In just two years, Trinity Regional Hospital Sachse, a community healthcare provider in Texas, has filed for bankruptcy and is searching for a buyer following a series of missteps that started before the hospital opened.
According to The Dallas Morning News, the owners of the 32-bed not-for-profit borrowed $68 million in 2020, telling financers that the fast-growing population northeast of Dallas needed a new provider following two hospital closures. They said that the site would attract patients due to its proximity to a new highway and that the 20-acre medical campus would include doctors’ offices and an outpatient surgery center.
Additionally, the hospital was supposed to have a “lean” structure with a “culture of speed and quality in patient care,” reported The Dallas Morning News. Tasks such as reading radiology scans would be limited to 30 minutes, and the use of managed care and discounted services was expected to be “minimal” due to 80% of the population having commercial insurance.
Despite these promises, several red flags stood out from the start. Here is a breakdown of them:
- Unrated bonds: The hospital was financed with unrated bonds that had yields ranging from 6% to 15%. According to Bloomberg, seven unrated hospitals have defaulted this year due to failure to pay and violations of their borrowing agreements.
- Opened too fast: Right before construction began, one $15 million bond investor pulled out, creating a funding deficiency. The hospital proceeded with construction and opened before it had an operating ICU or government approval to accept government-issued patients.
- A recruitment slog: Due to the effects of the pandemic, the hospital, like others, struggled to hire physicians, limiting the number of patients it could see. Additionally, its ICU was constructed incorrectly and had to be renovated, setting it back care-wise and financially.
“It completely encompasses all of the complexities and bureaucracy and patient care issues in one small community hospital,” Jon Nash, the chief restructuring officer for the hospital and managing partner at MeadowLark Advisors, told The Dallas Morning News.
A year after opening, Trinity Regional Hospital Sachse hired MeadowLark Advisors to help find a buyer, but prospective buyers have been turned off by its $2 million annual land lease payments.
The provider declared bankruptcy on August 29, asking Principal Street and Aberdeen Standard Investments to provide $14 million in bankruptcy financing. It proposed a fixed 12% interest rate to help pay back. The financing requires court approval.
“We’ve fixed all of the big problems, we’ve got the ICU up and running, and we now own the land it sits on. This hospital is ready for a buyer to run with it,” said Nash.