Years of multi-million dollar loses has forced the Walker County Hospital Corporation, the private operator of Huntsville Memorial Hospital, to file for bankruptcy protection.
The hospital corporation’s bankruptcy has been telegraphed for over a year. It failed to make rent payments to the taxpayer-funded Walker County Hospital District, and needed a multi-million dollar subsidy from the same organization to make payroll in September 2018.
The financial woes were the culmination of years of losses due to inflated salaries, alleged insurance fraud and failing attempts to establish a network of clinics.
However, the hospital will remain open due to a taxpayer takeover, which will involve a new joint-venture nonprofit between the Walker County Hospital District and Plano-based healthcare provider Community Hospital Corporation.
“This move ultimately supports HMH’s successful completion of a strategic partnership to preserve quality, local healthcare,” said Mac Woodward, Walker County Hospital Corporation Board Chair. “In the end, the hospital’s goal is to emerge a more focused and profitable organization that’s better positioned to provide quality care for generations to come.”
The hospital district gave authority to its chairman Anne Woodard authority to execute an asset purchase agreement with the hospital corporation, along with finalizing a management agreement with CHC during a special session last week.
“After discussions with our attorney, we have decided to go down this path, which is the next step in the process,” district board member Dr. David Toronjo said following the vote. “The welfare of the public and the taxpayers of Walker County has to be our No. 1 priority. … Our goal is to maintain a hospital in Walker County and this is the next step.”
The hospital corporation bankruptcy protection was filed Monday morning in the United States Bankruptcy Court for the Southern District of Texas under Chapter 11 of the United States Bankruptcy Code.
“This is simply the next step in our journey to protect local healthcare,” said Steven L. Smith, CEO of HMH. “While we have faced challenges in the past, we have made significant strides over the past year and have much to be proud of – from the American Heart Association’s Stroke award to the patient care advancements in the ED to the 49.9 percent improvement in our operating margin and 46.5 percent increase in our net margin. Our caring and talented employees, providers and caregivers have been working hard day in and day out to improve the quality of the care we provide, and because of them, we’re in the best position to enter a strategic partnership.”
The decision comes at the end of a year-long journey by the Walker County Hospital District Board to explore options for the future of the hospital. Walker County Hospital Corporation began a process in September 2018 to identify a potential strategic partner to better position HMH to provide quality, local healthcare long into the future.
“A number of highly-respected health systems formally indicated interest in exploring a future with HMH, and we were pleased that the District Board signed an LOI with CHC,” Woodward said. “After much deliberation and discussion, our financial advisors counseled us that Chapter 11 was necessary to enable a successful partnership with CHC or another strategic partner.”
Across the country, hospitals and health systems are taking similar actions to protect local healthcare access. Amid a changing industry, rural and community hospitals are filing for Chapter 11 as a way to address industry challenges and restructure their finances that ultimately allows them to partner with other health systems.
Hospital officials said they anticipate completing the Chapter 11 process within three to five months. In the meantime, it’s business as usual at HMH.
“Nothing changes today for our patients or employees,” Smith said. “All of our physicians, nurses, employees and caregivers will continue to provide quality, compassionate care, just as we always have. We are offering the same quality care provided by the same experienced physicians and employees in the same location.”
Huntsville Memorial Hospital is a joint-commission-accredited, not-for-profit acute care community hospital. Founded in 1927 to memorialize those lost in World War I, the facility has provided effective health care services, delivering quality care to the residents of Walker County and its surrounding communities.