News & Insights
Jul 6, 2020
Promise Healthcare Group, LLC was one of the nation’s largest healthcare providers focused on post-acute care services. The investor-owned company operated two freestanding medical-surgical hospitals, 14 long-term acute care hospitals (LTACHs), and two skilled nursing facilities. The company also had 45 affiliates across eight states.
Changes made in 2015 and 2016 by the Centers for Medicare & Medicaid Services (CMS) significantly affected the company when Medicare reimbursement rates for certain LTACH patients were reduced from $41,000 per stay to $10,000.
In 2017, Promise hired Waller to explore strategic alternatives in light of financial distress caused by the reduction in reimbursement rates. Promise also hired FTI Consulting, Inc. to serve as the company’s chief restructuring officer and Houlihan Lokey Capital, Inc. as its investment banker.
Waller Bankruptcy and Restructuring Attorneys helped guide Promise in all phases of its bankruptcy case, including preparing and filing more than 40 separate business entities into Chapter 11 cases in the United States Bankruptcy Court for the District of Delaware, and assisting Promise in securing and documenting an $85 million debtor-in-possession loan which comprised a rollup of $65 million of the company’s pre-existing credit facility and $20 million of new capital.
Promise’s Chapter 11 case commenced in early November 2018. Promise filed its case with more than $350 million in liabilities, much of which was caused by significant decreases in government reimbursement rates for LTACHs. Promise planned to sell certain non-core or underperforming assets while concurrently reorganizing its strongest performing assets.
It soon became clear, however, that Promise would need to sell substantially all of its assets and there would be no opportunity to restructure the company.
Over a four-month period, Waller Corporate and Bankruptcy attorneys negotiated and obtained court approval of the sale of 18 healthcare facilities. The process included filing motions to approve sales (including filings on December 24 and January 1), and conducting an auction related to more than 15 separate facilities over a 36 hour period in February. The sales ranged from the acquisition of equity for Promise’s acute care hospital business in St. Louis (in order to preserve and permit the buyer to benefit from the hospital’s medical residency slots), to the purchase of assets for properties located from California to Florida. In one of the more unique sales, Waller successfully negotiated and closed the sale of five of Promise’s LTACHs and its two skilled nursing facilities for a total cash purchase price of $7. The sale also relieved the company from ongoing operational losses as well as costs associated with the potential closure of the facilities.
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