- Low reimbursement rates from private and government insurance carriers;
- "Unsustainable debt levels;"
- Rather expensive lease obligations relating to operations that have since ceased; and
- A reduction in income and revenue.
Also noted in the Declaration was the failed sale of the hospital in 2013, which has allegedly been held up due to the failure of the State of New Jersey to give approval to the sale.
It appears based on the Declaration that Saint Michael's intends to sell "substantially all...[its] assets pursuant to...the Bankruptcy Code."
Contemporaneously with the filing of the petition are four "First Day Motions," which are as follows:
- Debtor in Possession Financing approval to allow the hospital to continue operations during the pendency of the Chapter 11 proceedings;
- Prohibition of utility services from altering or cancelling services and allowing for the payment of said utility services;
- Payment of employee wages post-petition and pre-petition; and
- Continued use of existing bank accounts and "cash management systems," as opposed to special "Debtor in Possession" bank accounts.
Based on my review of this particular document, it appears that Saint Michael's is contemplating what is known as a "liquidation" Chapter 11 bankruptcy, to be contrasted with a typical Chapter 7 liquidation. In Chapter 7, the liquidation of all assets is overseen by the Chapter 7 Trustee, and the business effectively dissolves once the estate is administered. That particular Chapter is useful primarily for smaller business with few, if any assets.
Here, where the Debtor in Possession doubtless has assets valued at just shy of $81 million, they made the decision to proceed in Chapter 11, where the hospital itself (by and through its executives and administrators) act as the "Debtor in Possession," and continue to administer and run their business operations while preparing for the sale of assets down the road. The unique nature of Chapter 11 allows a business owner to continue his operations while crafting the Chapter 11 Plan, whether it is one of liquidation or one of reorganization.
A copy of said Declaration can be found at this link: