Massive Texas Emergency Room Bankruptcy Case

[Neighbors Emergency Center, LLC 4:2018bk33869]

Published: July 19, 2018

It’s becoming more and more difficult to operate an independent healthcare facility these days, indemnified by the string of healthcare bankruptcies dating back to the start of 2018. In July, a number of healthcare clinics operating under NEC, or Neighbors Emergency Care, are closing due to Chapter 11 bankruptcy. In no less than 49 Chapter 11 bankruptcy cases filed with the US Bankruptcy Courts in the Southern District of Texas, NEC is undertaking a massive bankruptcy initiative with the assistance of the bankruptcy law firm Porter Hedges LLP.

NEC Chapter 11

Neighbors Emergency Center is made up of a surprisingly confusing collection of independent businesses going by the names of Neighbors Emergency Center, LLC, Next Door Urgent Care, LLC, NHS Emergency Centers, LLC, Neighbors GP, LLC, and Neighbors Practice Management, LLC, to name a few. It seems that all the companies, each listed as being headquartered on Richmond Ave. in Houston Texas are filing for debt relief under Chapter 11 of the US Bankruptcy Code. While many of the subsidiaries Chapter 11 filings are different, most claim creditors in the 1-49 range, with RKMS, the owner of a real estate lease with the company being the largest unsecured debtor, being owed $2.6 million. The bankruptcy trustee for the cases will no doubt have their hands full sorting out which affiliate will pay what as many of the bankruptcy petitions place their assets and liabilities in widely different sizes. Perhaps the largest dollar amounts come from the Neighbors Practice Management, LLC filing which includes assets in the $1,000,001 – $10 million with $500,001 – $ 1 million in liabilities.

The Problem with Private Emergency Rooms

Freestanding emergency rooms have been fighting an uphill battle over the past several years against negative PR associated with enormous medical bills that patient’s insurance wouldn’t cover due to the ER being “out-of-network”. Many private medical practices such as Neighbors Emergency Care aren’t recognized by the Federal Government, ruling out acceptance of government insurance programs such as Medicare or Tricare.

This is a situation that many industry lobbying groups have been trying to change inside the Texas Legislature, in order to have the freestanding ERs to be recognized as emergency care centers. Texas Legislators, however, responded with passing rules that required freestanding emergency rooms such as NEC to post a notice of which insurance networks they were part of. Exacerbating this problem, major insurance companies that they do take are not as quick to pay their bills as they once were.

Conclusion

It’s unclear whether the corporate group will use the Chapter 11 bankruptcy to successfully reorganize debt and continue the business, or if this is the first step towards a company-wide shutdown. The company hasn’t announced in branch closings as of yet, but judging from the highly segmented bankruptcy filings, it seems that underperforming emergency rooms and health care facilities may be forced to fend for themselves and/or shutdown.