State mandates of costly services can cause hospitals to shutdown

See California Nonprofit Hospitals Turn to Bankruptcy for Leverage Against State: Distressed nonprofit hospitals in the state are using chapter 11 to gain leverage against the attorney general, whose office critics say has caused some sales to collapse by Akiko Matsuda of The WSJ. Excerpts:

"Beverly Hospital near Los Angeles tried and failed for years to sell itself. It turned the corner when it filed for bankruptcy.  

The chapter 11 filing in April gave the hospital operator some leverage against the state’s attorney general, who has the authority to mandate prospective buyers to maintain costly services such as emergency and charity care, and to accept patients covered by government-backed healthcare programs. 

Such requirements had stunted Beverly’s earlier sale attempts. As its finances worsened, the hospital faced the rising possibility of shutting down, leaving tens of thousands of low-income patients in the city of Montebello without healthcare services."

"The states’ stringent review process meant to protect the public and ensure acquirers would continue providing essential healthcare services. But critics say the irony is by enforcing these requirements, sales have fallen through and at least one hospital has had to shut down, causing patients to lose much-needed healthcare altogether."

"But these legal challenges could become more prevalent in the coming years as many hospitals struggle financially as a result of the Covid-19 pandemic and may need rescue mergers. To counter attorneys general’s stringent review process, more nonprofit hospitals may try to seek bankruptcy protection."