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New Jersey’s hospitals, like acute care centers in many states, are facing an increasingly difficult future. This is especially true for the state’s urban hospitals, where the payor mix is skewed toward charity care patients instead of those who are fully insured. Medicaid and disproportionate share hospital (DSH) payments, which help partially to compensate hospitals for services provided to uninsured and underinsured patients, are huge state budget items in New Jersey.

The Berger Commission report will change New York’s health care system and create an environment ripe with opportunities for restructuring professionals to assist boards and management teams in the following areas:

Strategy: Evaluate M&A and combination opportunities

Financial: Refinancing hospital indebtedness

Operational: Reconfiguring hospital operations and reducing costs

A significant portion of the revenue of many health care providers is dependent upon payments made by governmental health care programs such as Medicare and Medicaid. Payments under the Medicare program, for example, are made based primarily on the provider’s future estimates of costs, and are later subject to a “true-up” when the actual costs are known.¹ As a result of the true-up, the provider may have been over- or underpaid at the time of the prospective payment.

Sales of debtors’ assets in bankruptcy proceedings are quite common, either as part of a plan of reorganization or liquidation or pursuant to Bankruptcy Code §363. The Bankruptcy Code and the Federal Rules of Bankruptcy Procedure provide that a sale of a debtor’s assets occurs after notice to all creditors and an opportunity for a hearing. In the case of a not-for-profit entity (an “NFP”), the ability of a debtor to sell its assets in a bankruptcy often overlaps with various state laws and regulations governing NFP asset sales.

Much of the commentary on the pending bankruptcy legislation has focused on consumer bankruptcies. However, several provisions of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, S. 256 (the “Act”), are specifically targeted to health care bankruptcies. If it becomes law, as is widely expected, the legislation will provide an exception to the automatic stay for government action to suspend a debtor from participation in the Medicare program or any other federal health care program.

Intrepid U.S.A. Inc. and its affiliates operate as home health care providers and nurse and medical staffing providers through approximately 5,766 employees in 100 locations in 31 states, primarily in the Midwest, South and Southeastern United States. Intrepid serves the elderly, homebound, disabled and other disadvantaged individuals, providing in-home nurses, therapists and administrators. It is currently in bankruptcy in Minneapolis.

In recent years, nonprofit health care entities have experienced increased and highly publicized state attorney general scrutiny of, and sometimes interference with, the sales of facilities, use of assets and other health care transactions.¹ Traditionally, state attorney general review of corporate health care transactions has been reserved for nonprofit-to-for-profit asset conversions and instances of regulatory oversight of transactions involving outright self-dealing or ultra vires conduct.