Springfield Hospital CEO clarifies “bankruptcy,” discusses restructuring

By PATRICK ADRIAN
[email protected]
BELLOWS FALLS, Vt. — Springfield Hospital executives met with Bellows Falls and Rockingham residents last night to answer questions and discuss the ongoing plan to restore the hospital’s solvency.

Interim CEO Michael Halstead of the hospital and acting CEO Joshua Dufresne of Springfield Medical Care Systems held a community meeting last night at Rockingham Free Public Library, as one of five scheduled town forums the hospital scheduled to educate residents about the hospital’s financial plan and field public questions and concerns.

During the discussion Halstead addressed last week’s media reports about the hospital looking to file for Chapter 11 bankruptcy, which he said caused public anxiety and confusion.

“A lot of times people hear bankruptcy and think that the organization is going to close,” Halstead said. “[But] Chapter 11 is a code that allows an organization to restructure its debt as long as it can prove to the courts that once it has restructured itself it can be a viable organization going forward.”

Halstead said that Chapter 11 bankruptcy is a common strategy an organization can take when it has accumulated a lot of debt and does not have the ability to pay it back.

According to Halstead, whose company Quorum Health Services took over operations of Springfield Hospital in January, the hospital accrued a $14 million deficit in the previous two years.

“The organization was spending more money than it was taking in,” Halstead said. Despite generating about $55-60 million in revenue per year, its costs were far greater.

According to an audit, the board found no misappropriation of funds but rather a number of unfollowed policies and practices that kept the board from seeing the problem sooner, said Halstead.

The hospital currently has a plan to reduce $6.5 million in operating expenses. In February they reduced the staff by 30 employees, cut management salaries by 10 percent and hourly pay by 4 percent. They also closed the Springfield birthing center, which Halstead said was a difficult but necessary decision.

The birthing center cost the hospital $500,000 per year to operate, which is an expensive service for a small hospital, Halstead said.

Filing for Chapter 11 is “phase two” of the hospital’s solvency plan, with the budget cuts representing phase one and phase three being the hospital’s hire of a permanent CEO, Halstead said.

“The board has not decided yet to file for Chapter 11 but is strongly considering it,” Halstead said.“We want to make sure it’s not a surprise if we do, which is why we’re talking about it,” Halstead said.

For an organization to file for bankruptcy they must first show the courts that they are maintaining the same cash flow over a 13-week period. Their filing must also demonstrate through their financial plan that the organization will be able to survive by restructuring their debt.

Halstead told residents in attendance that a Chapter 11 bankruptcy will not affect patient services.

“The other bankruptcy people think of is Chapter 7, which means turning the lights off, locking the doors and divvying up whatever assets to pay off the creditors,” Halstead said. “That’s not what we’re talking about.”