Green Valley Hospital Embraces Chapter 11 as a Stepping Stone to Future Success

Green Valley Hospital is initiating Chapter 11 bankruptcy proceedings less than two years after its launch, as announced by CEO John Matuska on Friday. This move aims to enhance the financial viability of the for-profit hospital and is seen as a necessary step toward long-term sustainability.

Matuska, who became CEO in October and is the hospital’s third leader, confirmed that the formal filing would occur in federal bankruptcy court in Tucson by the end of the day. He emphasized that this restructuring will not interrupt daily operations, and no job losses are anticipated for the hospital’s approximately 300 employees.

“Chapter 11 does not mean that you close. This has no impact on hospital operations. We have the funds to cover salaries, benefits, and operational expenses,” stated Matuska.

The hospital’s current financial challenges stem from several factors, including early mismanagement and a state-imposed hospital assessment following the expansion of Arizona’s Medicaid program in 2014. Matuska believes that this Chapter 11 filing will provide the hospital with a clear pathway to financial health.

Chapter 11 allows entities to reorganize debt while continuing operations, in contrast to Chapter 7, which typically involves liquidating assets to pay creditors. According to Tucson bankruptcy attorney Kasey Nye, the process allows the hospital to maintain control and devise a plan for restructuring its liabilities under court oversight.

Matuska indicated that the Chapter 11 process could last five to six months, ensuring the community stays informed. He noted that the hospital was initially undercapitalized when it opened, contributing to its financial strain. “It’s a beautiful facility, but small hospital margins necessitate maximizing usage and avoiding overbuilding,” he added.

The original construction cost of the 49-bed hospital was approximately $79 million, which Matuska described as excessive given current industry standards of around $1 million per bed. The hospital’s debt includes high-interest loans that are burdensome, compounded by the annual $600,000 assessment related to the Medicaid program, which primarily impacts hospitals with a higher percentage of Medicaid patients.

Despite nearly 80 percent of its patients being Medicare beneficiaries, the hospital continues to shoulder this hefty fee, asserting that the taxation doesn’t account for its patient demographics. Matuska remarked, “We’re hoping to get this legislation re-evaluated.” Issues with billing and collections previously contributed to the debt, but these problems have since been addressed.

Prior to the opening of Green Valley Hospital, locals had to travel about 30 minutes to access emergency services, making the facility important for the community, predominantly composed of retirees. Matuska assured that while the hospital may not perform highly specialized surgeries, it can meet a substantial portion of local medical needs.

Green Valley Hospital’s ownership is unusual, with 80 percent of its funding derived from the Immigrant Investor Program (EB-5). This program, initiated by Congress to bolster the U.S. economy, involves foreign investors who contribute to job creation in exchange for an expedited green card. Most investors are from China, but funds have also come from families in Mexico and other countries.

In the context of the Pima County healthcare landscape, Green Valley Hospital holds a market share of just 1.48 percent, according to data from the Arizona Hospital & Healthcare Association. The facility includes an emergency department, surgical suite, catheterization lab, full-service lab, and inpatient pharmacy.