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Lessons to Learn from Gilbert Hospital's Case of Filing for Chapter 11 Bankruptcy Reorganization

Gilbert Hospital, one of the most profitable hospitals in the US before, has recently filed Chapter 11 Bankruptcy reorganization.


Chandler, AZ -- (SBWIRE) -- 07/25/2014 -- Loss of financing, alterations in management, competition from other nearby hospitals, and discouragement from patients due to construction near the hospital – these are all potential factors why one of the most profitable hospitals in the United States and has served as a model hospital when it comes to emergency-room centers, recently filed for Chapter 11 Bankruptcy reorganization.

Gilbert Hospital’s Bankruptcy Attorney Pernell McGuire revealed that the most critical reason for the filing of the bankruptcy was due to loss of available cash to pay day-to-day operating expenses of the hospital. Stillwater Bank, its lender, was forced to seize around $1.1 million from the hospital which was then led to the loss of cash. Gilber Hospital’s estimated total liabilities range from $1 million to $10 million. Their assets only amount to less than $50,000.

It should be noted as well that in 2013, the investors of Gilbert Hospital resolved a Maricopa County Superior Court lawsuit. In the said lawsuit, Dr. Timothy Johns, founder of Gilbert Hospital was accused of redirecting funds to Florence Hospital (Anthem in Pinal County) and Peoria Regional Medical Center. Dr. Johns is appointed as one of the hospital’s Oversight Committee. In addition to this, there are other two hospitals that were launched by Dr. Johns that had gone through financial difficulties.

It was also last year when Florence Hospital filed Chapter 11 Bankruptcy while Peoria Regional Medical Center’s construction was not completed due to lack of funding.

Dr. Johns’ goal is to have a stand-along hospital emergency room guaranteeing patients would be able to receive medical attention from a doctor within 30 minutes of arrival. There were several doctors who invested $60,000 each and Gilbert Hospital was launched in 2006 with 100 employees. Gaining a hospital-leadership position in Chandler Regional Medical Center in Arizona, Dr. Johns projected that Gilbert Hospital that the hospital would have around 24 patients each day. But eventually, and even during its launch, the real numbers went beyond the projection as there were three times the volume of patients who sought emergency care from the hospital – making it one of the most money-making hospitals in the US. In 2011, Gilbert Hospital had a total of $20 million in cash. This was then used by Dr. Johns for founding credit lines for Florence and Peoria hospitals. But it was due to financial mismanagement which led to the draining of funds.

Keith Hendricks, attorney of Dr. Johns stated that alll the diversion of funds from Gilbert Hospital to Florence and Peoria hospitals were all reflected in Gilbert Hospital’s audited financial statements.

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