Less than two years after it opened, Green Valley Hospital is fling for Chapter 11 bankruptcy, its CEO said today.
John Matuska told the Star the decision was made with the intent of financially strengthening the hospital for long-term success. Matuska took the helm of the for-profit hospital in October and is its third CEO.
He said the hospital is expected to file court papers in federal bankruptcy court in Tucson today, March 31. He stressed that the filing represents a restructuring of debt, and will not affect day-to-day hospital operations. The hospital has about 300 employees and no layoffs are expected, officials said.
"This hospital will remain open and will successfully serve our community for a very long time," Matuska said in a prepared statement. "This is merely a procedural step, and to be sustainable we have to take this step to reorganize our finances and alleviate some of our debt burden."
Chapter 11 bankruptcy is the "clearest, fastest path toward a financially healthy future for Green Valley," he said.
The bankruptcy process is expected to take five or six months and hospital officials will keep the community updated along the way, he said.
"When they opened, the hospital was undercapitalized," he said. "It's a beautiful facility. But because hospital margins are so small you have to maximize the use of your facility and not overbuild it. It probably was overbuilt and cost too much to build."
The cost of the 49-bed hospital was about $79 million, Star archives show. The rule of thumb for building hospitals at the moment is $1 million per bed or thereabouts, Matuska said.
"Some of the loans we have are very high interest rate/fee loans that we can't afford," he said. "And on top of it we get hit with this hospital assessment."
The assessment is a fee that Arizona hospitals pay as part of restoring and expanding Medicaid coverage for childless Arizona adults, which happened in 2014, before Green Valley Hospital was built.
The fee brings in about $265 million per year to the state's Medicaid program, which is called the Arizona Health Care Cost Containment System (AHCCCS). Medicaid is a government health insurance program for low-income people.
The theory behind the hospital levy is that patients with government-provided insurance coverage will result in less bad debt for a hospital because of a personβs inability to pay.
But Matuska said that since only about 7 percent of the Green Valley Hospital's patients are on AHCCCS, the $600,000 assessment it's paying every year is a large financial burden.
About 80 percent of the hospital's patients are covered by Medicare or Medicare managed care. Medicare is a government insurance program that primarily covers adults over the age of 65.
"They didn't anticipate what would happen to a new hospital built in an area where you don't have a lot of Medicaid patients," he said. "And you are still being taxed at $440 per discharge....
"We have talked to many of the legislators in Phoenix and not one person said this is fair. We're hoping to get this legislation changed."
Matuska said another factor with the hospital debt were problems with its billing and collections, but that issue has been addressed.
"Chapter 11 does not mean that you close. This has no impact on hospital operations. We have the funds to pay for salaries, fringe benefits, doctors' fees, supplies, equipment etc.," he said.
"If it wasn't public people wouldn't even know we are going through the process."
The filing will be accompanied by a reorganization plan, Matuska said.
