec. 31, 2017, is subject to the tax, according to the American Hospital Association. The AHA urged Congress to provide an exception for existing contracts or nonqualified deferred compensa- tion plans for tax-exempt healthcare organizations. n Advocate Aurora, Beaumont merger would create $17B system with 36 hospitals By Ayla Ellison A dvocate Aurora Health and Beaumont Health an- nounced June 17 that they signed a nonbinding letter of intent to create a health system spanning Michigan, Wisconsin and Illinois. The possible combination of Southfield, Mich.-based Beau- mont and Advocate Aurora, which has dual headquarters in Downers Grove, Ill., and Milwaukee, would create a $17 billion system with 36 hospitals, according to the Chicago Tribune. Beaumont has eight hospitals in Michigan; Advocate Aurora has 16 hospitals in Wisconsin and 12 in Illinois. A combined system would also include more than 545 outpatient sites, about 108,000 employees and more than 13,000 physicians. Though talks are ongoing, the health systems already have agreed to an equal one-third governance representation of any future partnership between Beaumont, Advocate Health Care and Aurora Health Care, which merged in 2018 to create Advocate Aurora Health. n

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