BKINFORMATION.COM - October 5, 2000

Farrel Fritz, P.C. Begins Reorganization Of  Long Island Healthcare Corporation, Owners Of Island Medical Center

Uniondale, N.Y.: Beset by declining patient census and financial liabilities from a previous owner's bankruptcy, the owners of Island Medical Center (formerly Hempstead General Hospital) today filed for voluntary relief under Chapter 11 of the U.S. Bankruptcy Code. According to attorney Ted Berkowitz of the Uniondale law firm, Farrell Fritz, who is managing the bankruptcy proceedings for the hospital's owners, Long Island Healthcare Corporation (LIHAC), the strengths of the hospital simply weren't enough to overcome a significant burden of debt that was the legacy of the hospital's previous owners.

"Island Medical Center plays an important role in the Hempstead and Uniondale communities as a truly locally-based health care facility," said Berkowitz. "Our two top priorities are to ensure the health and well-being of patients, and the jobs of employees. "We are doing everything possible to make certain that the doors of this hospital remain open."

Island Medical Center is a 213-bed acute care hospital, and is the only such facility located in the Village of Hempstead. Founded in 1956, the hospital employs over 500 people. It is one of only two "for-profit" hospitals on Long Island - a status that costs the owners approximately $725,000 in taxes each year. LIHAC, a closely held corporation, purchased the hospital in 1999 from Hempstead General Hospital, which had itself declared bankruptcy in 1994. As the purchase price for the hospital's assets, LIHAC was required to assume approximately $9.66 million of Hempstead General's liabilities.

"Like many hospitals, Island Medical Center has struggled with cuts in Medicaid and Medicare reimbursement levels, movement of services from inpatient to outpatient settings and the intense competition and consolidation in the Long Island health care market," said Berkowitz. "When you add to that the liabilities LIHAC assumed from HGH's bankruptcy, it caused a cash-flow crisis that was beyond the ability of management to stem. We believe, however, that the hospital has significant value to a healthcare entity with the financial resources to make a long-term capital investment."

In the short term, interim management at Island Medical Center is working to obtain temporary loans for working capital from state and local authorities. At the same time, several potential buyers have expressed interest in the facility. The hospital anticipates that it can conclude the sale in six to 12 months.

"The various authorities involved have been very sympathetic to the hospital's situation, as has the leadership of Health and Human Service Employees Union 1199, the New York State Nurses Association and their members," said Berkowitz. "With their support, we hope to restore Island Medical Center to financial health so that it can continue its proud record of service to the Hempstead community."