El Segundo-based hospital operator Pipeline Health System, which filed for Chapter 11 bankruptcy protection on Oct. 2, announced that its Chapter 11 recovery plan has been confirmed by the U.S. Bankruptcy Court for the Southern District of Texas. The streamlined company is expected to emerge from bankruptcy sometime next month.
During the bankruptcy, Pipeline Health sold two Chicago-area hospitals it had long sought to sell. The company also filed a restructuring plan to eliminate $275 million in financing debt and more than $55 million in unsecured liabilities.
The exit from bankruptcy, announced on Jan. 13, also involved some key personnel changes, including the CEO position. Longtime CEO Andrei Soran will step down on the day the company officially exits bankruptcy protection. He will be replaced by current chief financial officer Robert Allen, who has 25 years of experience as an executive at local hospitals.
Prior to joining the Pipeline Health team in November 2020, Allen was CEO of CHA Hollywood Presbyterian Medical Center. He previously held CFO positions at several local hospitals, including Keck Medical Center of USC, Cal Hospital Medical Center, Valley Presbyterian Hospital and Sherman Oaks Hospital and Health Center.
In addition to Soran, three other executives are also leaving: Joe Badalian, chief operating officer; Dr. Bob Frank, chief medical officer; and Traci Bowen, chief human resources officer.
Pipeline Health specializes in operating safety net hospitals that need to serve all patients regardless of insurance status or ability to pay. By this definition, safety net hospitals tend to be in a more precarious financial position than other hospitals.
Of the 94 hospitals in Los Angeles County currently, 44 are considered safety net hospitals, according to data provided by the Hospital Association of Southern California. The vast majority of patients at these hospitals are either covered by Medicaid (called Medi-Cal in California) or uninsured.
In Los Angeles County, Pipeline Health operates Gardena Memorial Hospital, Norwalk Shore Plaza Hospital, Huntington Park Community Hospital and East Los Angeles Doctors Hospital. It also operates White Rock Medical Center in Dallas.
At the time of the bankruptcy filing, Pipeline Health also operated two hospitals in the Chicago area. Pipeline Health has been trying to sell the hospital for more than a year, and in June received approval from the Illinois state board to sell the hospital to a start-up called Resilience Healthcare. Proceeds from the sale will be used to help Pipeline Health stabilize its financial position.
But there were unspecified delays in final negotiations; those delays helped trigger Pipeline’s bankruptcy filing.
Pipeline Health eventually sold the hospitals during bankruptcy, leaving five safety-net hospitals. Financial terms of the sale were not disclosed.
Pipeline Health reported total revenue of $3.2 billion for the 12 months ended August. But a more accurate measure of the company’s financial health is operating income of $684 million “after adjustments, chargebacks and bad debts” for the 12 months ended in August. Meanwhile, the company faced $761 million in operating expenses. Net losses for the period totaled $272 million.
The company attributed its deteriorating financial position and subsequent decision to file for bankruptcy to “the Covid-19 pandemic exacerbating significant financial challenges across the industry, including soaring labor and supply costs, reduced revenue generation and delayed payments already provided for the Various insurance plans for critically ill patient services.”
