Owner Of 2 Chicago Hospitals Files For Bankruptcy After It Fails To Sell Them
Pipeline Health System, the for-profit owner of two Chicago-area hospitals, filed for Chapter 11 bankruptcy over the weekend after the sale of both properties failed to close on time, leaving it with an onerous debt load made worse by the pandemic.
The El Segundo, California-based company, which also operates safety-net hospitals for patients heavily reliant on government healthcare programs in California and Texas, filed for bankruptcy protection in Texas Southern Bankruptcy Court, citing $603M in debt, including about $330M in secured term loan debt, Law360 reports.
The hospital system pointed to “skyrocketing labor and supply costs, decreased ability to generate revenue and delayed payments from various insurance plans for critical patient care services already delivered,” in a statement announcing the bankruptcy filing.
The filing follows a delay in Pipeline’s $92M deal to sell off West Suburban Medical Center in Oak Park and Weiss Memorial Hospital in Chicago, which fell through in August.
According to Law360, the filing states that profits from locations in other states have been subsidizing Illinois operations. A plan filed alongside the bankruptcy petition calls for Pipeline to either sell the equity in a reorganized company or unload some of its assets to its lenders through a credit bill of outstanding debt if its previous deal with Resilience Healthcare cannot close.
In comments to Crain’s Chicago Business, Pipeline spokeswoman Jane Brust said the delayed deal with Michigan-based healthcare management group Resilience is still active, though no closing date has been set.
“It has taken much longer than we had hoped,” Brust told Crain’s.
Pipeline also operates White Rock Medical Center in Dallas and four facilities in California, including Memorial Hospital of Gardena, Community Hospital of Huntington Park, East Los Angeles Doctors Hospital and Coast Plaza Hospital in Norwalk.
About two-thirds of Pipeline patients relied on government-issued healthcare coverage in 2020, according to Fierce Healthcare. The company was socked with $24M in federal and state reimbursement delays and withheld funding, the website reported, while expenses skyrocketed over the course of the pandemic. The company said in its filing that labor costs alone rose $52M in 2022 through August over pre-pandemic spending.
As it works toward a sale, Pipeline said its doors would remain open.
“We intend for the restructuring process to allow our hospitals to remain open and operating in their communities, while putting the hospital system in a more secure and sustainable financial position going forward,” Pipeline CEO Andrei Soran said in the company’s statement. “Our employees and physicians across the organization have a long tradition of caring for patients in their communities, and our goal is for that care to continue.”
