On Monday, May 6, 2019, Astria Health and 13 related companies, including Astria Sunnyside Hospital, Astria Toppenish Hospital, and Astria Regional Medical Center filed for Chapter 11 protection under the United State Bankruptcy Code in the United States Bankruptcy Court for the Eastern District of Washington, Yakima Division to restructure its finances, give it time to replace its existing corporate billing office company with another company, and enter into a plan of reorganization with its creditors. Astria Health has secured debtor in possession financing to ensure it has sufficient liquidity to maintain patient care and hospital operations during the process. Astria Regional Medical Center, Astria Toppenish Hospital, Astria Sunnyside Hospital, and Astria Health Centers will remain open and continue to care for patients as usual as the organization moves through the process. There is no plan to close facilities. Employee jobs and wages will not be impacted.
Astria Health converted to a new Electronic Health Record (EHR) system last year after purchasing the two new hospitals. At the time of the conversion, Astria Health also contracted with a company to manage the revenue cycle including business office billing, claims processing, and collecting. That firm’s business office has managed the hospitals’ and health centers’ billing, claims processing and collecting since August 2018. They promised accounts receivables (AR) would return to pre-transition levels quickly after implementation with minimal negative cashflow impact from the transition. The two parties agreed upon specific performance guarantees for accounts receivable and cash collections that the business office operation has not met.
Astria Health has realized considerable positive performance at all three hospitals since purchasing the two new hospitals in September 2017. However, the large amount of unprocessed accounts receivable (AR) value trapped in the contracted business office operation has taken much longer to process than agreed upon. This has resulted in a significant shortfall in cashflow which we are addressing through this process. Although hospital leadership has actively managed the supply chain to ensure necessary supplies for patient care, this delay in cash collections has now become severe enough to potentially disrupt the organization’s ability to pay for crucial items in a timely manner.
The Chapter 11 process allows all three Astria Health Hospitals and all Astria Health Centers to continue to operate as usual to care for patients. The filing provides a pause with creditors, provides additional access to capital, and allows for additional time to switch to a more sophisticated business office vendor and increase cashflow through the revenue cycle. Most importantly, it ensures Astria Health physicians, caregivers, and staff can focus on patient care. The organization’s goal is to emerge from Chapter 11 by year end 2019.
“As one of the largest healthcare providers and employers in the Yakima Valley, we believe this step was necessary in order to protect the Valley’s hospitals and its local economies,” said John Gallagher, Astria Health President and Chief Executive Officer. “We believe it will protect and sustain the three hospitals for the future. All three hospitals are key community assets badly needed by patients and local communities and are vital to the health and wellbeing of the towns and cities located throughout the Valley”.