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Case Study: Pioneer Health files for bankruptcy, sells multiple facilities

Jul 6, 2020

CHALLENGE

In 2016, Pioneer Health, the parent company of numerous small and predominantly rural hospitals and healthcare facilities located through the southeastern United States, commenced a Bankruptcy Case by filing a voluntary Chapter 11 petition in the United States Bankruptcy Court for the Southern District of Mississippi. On that same date, certain affiliates of Pioneer Health also filed voluntary Chapter 11 petitions for relief, including: Pioneer Health Services of Patrick County, Inc.; Pioneer Health Services of Newton County, LLC; Pioneer Health Services of Stokes County, Inc.; Pioneer Health Services of Choctaw County, LLC; Pioneer Health Services of Oneida, LLC; Pioneer Health Services of Monroe County, Inc.; Pioneer Health Services of Early County, LLC; and Medicomp, Inc. Delays in payment by insurance companies, increased use of high deductible health plans and the need to invest in an EHR system were some factors that led to the bankruptcy filings.

STRATEGY

Pioneer Health sold several of the businesses using Section 363 of the bankruptcy code, including Rural Solutions, an accountable care organization; Pioneer Health Services of Monroe County, a critical access hospital; Pioneer Health Services of Early County, a critical access hospital and related nursing home; Pioneer’s hospital management services business; Medicomp, a provider of inpatient and outpatient therapy services; and Pioneer Health Services of Patrick County, a critical access hospital.

Waller was engaged by the Debtors to serve as special counsel to facilitate the sale of all of Pioneer’s assets pursuant to Section 363 of the Bankruptcy Code. Waller attorneys served as healthcare regulatory and M&A counsel to Pioneer in relation to the bankruptcy proceedings and the sale of its facilities. Waller also provided bankruptcy and real estate advice as it related to the sales of the facilities of Pioneer Health. The case presented some unique issues, including the sale of a provider agreement of an accountable care organization and whether to sell the facilities as a “package” to one buyer or piecemeal to several buyers. After conducting an auction, the latter option was chosen. Both assets and ownership interests were sold, depending on the facility.

OUTCOME

The ultimate outcome was that the majority of facilities remained open and continue to serve their communities. With the proceeds from the various sales, Pioneer Health’s secured creditors were paid in full, and its unsecured creditors received a distribution as well.

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