Despite the strong stock market performance and the low interest rate environment, financial distress, as measured by the number of Chapter 11 bankruptcy filings, is gradually increasing in both general Chapter 11 and real estate. The exception to this “gradual” increase is in healthcare, which has seen filings spike to record-high numbers filings over the past two years, as documented in the Polsinelli/TrBk Distress Indices.
Some reasons for the increased distress in healthcare are obvious, such as those related to a new regulatory and economic environment created under “Obamacare.” Others are common in the industry, such as decreasing reimbursement rates, litigation exposure, and the impact of rapid industry consolidation. And the impact of those factors is further exacerbated by a political environment so uncertain that it is difficult to predict what healthcare may look like four or eight years from now. In addition to concerns over traditional volatility in the sector, the healthcare economy is also in the process of adapting to advances in digital and mobile technologies that are fundamentally changing the way healthcare is delivered.
The time is right to examine distress in healthcare, including how companies can prepare for and respond to particular issues, as well as take advantage of the opportunity presented by change. Change is not always a bad thing if you are prepared and opportunistic. This issue of the JCR provides you with both conceptual and practical food for thought to help prepare your clients for changes to come.
Catherine Gao and Wayne Wietz of Hammond Hanlon Camp LLC address the impact The Tax Cuts and Jobs Act of 2017 may have on healthcare providers. The sweeping tax reform legislation creates unique challenges for healthcare providers and is a timely topic for all companies, regardless of their level of distress.
Jonathon Killion and Jeffrey Pielusko of Carl Marks Advisors lay out specific strategies for healthcare providers that are addressing some of the disruptive forces in healthcare. They discuss proactive approaches to contracting pricing, shifting risk, competition, and other issues.
Thomas Califano of DLA Piper and Travis Vandell of JND Corporate Restructuring tackle the interplay between the extensive disclosure requirements of Chapter 11 and the Health Insurance Portability and Accountability Act (HIPAA).
Patrick Pilch and David Friend of The BDO Center for Healthcare Excellence & Innovation provide valuable thought leadership on the revolutionary forces currently impacting the healthcare industry and thoughts on the evolving future of healthcare services.
In an article that addresses both healthcare and non-healthcare bankruptcy cases, Ken Epstein of Bentham IMF discusses how to use litigation funding to provide capital for a post-confirmation trust and practice tips for evaluating funding agreements.
Finally, Trey Monsour of Polsinelli PC discusses the unique issues surrounding the application of Section 363(f) of the U.S. Bankruptcy Code in hospital bankruptcy cases, including how to approach the thorny issues involved in selling a bankrupt hospital.