9 Primary Reasons Why Hospitals File for Bankruptcy

A study published in the Journal of Healthcare Management found that between 2000 and 2006, 42 acute-care hospitals in the United States filed for bankruptcy, and the most highly cited reason for filing was poor financial management.

Amy Yarbrough Landry, PhD, assistant professor of the Department of Health Services Administration at the University of Alabama at Birmingham, was one of the authors of the study, published in 2009. She found several "common themes" among hospitals that had to reorganize through bankruptcy. Here were nine of the most major ones, which were cited by bankrupt hospitals featured in the study.

1. Poor financial management. Unmanageable debt and inability to pay bills

2. Payer mix/reimbursement. Reductions in Medicare and Medicaid payments

3. Poor overall management. Ill-advised construction projects and physician practice purchases

4. Fraud allegations. Executive mismanagement of payrolls taxes/pensions, embezzlement

5. Financial strategy. Filing for bankruptcy to become a cheaper, more attractive lure for buyers

6. Competition. Losing admissions and surgeries to area hospitals

7. Physician politics. Lack of physician support for management, physician flight

8. Workforce issues. Shortage of clinical workers, unionization

9. Declining volume.

More Articles on Hospitals and Bankruptcy:
Detroit-Area Hospitals Don't Expect Major Snags From City's Bankruptcy
Sound Shore Health System Gave CEO, CFO Payments Before Bankruptcy Filing
Chapter 9 Bankruptcy Hits Hardeman County Hospital in Texas

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