Victory Memorial Hospital files for Chapter 11

New York, Nov. 17 - Victory Memorial Hospital filed for Chapter 11 Wednesday in the U.S. Bankruptcy Court for the Eastern District of New York.

The Brooklyn, N.Y.-based hospital said it "has a serious liquidity crisis and finds itself in a very tenuous financial position, with limited cash, an inability to service debt or make necessary capital improvements, or otherwise sustain operations in their current form."

Among the problems, the hospital said it has been facing increased competition from health care network systems.

Victory Memorial noted that it is an independent hospital rather than a member of a health care network system which means it cannot obtain the more favorable managed care rates provided to the larger health care network systems.

In addition, because of its small size it has to pay higher prices for supplies.

The problems have been exacerbated by a continuing reduction in Medicare and Medicaid payments.

Additionally, Victory said it lacks the resources to offer the physical plant and infrastructure necessary to attract new physicians.

Finally, the hospital said its computer system is "outdated and antiquated and needs replacement."

Victory Memorial listed assets of $49.486 million and liabilities of $85.563 million.

It also asked the court to approve a $2 million debtor-in-possession facility from the Dormitory Authority of the State of New York, with $880,000 to be available on an interim basis.

The loan will run until Victory Memorial replaces it with a commercial facility, the plan of reorganization becomes effective or a trustee is appointed.

Interest will be at the Treasury Bill rate.

The hospital obtained a $650,000 emergency loan from the federal secretary of Housing and Development one day before filing, with the expectation that the money will be repaid from the DIP facility.

Victory Memorial owes the dormitory authority $23.466 million under a mortgage note. Payments on that note secure DASNY Victory Memorial Hospital FHA Insured Mortgage Hospital Revenue Bonds Series 1999.

In addition it owes $4.533 million to the Pension Benefit Guaranty Corp. under a promissory note and mortgage agreement, $5 million to Maimonides Medical Center under a promissory note and mortgage and $5.2 million to Madison Realty Capital, LP under a mortgage note.

Victory Memorial's case number is 06-44387.

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