New Hampshire Hospital Group Goes Bankrupt After Covid Stress
(Bloomberg) -- LRGHealthcare filed for Chapter 11 on Monday, the latest hospital chain to succumb to disruptions from the novel coronavirus.
The company is luckier than other medical groups that have been forced to shutter. It has a so-called stalking horse offer from Concord Hospital Inc. for Lakes Region General Hospital, Franklin Regional Hospital and the hospitals’ ambulatory sites, according to a statement on its website and court papers. The group plans to conduct a sale process and auction for the assets.
The pandemic has pushed a cohort of struggling U.S. hospitals into deeper financial distress as they cope with the cost of care and precautions, a slowdown in profitable elective procedures, and a loss of lucrative privately insured patients. The American Hospital Association released a report in July from Kaufman, Hall & Associates that estimated as many of half of U.S. hospitals could be losing money by year-end. Population shifts from rural areas have also pressured many institutions.
Problems at LRG, which listed liabilities of more than $100 million, began many years before the virus gut-punched the U.S. economy.
Previous managers invested in inpatient care at a time when “patient demographics and medical trends indicated more reliance on outpatient services and decreased hospital use,” according to a court declaration. Costs rose, reimbursements fell, and it lost patients to other communities. The Laconia, New Hampshire-based company made extensive cost cuts, including eliminating more than a fifth of its workforce, but found that the reductions “did not result in profitability or sustainability.”
In 2018, the company tried to sell itself to a larger system but wasn’t successful, with most bidders wary of its large debt load. It eventually made an agreement to sell itself to Concord.
The company got a $5.25 million loan from the state of New Hampshire in April and about $15 million from the CARES Relief Fund, according to a court filing, but it wasn’t enough to offset a “tumultuous” previous decade.
When the pandemic hit, the hospital only had three days of cash on hand. Revenues fell 60% in the first weeks, but with the government money, it was able to keep operating, though barely. “Without further relief, closure was otherwise imminent,” the company said in the filing.
As of the filing date, about 38% of its staff of about 1,400 full and part-time workers is furloughed and it’s bringing in only about 80% of its normal revenue. In 2019, LRGHealthcare had net patient revenues of almost $206 million, court documents show.
The case is LRGHealthcare, 20-10892, U.S. Bankruptcy Court, District of New Hampshire (Concord)
©2020 Bloomberg L.P.