Brentwood-Tenn.-based Quorum Health Corp., which operates two hospitals in Metro East, has filed for Chapter 11 bankruptcy.
The filing was made Tuesday in the U.S. Bankruptcy Court for the District of Delaware. According to a release, Quorum and its lenders have entered into a restructuring support agreement to reduce the company’s debt by $500 million and recapitalize the business.
Quorum owns QHR Health and 23 affiliated hospitals, including Gateway Regional Medical Center in Granite City and Red Bud Regional Hospital in Red Bud. The hospitals will remain open and employees will continue to get paid, the company said.
“We believe the financial restructuring plan announced today will strengthen our business and enable our community hospitals to continue the important work they are doing in addressing the COVID-19 crisis, as well as serve their patients and communities,” Quorum CEO Bob Fish said in the release. “Quorum Health has been transparent about the need to restructure our debt over the past year. We believe the RSA will significantly reduce our debt and annual interest expense and better position our company, our affiliated hospitals, and our hospital management and consulting company, for future growth. The RSA will also build on the significant progress we have made to strengthen our operations. We are grateful for the support of our financial stakeholders, which we believe represents a statement of confidence in our business and enables us to move through this process on an expedited basis.”
In a statement on the company’s website, Fish said the move “represents a critical step toward long-term financial stability.”
“We believe the financial restructuring plan will strengthen our business and enable our entire Quorum family … to continue the important work they are doing in addressing the COVID-19 crisis, as well as serve their patients and communities,” he said.
“Our company has been transparent about the need to reduce the large amount of debt and the associated high interest rate inherited when Quorum Health was formed in 2016. By working with key investors in advance, we have been able to utilize the rules under Chapter 11 of the U.S. Bankruptcy Code to recapitalize the company,” he said.
The operations of Quorum Health and our hospitals are unaffected and all facilities are open and available to provide patient care.
“Our subsidiary, Quorum Health Resources, is also continuing to provide the same high quality services to its hospital, health system and healthcare provider clients. Employees will be paid in the ordinary course for the work they perform, and key vendor relationships remain intact.”
“This process, which is expected to last approximately two months, will allow our company to maintain operations during a critical time. Upon emergence, I am confident Quorum Health will be better positioned to navigate this new reality and fund future growth.
“Thank you for your continued support of our company and its mission to serve the healthcare needs of rural and non-urban communities,” the statement said.
Following is an FAQ offered on the company website.
What does this mean? Is QHC going out of business? Will the company and its hospitals continue operating?
This balance sheet restructuring does not affect the company’s operations. Our hospitals remain open and available to care for patients and the QHR Health subsidiary will continue serving its hospital, health system and healthcare provider clients.
Is this filing related to the COVID-19 pandemic?
While Quorum Health has been transparent about the need to restructure the size and cost of its debt for many months, this action comes at a critical time. Our ability to continue meeting the needs of the patients and communities we serve is more important than ever. We believe this financial reorganization not only ensures Quorum hospitals can continue to care for their communities during this unprecedented time, but also better positions our company for future growth.
Why is this happening?
Though earnings from overall operations have been positive, the size and cost of the debt that was put in place when the company was formed in 2016 have significantly limited our ability to manage and fund growth. This financial restructuring plan will allow us to build upon the important progress we have made in recent years while reducing our total debt and improving our interest rate. It is also intended to ensure Quorum hospitals have the resources and cash flow needed to continue operating throughout the COVID-19 crisis.
Will patient care be impacted?
No. We will continue caring for patients as we always have. The intent of the plan is to ensure that patients and families experience the same care that exists today.
How long will the restructuring process last?
The process is expected to last approximately two months.