Coronavirus crisis puts bankrupt hospitals back in demand

These hospitals' rebirth comes as health-care facilities are being pushed to their limits by the pandemic

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From small-town Vermont to Los Angeles, local governments are commandeering shut-down hospitals to add space amid the coronavirus pandemic -- a trend that could revamp the market for health-care facilities.

Just months ago, St. Vincent Medical Center in Los Angeles and Astria Regional Medical Center in Yakima, Wash., were closed, unable to bring in enough revenue to stay afloat. Both are poised to reopen with the help of state funds and, in the case of St. Vincent, $135 million from the family foundation of Patrick Soon-Shiong, the billionaire owner of the Los Angeles Times.

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In Vermont, a bankruptcy court pulled back from the brink one of many hospitals facing a financial squeeze from the drop-off in lucrative surgeries that are critical to their bottom lines. In West Virginia, a government-funded community health-care group stepped in with a deal that will save critical beds at another bankrupt small hospital.

These hospitals' rebirth comes as health-care facilities are being pushed to their limits by the pandemic. As medical centers across the U.S. prepare for an influx of hundreds of thousands of new patients, President Trump is expected to use a federal stimulus package to pay hospitals that treat uninsured people infected with the new coronavirus.

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Bankruptcy judges are acting quickly on creative arrangements that allow public officials to rescue health systems that could be pushed to their limits by a surge in Covid-19 cases.

Vermont has agreed to prop up ailing Springfield Hospital, in the southeast of the state, with a loan approved in court Thursday. Without the state loan, Springfield could have been forced to close due to a drop-off in revenue as people forgo elective medical care, according to court papers.

Bankruptcy-court records show that Springfield Hospital brought in revenue of $121.2 million in the fiscal year ended September 2018, the most recent complete year available, up from $115.4 million the previous year.

If Springfield closed, people with Covid-19 infections severe enough that they can't breathe without assistance would face a 45-minute drive to the nearest hospital.

"The global pandemic is having a significant negative impact on small rural hospitals. Outpatient visits are drying up and nonessential procedures are not taking place in many of these hospitals," said Andrew Helman, a lawyer for Springfield.

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Rick Gundling, an executive with the Healthcare Financial Management Association, a trade group, said the pandemic invites a discussion on whether society should maintain excess capacity -- too many beds -- during normal times that can be put into service when needed.

"Maybe having some excess is good, and maybe we as a society agree we will share in the costs of being able to flex up for something like this, " he said. "We're right in the middle of the pandemic, so people are not thinking long term yet. But this will cause a national conversation."

Springfield has 25 hospital beds and another 12 beds in its busy emergency room, which logged 16,235 visits in 2018. The hospital also has testing and laboratory facilities, four ventilators and hundreds of employees.

But pandemic rules against nonessential activity have squeezed the revenue streams at Springfield so badly that the hospital could have been forced to choose between making payroll and buying supplies, had Vermont not stepped in, court papers said.

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Losing out on revenue from outpatient and elective procedures, small rural hospitals are also looking at increased demand for emergency care due to the pandemic, Mr. Helman said. He said he has alerted the judge overseeing the bankruptcy turnaround efforts of Penobscot Valley Hospital and Calais Regional Hospital in Maine about the financial squeeze of Covid-19.

"I have been working closely with states where my chapter 11 hospital clients are located to obtain necessary support," Mr. Helman said. "These businesses need to stay open."

Pennsylvania health chief Rachel Levine said Wednesday the state is deciding whether to reopen Ellwood City Medical Center, which was stripped of its license in February. The facility's owner, Americore Health LLC, filed for chapter 11 bankruptcy protection last year.

Not all attempts to save shut-down hospitals work out.

The historic Hahnemann University Hospital in Philadelphia, which closed last year, has elevators that are mostly out of service and it has been stripped of ventilators, masks, beds and other critical supplies, which were auctioned off to pay creditors, according to a person who was on site in the final days.

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Hahnemann was considered a candidate for reopening until Los Angeles businessman Joel Freedman, who controls the property, asked for rent that, according to his spokesman, Sam Singer, was market rate.

Philadelphia authorities decided they had better options and said the once-thriving institution would have absorbed too much public funding to be made usable. Vacant for months, Hahnemann wasn't in the same market as hospitals that were closed more recently or that were ailing but open.