When a community hospital closes or is sold to a for-profit operator, there is a loss to the community, according to a commentary by Kenneth Rosen in the Wall Street Journal Bankruptcy Beat Blog. Despite protestations by for-profit operators, a community loses something of value by the conversion of a nonprofit hospital to a for-profit hospital. The mission statements are different. The question is how the loss gets valued and whether the community is compensated for the loss. Societal benefit played a role in the development of bankruptcy law in the U.S., according to Rosen, and it should play a role in the allocation of proceeds from the sale of a nonprofit hospital. The nonprofit hospital that operates in chapter 11 in order to effect a sale for the benefit of the debtor’s creditors (like most chapter 11s today) continues to receive services rendered by the community. Without those valuable services, the hospital may not be able to operate post-petition, according to Rosen. Read more. (Subscription required.)
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