Certain changes to the business rela- tionship might be worth pursuing, too, he says. “You would probably want to go on a cash-on-delivery (COD) basis for products and services, so you would pay for them when they are provided by the vendor, not before. That could be difficult if you have a contract with the vendor, unless you have a provision that allows you to terminate the contract.” It would be beneficial, as a good risk management practice, for ASCs to include provisions in their contracts that provide flexibility, Walsh says. “This can include the ability to ter- minate contracts or go to COD upon a delayed delivery of supplies or ser- vices, and to require vendors to report on their financial performance to you.” An ASC, however, will typically
not know that a company is filing bankruptcy before it happens, Casa- grande says. “That process is usually shrouded, so surgery centers must be prepared to react in the event that one of their vendors declares bankruptcy.” It is imperative that ASCs remain
informed during the bankruptcy case, he says. “By either involving your legal counsel or doing it yourself, make sure the bankruptcy court is aware of your relationship with the debtor and that you receive notifications of what is hap- pening in the bankruptcy case. While you should receive notice of any actions that affect your rights, that may not always happen for a variety of reasons.” If you have an ongoing business relationship, you might want to restart your accounting of goods, services and payments as of the date of the bank- ruptcy filing, Casagrande adds. “The court will look at what happened before the filing date and after in terms of determining the rights and obliga- tions of the parties.”
ASC Impact If
your ASC lacks a contractual
relationship with a vendor that files for Chapter 7, the impact on your
If the vendor attempts to liquidate,
facility is fairly straightforward, says Stephen Blake, chief executive officer and administrator of Central Park Surgery Center in Arlington, Texas. “If the company goes out of business, you will need to find a new vendor to provide the supplies or services previously provided by the vendor that is no longer operating.” If such a vendor files for Chapter
11, you will likely have a decision to make, he says. “If the vendor is going through a reorganization, that may not require you to look elsewhere for services. If the vendor is giving you quality products and/or services at good prices, and this continues to go forward during the bankruptcy proceedings, work with the vendor in the hope that the relationship will continue. Look at all relationships with vendors as partnerships. Any time you lose a partner, it is a loss to the organization.”
Where matters can become more
complex is when you have a contrac- tual relationship with a vendor that declares bankruptcy, Casagrande says. “If an ASC is pre-paying for goods or services, it will be affected by the fil- ing. Whether it is pre-payments for information technology or linen clean- ing services, or perhaps a large project such as physical improvements to the center, if the term of the contract or the work has not completed, almost any- thing can happen when the company declares bankruptcy. This is when it is particularly worthwhile to involve your legal counsel.”
your contract could end up in the hands of another vendor, Walsh notes. “That contract is a valuable asset to the vendor. The vendor may be able to assign the contract and sell it to another similarly situated vendor. You would then be forced to accept supplies and services from them, as long as it is of the same quality.” Casagrande says, “If it is a Chap- ter 11 reorganization, the company that filed for bankruptcy might try to continue to operate under the contract because they see value in it for their ongoing business operations.” He adds, “When you have an ongo- ing contractual relationship, that is where a bankruptcy can open up a can of worms. Different type of contracts may be treated differently, so it is important to speak with a legal professional about your rights and obligations.” When an ASC is faced with a vendor that has declared bankruptcy, it would be wise to prepare for the potential impact on its operations, Blake says. “If a vendor bankruptcy could interrupt the services your ASC needs, research different vendors that could serve as a possible replacement. If the bankruptcy could result in your ASC lacking specific supplies, try to add more stock of those supplies, especially in the area of critical drugs/supplies.” While ASCs may be directly
affected when their own vendors declare bankruptcy, surgery cen- ters also can feel the effects of other vendors going this route, Blake says. “When a vendor exits the market, the number of choices for product/service providers decreases. I have never seen where the loss of a business resulted in a reduction in prices. If there is too much consolidation, whether through closings or acquisitions, choices are reduced and prices usually increase. From an operational perspective, that is usually a much larger concern.”
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