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Rite Aid is preparing to file for bankruptcy in coming weeks to address mass federal and state lawsuits the drugstore chain is facing over its alleged role in the sale of opioids, WSJ Pro Bankruptcy reported. The chapter 11 filing would cover Rite Aid’s more than $3.3 billion debt load and pending legal allegations that it oversupplied prescription painkillers. Philadelphia-based Rite Aid hasn’t agreed on a settlement with federal, state government and private opioid plaintiffs to resolve those opioid liabilities in a potential chapter 11 and is currently planning to treat them as general unsecured claims, they said. Unsecured claims rank behind a company’s collateralized debt in bankruptcy and share in the amounts left over after secured claims are paid in full. The terms offered to Rite Aid’s opioid-related claimants in a potential chapter 11 could change. Rite Aid faces more than a thousand federal lawsuits that were consolidated into a multidistrict litigation in Ohio. The company also faces a significant number of similar cases pending in state courts that allege it contributed to the opioid epidemic, as well as a civil lawsuit by the Justice Department that alleges the company dispensed controlled substances in violation of the False Claims Act and Controlled Substances Act.

A bankrupt California hospital will receive a $10 million loan from a new state program to aid troubled providers, Bloomberg News reported. The loan would throw a lifeline to the San Benito Health Care District, which operates Hazel Hawkins Memorial Hospital in Hollister. San Benito filed for a rare Chapter 9 bankruptcy in May as it faced waning cash and unfunded pension obligations. Hazel Hawkins is one of 17 facilities to receive a loan through the program, a state press release outlined on Thursday. The community hospitals will be award a combined total of close to $300 million of assistance. “Across the country, community hospitals are experiencing financial stress like never before. These hospitals are often the only acute health care access point in their area,” said Governor Gavin Newsom said in the statement. “In partnership with the legislature, we are working to keep the doors open so Californians can access critical care close to home.” Like hundreds of other ailing rural hospitals, Hazel Hawkins caters to poorer patients lacking private insurance, or any insurance at all. Meanwhile, US hospitals still contend with higher labor costs and staffing shortages exacerbated by the pandemic. Hazel Hawkins said it would exhaust its cash next year and needed to restructure its outstanding obligations as it sought a buyer or partner, according to court papers. Read more.

The financially troubled healthcare sector will be the focus of the ABI Healthcare Program, September 18-19, 2023, in Nashville, Tenn. For more information and to register, click here.

Mallinckrodt said it plans to file for bankruptcy in the coming days after reaching a deal with most of its lenders to restructure its debt as the company struggles to make opioid settlement payments, WSJ Pro Bankruptcy reported. The filing will mark the company’s second bankruptcy filing. Mallinckrodt, one of the largest makers of opioids, emerged from chapter 11 last year. The company said it has reached a restructuring deal that has the support of most of Mallinckrodt’s creditors. The agreement provides for a final payment of $250 million to an opioid victims compensation trust. Mallinckrodt said it has already paid $450 million to the trust, which was established to fund addiction treatment and address the U.S. opioid crisis. The creditor agreement also would reduce the company’s total funded debt by about $1.9 billion, Mallinckrodt said. The company said it expects to complete the chapter 11 process in the fourth quarter of this year, and said it is still operating normally.

The U.S. has at least 600 fewer nursing homes than it did six years ago, according to a Wall Street Journal analysis of federal data. More senior care is happening at home, and the Covid-19 pandemic caused many families to shun nursing homes while draining workers from an already short-staffed industry. The result? Elderly patients are stuck in hospitals, a dangerous place for seniors, waiting for somewhere to go—sometimes for months. Beds are disappearing while the need for senior care is growing. The American population 65 and older is expected to swell from 56 million in 2020 to 81 million by 2040. Even before the industry started to shrink noticeably, it was effectively contracting. Though fewer people tend to live in counties without nursing homes, those counties tend to have more elderly residents than average. For people who need comprehensive care, closures can mean disruptive moves or ending up far from loved ones. Data show capacity in the nursing-home industry has lagged behind growth in the ranks of older Americans for many years. By 2018, the decline accelerated as nursing-home beds steadily disappeared. The shrinkage was decades in the making. Most older people would prefer to stay in their homes and more Medicaid spending on long-term care has gone to home- and community-based services rather than institutions such as nursing homes since 2013. Those forces contributed to a net loss in nursing-home beds that has hit almost every state. Read more.(Subscription required.)

The financially troubled senior living facilities will be one of the session topics at the ABI Healthcare Program, September 18-19, 2023, in Nashville, Tenn. For more information and to register, click here.

A senior-living company filed for bankruptcy this week after it exhausted an emergency loan, the latest to falter because of COVID-19, Bloomberg News reported. Nashville Senior Care LLC’s plight illustrates the pressures bearing down on the senior-living sector. Higher staff and supply costs on top of tepid demand for such facilities have caused defaults to outpace the rest of the municipal bond market this year. About 8% of the $43 billion in outstanding senior-living bonds is in default, compared with less than 1% of the total municipal bond market, according to data compiled by Bloomberg. At Nashville Senior Care, the pandemic shutdown lowered the number of residents “precipitously,” while expenses rose “dramatically,” leaving the facilities without the means to make needed investments, executive director Thomas Johnson said in a court filing. Read more.

The financially troubled healthcare sector, including a spotlight on struggling senior care centers, will be the focus of the ABI Healthcare Program, September 18-19, 2023, in Nashville, Tenn. For more information and to register, click here.

London-based digital-first healthcare platform Babylon Health has filed for chapter 7 bankruptcy for two subsidiaries — Babylon Healthcare and Babylon Inc. — as it shuts down core U.S. operations, according to documents filed on Aug. 9 in a Delaware bankruptcy court, Becker's Hospital Review reported. The filing comes shortly after a planned combination Babylon's core operating subsidiaries with MindMaze, digital neurotherapy company, collapsed. Both Babylon subsidiaries list hundreds of creditors with liabilities between $100 million and $500 million, according to the filing signed by COO Paul-Henri Ferrand. After administrative expenses are paid, only secured creditors — where the debt is backed by collateral — will be able to get paid. Earlier this month, Babylon closed its Austin, Texas, headquarters, laid off 94 employees and abruptly canceled patient appointments.

The nation’s largest hospital landlord said an unusual transaction that provided crucial financial support for one of its biggest tenants was a done deal. It wasn’t. The deal was good news for both companies, and for communities across the country concerned that their local hospitals could go broke, the Wall Street Journal reported. The landlord, Medical Properties Trust announced the transaction in May. When it reported quarterly results on Aug. 8, it said the arrangement boosted its own revenue. But a California state regulator on July 20 ordered that the transaction between MPT and Prospect Medical Holdings be put on hold, according to the order that the regulator sent to Prospect. MPT didn’t disclose the regulator’s order when it reported second-quarter results, or in its quarterly report filed the next day with the Securities and Exchange Commission. MPT played a crucial role in private-equity firms’ push into healthcare facilities. It used cheap, plentiful financing to buy more than 400 hospitals, in some cases enriching private-equity firms that sold to MPT at high prices and paid themselves large dividends. Now some of the deals have soured. Hospital chains that are MPT’s tenants have closed facilities and cut services, reducing healthcare options in some communities.

The Texas-investment firm that sought to take over Mercy Hospital in Iowa City is now asking the court to appoint an examiner to investigate the hospital's bankruptcy filings ahead of its sale to the University of Iowa, the Des Moines Register reported. Preston Hollow Community Capital, a major investor in the 194-bed Iowa City hospital, called into question the hospital's plans to liquidate through a bankruptcy fire sale process to the university health system for $20 million. In court filings this week, the Dallas-based company accused Mercy Iowa City leadership of mismanagement, leading to the hospital's "financial freefall" in recent years. As a result, Preston Hollow Community Capital asked the court to approve "a comprehensive financial and legal review" of the hospital, its board of directors, its former managing partner MercyOne and its other partners, including Allscripts Healthcare Solutions, an electronic health records vendor. "In order to achieve that outcome, Preston Hollow Community Capital has requested the court appoint an examiner in line with longstanding provisions of the U.S. Bankruptcy Code," the company said in a statement. "This step will help maximize financial recovery for all creditors, including the pensions of hospital employees and retirees, while at the same time ensuring the sale process is fair and accurately reflects the hospital’s overall value to the community." Mercy Iowa City officials disputed the allegations made by the investment firm in a statement this week. Read more.

The financially troubled healthcare sector will be the focus of the ABI Healthcare Program, September 18-19, 2023, in Nashville, Tenn. For more information and to register, click here.