Promise Healthcare Group, a hospital and nursing home chain based in Boca Raton, Fla., filed for Chapter 11 bankruptcy on Nov. 4.
Promise and more than 40 of its affiliates entered bankruptcy after years of financial troubles. In bankruptcy court documents, Promise reported more than $565 million in combined debt.
"While I believe that the Debtors' overall business is fundamentally strong, the Debtors have been operating with an unsustainable balance sheet due to current industry dynamics and certain underperforming facilities within the Debtors' portfolio," Andrew Hinkelman, chief restructuring officer and interim CFO of Promise Healthcare Group, said in bankruptcy court documents.
Mr. Hinkelman pointed to several factors that lead to Promise's financial struggles, including changes to Medicare reimbursements that caused revenue to decline significantly during 2015 and 2016. "When rates declined sharply, the Debtors were unable to adjust operating cost structures at the facilities, leading to a direct impact on profitability," he said.
Promise ended fiscal year 2016 with a net loss of $5.2 million, and it reported a $25.2 million loss in fiscal year 2017. As of Sept. 30, the company had an $8.2 million loss for this year.
The company has obtained debtor-in-possession financing and has hired advisers to implement a restructuring plan that will include the sale of some or all of Promise's assets, according to bankruptcy court documents.
Promise and its affiliates currently operate two short-term acute care hospitals, 14 long-term acute care hospitals and two skilled-nursing facilities.
More articles on healthcare finance:
CHS sees net loss swell to $325M in Q3
CMS' final physician payment rule for 2019: 6 things to know
The rural hospital closure crisis: 9 things to know