CarePoint Health, more than $108 million in debt, declares bankruptcy
Taken from NJ.com
By Ron Zeitlinger | The Jersey Journal & Teri West | The Jersey Journal
November 4, 2024
CarePoint Health, the Hudson County non-profit healthcare system teetering on the brink of financial collapse, is more than $108 million in debt, according to bankruptcy documents filed Sunday in U.S. Bankruptcy Court in Delaware.
The company issued a news release Monday morning, putting a positive spin on the long-awaited Chapter 11 filing, saying it has obtained $67 million in new financing to ensure that its three hospitals remain open and that there will be no interruptions to its ability to provide patient care in the communities it serves throughout this process.
Chapter 11 bankruptcy allows some breathing room for the debtor, CarePoint, to reorganize its finances and continue operating.
CarePoint Health operates Bayonne Medical Center, Christ Hospital in Jersey City and Hoboken University Medical Center. Last week CarePoint and Hudson Regional Hospital announced they would merge to form a new healthcare system, Hudson Health.
“We chose this path after we thoroughly evaluated all available options that would ensure the continued delivery of uninterrupted care while enabling this necessary financial restructuring,” said Dr. Achintya Moulick, the chairman of CarePoint’s board of trustees and also the CEO and president of the company. “Safety net hospitals like Christ Hospital and Hoboken University Medical Center are vital lifelines for the uninsured, underinsured, and most vulnerable populations. We are proud to have kept our doors open these past five years despite an extremely challenging environment.”
CarePoint officials say employees’ pay and benefits will continue, as will existing patient care.
A list of CarePoint’s top 30 creditors includes CarePoint Health Captive Assurance ($18.9 million), a related company, as well as the Internal Revenue Service ($16.9 million), PSE&G ($5.3 million), Hudson County ($15.7 million) and the state Division of Taxation ($3.5 million). In total, there are approximately 7,500 creditors listed over 257 pages in the filing.
The debt from the top 30 creditors alone is $108.2 million.
Chapter 11 bankruptcies allow entities ― be it a corporation, an individual or a non-profit health system like CarePoint ― to lower their debt and rearrange their finances, all while staying operational and keeping a hold of their assets.
Ultimately, it will lead to CarePoint creating a reorganization plan to address its debts. In the process, it will have to file a statement disclosing relevant financial information, and its creditors will then hold a hearing to determine whether they accept CarePoint’s plan for paying them back.
It appears that at least part of CarePoint’s plan to pay off its debts is via its new partnership with Secaucus-based Hudson Regional Hospital. Hudson Regional Hospital has long wanted to operate Bayonne Medical Center, where it owns the land. Through the new deal, it would also have the option to purchase the property under CarePoint’s other two hospitals.
Hudson Regional Hospital officials did not respond to a request for comment.
Chapter 11 bankruptcies in the healthcare industry, especially hospitals, increased every year from the COVID-19 pandemic to 2023, according to a Gibbons Advisors report published in January. The firm, which provides restructuring advisory services for the healthcare industry, expected the trend to continue this year.
It attributed the rise in bankruptcies to a variety of factors including relatively high interest rates, cost increases for both supplies and labor and an anticipated increase in patients losing Medicaid and becoming uninsured.
“As we anticipated, restructuring activity in the hospital sector increased markedly in 2023 and we expect to see a continuation of that level of distress this year as hospitals, particularly rural and standalone hospitals, work through challenging profitability, liquidity and leverage dynamics,” said Clare Moylan of Gibbons Advisors.
CarePoint officials attributed the system’s debts to increased operational costs after the pandemic, a lack of adequate state funding and “reimbursement challenges.”
The Hoboken and Jersey City mayors were involved in the decision to file for bankruptcy since they joined the CarePoint board in September. Both said they support the move, with Hoboken Mayor Ravi Bhalla calling it a “critical step in the right direction.”
“It is welcome news for residents of Hoboken and Hudson County as we were able to ensure that a hospital continues to remain right here in our Mile Square,” he said.
Jersey City Mayor Steven Fulop said the ability for the hospitals to remain open during the bankruptcy is “great news for Jersey City residents.”
“I am confident that this is the right direction and that it will put these essential community hospitals on more solid financial footing moving forward, which is critically important for Hudson County,” Fulop said.
According to CarePoint’s bankruptcy filings, it paid the law group Dilworth Paxson nearly $800,000 for bankruptcy preparation and more than $2.4 million to represent CarePoint Health in litigation, for a total of more than $3.2 million.
Court filings and additional information are available at https://dm.epiq11.com/Carepoint.
Moulick thanked his employees and doctors “whose deep commitment to addressing health inequities and delivering high-quality, compassionate care to our communities has been unwavering.”