North Carolina county helps to reopen rural hospital

Key Takeaways

“An open and operating hospital is worth much more than a closed one.”

Thomas Waldrep, a bankruptcy trustee appointed by the United States Bankruptcy Court for the Eastern District of North Carolina, found himself looking for a way to reopen the Washington County Hospital in Washington County, N.C., after it shut down on Feb. 14.

“It was quite a struggle, but we got it open again,” he said.

The critical access hospital, which is a designation given to certain hospitals in rural areas, reopened on May 1 after being shut down for over 10 weeks. With the hospital closed and the nearest facility over 20 miles away and located outside of Washington County, the community felt an impact.

Washington County Manager Curtis Potter said the hospital, which is no longer owned by the county after it was sold in 2007 to a private entity, had gone through a previous bankruptcy and was struggling again with cash flow issues. The county received information that hospital employees were not getting paid or receiving certain employee benefits, he said.

Washington County, which remains a creditor of the hospital, consulted with legal counsel and filed a petition for Chapter 7 involuntary bankruptcy as an unpaid creditor of the hospital.

Potter said the county determined it would be in the community’s best interest to institute the involuntary petition for bankruptcy. As creditors, he said the county is owed money from the hospital for different purposes such as providing EMS and transport services as well as money through back taxes.

Since Waldrep, a former bankruptcy judge, is experienced with medical-related commercial bankruptcy proceedings, he was appointed as the bankruptcy trustee. As trustee, Waldrep makes the financial decisions for the hospital and works to restore the hospital’s operations. He located substantial accounts receivables related to Medicare payables, according to Potter, which allowed the hospital to reopen with all services fully operational.

Potter said there was a period of around four weeks when hospital employees did not receive pay.

Waldrep explained that some employees were asked to come back to work, but the hospital staff is smaller than before the closure. The employees who returned were paid all of their backpay. Those who did not return will receive a priority claim and will have to file their claim with the bankruptcy court where they will receive their backpay at the end of the case.

While the hospital was closed, Emergency Medical Services, which is owned and operated by the county government, continued to operate and transport patients to the closest facilities. However, Potter said EMS was impacted with longer call times involved in transporting people to hospitals outside the county.

“Once it [the hospital] closed, we then had to transport people over a longer period of time using essentially the same number of ambulances and staff which placed strain on the system,” he said.

Potter said the largest barrier to providing healthcare is often transportation, adding that while services may be provided at a more centralized location in urban areas, there’s no guarantee those living in rural areas can get transportation to these facilities.

“We have a large population of folks whose healthcare services are very much dependent on the continued operation and existence of our own community hospital,” Potter said.

Waldrep said hospital bankruptcy cases like the one at Washington County Hospital are difficult because of the “number of constituencies and players that are involved.”

“You have people whose very lives can depend on the existence of a rural hospital within reach,” he said. “They’re getting medical care when sometimes a few minutes are critical.”

Waldrep said he is confident in the new management team and said the hospital is becoming stable again.

“Time will tell over the next few months, but I believe that it [the hospital] will have positive cash flow and will have value that we will use to pay the creditors of the hospital,” he said.

Potter added that the county is continuing to work with Waldrep, state regulators and the hospital administration.

“We are continuing to cooperate… to keep tabs on what is happening and try to support its reopening and continued operation,” Potter said.

Waldrep added, “It is a critical, critical thing to keep these rural hospitals open and I’m glad we could do it in this case.”