Large Texas Health Care System Looking to Restructure Debt
University General Health System, Inc. of Houston, Texas filed for Chapter 11 bankruptcy protection on February 27, 2015. The diverse health care system has an estimated $50 million in debt, while only owning $10 million in assets. The bankruptcy filing will allow the company to reorganize itself and restructure its debt.
University General Health Systems, commonly known in the Texas as UGHS, is a comprehensive health network, that includes University General Hospital, an acute care hospital, three ambulatory surgical facilities, diagnostic imaging centers, physical therapy and sleep clinics, as well as a wound care center.
Several poor financial decisions have had a major impact on the Texas health care system, whose main hospital is located in Houston. Additionally, decreased revenue and the inability to properly deal with claim collections were cited as reasons for the decision to file for Chapter 11 bankruptcy protection.
“The filing was a difficult decision, but one that the Board believes will allow the Company to focus on improving operations at its flagship Houston hospital, while simultaneously creating a stronger financial foundation upon which to build its comprehensive strategic plan,” explained Hassan Chahadeh, M.D., Chairman and CEO of University General Health Systems. “This restructuring, once fully implemented, should provide UGHS with a much improved balance sheet and a capital structure that is more appropriate for its current business model.”
Earlier Downsizing Proved Insufficient
In past years, UGHS attempted to avoid filing for bankruptcy, with a number of significant financial moves. This included selling one of their hospitals in Dallas, a senior living facility and several outpatient departments that were not generating enough revenue.
UGHS now hopes that filing for Chapter 11 bankruptcy protection will enable them to further improve their tough fiscal situation.
“We have improved our revenue cycle management through a partnership with a nationally recognized leader in the industry,” Chahadeh said. “These operational changes have already reduced our costs by $13 million per year, with additional savings of approximately $1 million per month as a result of the Dallas hospital closure. We believe that the restructuring will allow us to emerge from Chapter 11 with a much-improved balance sheet and a healthy business that is positioned to achieve long-term success.”
Chapter 11 is the Right Decision for UGHS
By filing Chapter 11, UGHS expects to reduce their debt, and restructure their company in a way that will allow the health care system to stay open and develop as a health care leader.
“We believe that, under the circumstances, filing for Chapter 11 was the best course of action for UGHS,” said Chahadeh. “This action enables us to continue operating our business without interruption, while implementing a financial and operational restructuring in a Court-supervised and controlled environment.”
All doctors and other UGHS employees will remain at their positions during the bankruptcy proceedings. Additionally, all patients will continue to receive treatment.