Downey Regional Medical Center, facing a negative cash flow of about $1 million per month, has filed for Chapter 11 bankruptcy protection, the hospital announced in a statement today. The statement said the hospital's board of directors unanimously voted to file Chapter 11, but not indicate when the vote took place.
Downey Regional officials said they expect to emerge from bankruptcy within one year.
"Today's necessary actions will allow us to clean up the remainder of the financial morass that the current management team inherited that was over a decade in the making, and that we have been working to fix for two years," Downey Regional CEO Ken Strople said in the statement. "We are confident in our long-term prospects for success. I want to reassure our patients, our employees, the physicians, and the community that DRMC and its services will be fully open during this process, that excellent patient care will continue to be provided, that payrolls will be met, and that operations at the hospital will continue normally."
Since former CEO Allan Korneff was ousted two years ago, Downey Regional administration has been "feverishly working to fix literally thousands of problems with its financial systems," including inadequate billing and collection services.
Administration also blamed "unfavorable terms" in contracts with HMOs and medical groups.
Over the past 10 years, the hospital has drawn nearly $100 million in reserves to stop a negative cash flow of $1 million per month, officials said. The cash reserves ran out in March 2008.
Officials said the hospital will operate as normal as it reorganizes.