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Struggling hospital finds buyer, enters bankruptcy protection

August 12, 2014

Bloomington’s Monroe Hospital LLC, which has had a close relationship with Indianapolis-based St. Vincent Health, filed for bankruptcy reorganization on Friday and plans to sell its business to a Canadian hospital operator.

The Chapter 11 bankruptcy petition, filed in federal court in Indianapolis, said the 32-bed hospital had more than twice as many liabilities as assets. It has been losing money due to low patient traffic in the face of cross-town competition from Indiana University Health’s Bloomington Hospital.

Monroe and St. Vincent signed a management agreement two years ago, with St. Vincent taking responsibility for Monroe’s quality and safety efforts, finance functions, physician relations and patient satisfaction.

St. Vincent also considered adding Monroe to its 22-hospital network. Those merger talks and St. Vincent’s management of those Monroe services ended last October, but longtime St. Vincent executive Joe Roche was installed as Monroe’s CEO.

St. Vincent is now one of Monroe’s largest creditors, with the hospital owing St. Vincent’s physician group $170,000. St. Vincent physicians provide cardiac care and orthopedic surgeries to Monroe patients.

Even after the hospital is sold to a new owner, St. Vincent will try to continue its clinical relationship with Monroe.

“We’ve had a longstanding clinical affiliation and clinical relationships with physicians in Monroe County for a number of years,” said St. Vincent spokesman Johnny Smith. “We’re looking to continue those relationships.”

According to its bankruptcy filing documents, Monroe also owes $3.1 million to Bloomington physician practice Premier Healthcare LLC, $694,000 to Bloomington Anesthesiologists, $304,000 to the Indiana Hospital Association and $61,000 to the Katz Sapper Miller accounting firm.

Monroe Hospital is in default on its facility lease with MPT Bloomington LLC and its loan agreement with an MPT affiliate. Secured obligations under the lease and loan agreement total about $121.8 million, according to court papers.

Following the defaults, MPT terminated the lease but has allowed the hospital to stay as a “holdover” tenant during a marketing process. MPT agreed to refrain from taking other action against the hospital during the process, according to court papers.

MPT, the hospital and largest shareholder, Pennsylvania-based Vibra Acute Care LLC, entered into an offer letter with Prime Healthcare on July 23 that contemplates selling the business and leasing the facility to one of Prime Healthcare’s affiliates, according to court papers.

Subject to court approval, MPT will finance the hospital during bankruptcy by providing additional credit under the loan agreement up to $5 million and allowing the hospital to use cash representing collateral for its secured claims, according to the hospital.

Monroe Hospital is licensed by the state of Indiana through December 2014 and accredited through July 2016, according to court papers. It had about 315 employees as of the bankruptcy filing.

The petition lists assets of less than $50 million and liabilities of more than $100 million. The hospital estimates that general unsecured claims total more than $13 million. The hospital’s largest unsecured creditor is shareholder Vibra, owed about $3.4 million.
 

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