Citing skyrocketing labor and supply costs and delayed insurance reimbursements, a Los Angeles-based hospital chain has filed for Chapter 11 bankruptcy protection in a move that will impact facilities in Norwalk, Gardena, Huntington Park and East L.A.
Pipeline Health System LLC filed its petition Sunday, Oct. 2 in U.S. Bankruptcy Court for the Southern District of Texas.
The company operates seven hospitals in three states. Locally, they include Coast Plaza Hospital in Norwalk, Memorial Hospital of Gardena, Community Hospital of Huntington Park and East Los Angeles Doctors Hospital.
The other two are Weiss Memorial Hospital and West Suburban Medical Center in Chicago.
Keeping operations going
“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 a statement.
The company said it has secured financial commitments to keep its operations running and will continue to pay salaries and fees, while also purchasing needed equipiment and supplies during the bankruptcy process.
Chapter 11 will provide Pipeline with the needed flexibility and resources to continue operations and care for patients as the company charts a long-term, sustainable path forward, officials said.
Part of the strategy will be to complete the planned sale of the two Chicago hospitals to Resilience Healthcare, which was approved by the Illinois Health Facilities and Services Review Board on June 7.
If Resilience is unable to close the sale, Pipeline said it will market the hospitals to other potential buyers. The company didn’t say how much money it expects to receive from the sale.
The company said its decision to restructure its operations has been driven by industry-wide financial challenges that have been exacerbated by the COVID-19 pandemic, including skyrocketing labor and supply costs, a decreased ability to generate revenue and delayed reimbursements from insurance plans for patient services already delivered.
“As we move ahead, our patients, team members, vendors and communities can expect ongoing and transparent updates on our progress,” Soran said, when the bankruptcy filing was announced. “It’s important to know that our patients do not need to reschedule appointments as a result of today’s announcement.”
Hospitals stressed nationwide
The pandemic has stressed hospital finances across the nation.
More than 47 hospitals closed or entered bankruptcy in 2020, according to Becker’s Healthcare. And at the peak of COVID-19 hospitalizations in January 2022, roughly one in five hospitals reported critical staffing shortages.
A recent report from the American Hospital Association (AHA) says hospitals have faced significant revenue losses and skyrocketing expenses.
“Hospitals did not receive any government assistance through the COVID-19 Provider Relief Fund to help mitigate rising expenses and lost revenues during the delta and omicron surges,” the report said. “At the same time, patient acuity has increased, as measured by how long patients need to stay in the hospital.”
Data from Kaufman Hall, a consulting firm that tracks hospital financial metrics, shows that by the end of 2021, total hospital expenses were up 11% compared to pre-pandemic levels in 2019.
A big part of that is a deeper reliance on travel nurses to fill staffing shortages. In 2019, hospitals spent a median of 4.7% of their total nurse labor expenses for contract travel nurses, the AHA report said, but that skyrocketed to a median of 38.6% in January 2022.
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