| The authors are members of Dentons’ Restructuring, Insolvency and Bankruptcy practices. With more than 25 years’ experience representing health care industry stakeholders in complex transactions and high-stakes disputes, Dentons’ dedicated, multidisciplinary Distressed Health Care group brings unparalleled experience to the handling of matters involving financially distressed clients and transactions, in and outside of formal bankruptcy proceedings. Our client representation includes multistate health systems, academic medical centers and independent standalone hospitals, for-profit and nonprofit, in the U.S. and abroad, as well as
leading health insurers, pharmaceutical and medical device companies, lenders and investors, and governmental and NGO participants.
On May 23, 2023, the San Benito Health Care District, d/b/a Hazel Hawkins Memorial Hospital (the “District”), filed for chapter 9 bankruptcy, citing limited access to working capital, labor expenses (constituting 70% of the hospital’s annual expenses), and cash flow and revenue issues as the main reasons precipitating the filing. These issues are not limited to this debtor. Rather, many public health care organizations are facing similar challenges and may be able to take advantage of chapter 9’s provisions, which can help ensure they are providing quality care to their communities and achieving financial stability. This article provides an overview of the relatively rare use of chapter 9 and an update on the District’s bankruptcy case.
Chapter 9 Basics
Chapter 9 is a special chapter of the Bankruptcy Code that allows municipalities facing insolvency to seek protection from their creditors. In a chapter 9 case, a municipality continues to operate while developing a plan to reorganize its debts. Chapter 9 debtors can continue operating with little to no disruption, including making payroll, caring for patients and running facilities.
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