CRH files for bankruptcy but still operating

In an effort to restructure its debt and maintain operations, Calais Regional Hospital (CRH) filed for Chapter 11 bankruptcy protection on September 17. The hospital's operations - including handling roughly 38,000 patient visits a year and supporting 281 local jobs - will be continuing as normal during the bankruptcy process, which typically takes 12 months.
The vote to file was made by the CRH board of directors on July 30, according to the bankruptcy petition. It represents the latest in a long series of financially‑motivated decisions over the past few years, including closing the OB GYN unit and the Rose Room and parting with management company Quorum Health Resources. Enfolded in the filing is $25 million of debt to approximately 1,900 creditors.
According to DeeDee Travis, CRH vice president of community relations, the hospital's financial challenges have stemmed from many sources. She points to lower volumes, decreased reimbursements, an increased rate of free care and bad debt, rising regulatory requirements and a difficulty in recruiting permanent providers as among the major contributing factors. "The business of healthcare today is very complex so you can't just pinpoint one or two issues," Travis says.

Major factors explored
Usage of the hospital's services has been steadily declining. According to CRH's website regarding the bankruptcy, accessible at <www.calaishospital.org/Chapter11>, acute admissions decreased from approximately 900 to 500 from 2015 to 2018 while ER visits declined from approximately 10,750 to 9,450 over the same time period. With fewer paying patients, revenue has effectively stalled.
The Medicaid reimbursement method has been an additional ongoing hurdle, CRH CEO Rod Boula previously explained in an interview with former U.S. Senator Bruce Poliquin. CRH has been kept at a variable rate, limiting its reimbursement amounts to around 38% while most hospitals in the country operate at 70% or higher.
According to the court filings, the Department of Health and Human Services (DHHS) overpaid CRH by $1.1 million in 2018, a status of which it notified CRH on June 12, 2019, with a letter saying it would withhold claims payments if a payment arrangement was not reached. The hospital was currently repaying previous outstanding overpayments from 2016 and 2017, amounting to $5,367 being withheld from the DHHS claims payments of $67,859 a week. These withholdings produced an additional cash flow difficulty.
Despite the challenges, annual losses at CRH have steadily decreased each year, from $2.64 million in 2014 to $574,600 in 2018, pointing toward the hospital's positive trajectory. Filing for Chapter 11 bankruptcy is a "necessary step" in achieving financial stability, CRH asserts in the press release accompanying the announcement.
Effect of filing
Filing Chapter 11 won't remove CRH's obligation to its creditors, Travis explains. "There are some fairly complicated rules for how debts must be paid in Chapter 11, and the hospital will propose a plan that complies with those rules. It's still extremely early in the process."
Three creditors have secured credit on the hospital's assets: Katahdin Trust Company, the USDA and First National Bank, representing $3.6 million, $10.8 million and approximately $2 million, respectively. The three largest unsecured creditors are Anthem, Quorum and Bluewater, who are owed $512,429, $443,579 and $335,336, respectively.
The petition to file was submitted with several motions, including to prioritize payroll; to allow the use of cash collateral to continue operations; and to allow the use of cash management and payment systems.
Keeping employees paid is paramount, Travis emphasizes. "It will take some time going through the Chapter 11 process before an improvement in the cash on hand will be evident; however, the hospital prioritizes payments to staff when looking at where to apply funds."
While CRH is undergoing the bankruptcy process, the 13,000 residents within its service area are strongly encouraged by the hospital to utilize its services to help maintain its stability. "We expect a prompt and efficient reorganization, and to emerge from Chapter 11 restructuring a stronger hospital," states CEO Boula in the press release. "With continued community support and steady utilization of our services, we can stabilize this hospital and provide high‑quality healthcare to the region now and in the years to come."

Union response
Two weeks before the announcement regarding the bankruptcy filing was made public, members of the Maine State Nurses Association (MSNA) at CRH declared their preparedness to strike if a contract agreement was not reached. According to members of the union, the hospital will not agree to a contract without concessions related to paid time off and health insurance.
"We cannot claim with complete certainty that this move by CRH is simply a tactic to counter the overwhelming authorization that union members just gave their bargaining team to strike when necessary," comments Todd Ricker, labor representative for MSNA. "But what we can say is that this fits CRH's long history of avoiding transparency and accountability with its employees and the local community."
Ricker calls for full disclosure from the hospital, "including its plans to better manage the hospital in the interests of the patients it serves and the employees who keep it running every day."