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Health system files for Chapter 11 bankruptcy protection

A health system in a nearby state recently filed for bankruptcy. The health system specifically filed for Chapter 11 bankruptcy protection. It had quit paying several vendors in 2015, right before it closed a hospital following the state's halting of a subsidy that had run for a long time. Chapter 11 bankruptcy can be a helpful tool for companies facing debt problems in Massachusetts and elsewhere.

The health system announced that it would keep providing alcohol and drug services as well as psychiatric care at one of its medical centers. This is possible because its behavioral health business is capable of being self-sustaining. It will essentially run on a break-even basis.

The acute-care hospital that was a part of the health system has been shut down due to the system's inability to cover legacy liabilities. What drove it to file for bankruptcy right before the end of 2016 was that it was unable to afford its $400,000 mortgage payment that was due on the first of January. It owed more than $24 million total to the 30 biggest unsecured creditors it had. Independence Blue Cross was owed the most -- a total of nearly $11 million for worker benefits.

At times, a business's liabilities may end up outweighing its assets, leading to financial challenges for the company. Chapter 11 bankruptcy offers the benefit of enabling a financially struggling business to reorganize in order to cover their debt issues. Legal guidance may help companies to navigate this complex type of bankruptcy filing in Massachusetts and achieve their unique business-related aims in the immediate and long terms.

Source:, "North Philadelphia Health System enters bankruptcy", Harold Brubaker, Jan. 4, 2017

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