Case Study: Increasing cash runway and improving performance for distressed health network leads to successful exit


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Middle Market Healthcare Network (HCN)




HCN was a for-profit health network that grew over 30+ years from a small, single-location practice into a profitable, $235 million health network across multiple states with almost 100 legal entities. The business included healthcare operations (“OpCo”) as well as over 25 owned and leased properties (“PropCo”), financed by 10 non-syndicated secured lenders, with different borrowers and collateral, requiring cooperation on use of cash to effectuate a restructuring. HCN built a stellar reputation as a high-quality, low-cost provider, but ultimately struggled to compete against behemoth not-for-profit networks. To preserve value, HCN pursued partnerships with two large competitors. Both deals fell apart on the eve of closing when a Department of Justice (DOJ) investigation into billing practices expanded via the False Claims Act from $300,000 to over $100 million (that is not a typo – $100 million) and then settled for eight figures. The company started to market itself for sale, and within four months, the sale process stalled, leaving the company with only eight weeks of cash and eight-figure payments due to both the DOJ and the physicians.


  • Cash runway was extended from eight weeks to eight months through cash triage, asset monetization, and operational improvement.
  • EBITDA was improved by about $25 million within seven months and turned positive, becoming the basis for the sale multiplier that generated a positive result for stakeholders.
  • The CRO team argued for an out-of-court solution to preserve value while others strongly supported restructuring through a bankruptcy process. 
  • Multiple buyers were contacted, and ultimately a strategic investor worked collaboratively with the CRO to structure a favorable deal.
  • After a protracted debate with key stakeholders over venue and with the Federal Trade Commission (FTC) and the state attorney general over competitive impact, 100% of OpCo assets and 82% of PropCo assets were sold successfully out of court.
  • The OpCo and PropCo transactions created a positive outcome for stakeholders:
    • Secured lenders with purchased collateral were paid 100%.
    • Secured lenders with leased or transferred collateral were returned to performing status.
    • The physicians were paid in full.
    • The DOJ was paid in full.
    • Multiple litigations were successfully settled.
    • Unsecured vendors were paid 70-100% depending on the time period of the liability.
    • 1,300 employees were offered jobs for a period of time to evaluate performance.
    • Post-sale, CohnReznick continued to work with the seller to complete the wind-down of entities. 
    • Post-sale, CohnReznick was also asked to work with the buyer on transition and integration.


This serves as a successful example to distressed companies of how the right crisis management team can help them avoid bankruptcy and instead move forward through restructuring, workout, and an eventual sale. Our team was able to craft a multifaceted solution out of court that generated a spectacular outcome.