Judge clears way for vote on Oklahoma hospital’s bankruptcy exit plan

Bondholders will vote on a Chapter 9 bankruptcy exit plan for a rural Oklahoma hospital authority after a federal judge on Wednesday approved a key document in the case.

U.S. Bankruptcy Judge Terrence Michael in the Eastern District of Oklahoma said he reviewed an amended disclosure statement submitted by the Atoka County Healthcare Authority “in significant detail” and found it to contain adequate information.

Clay Christensen, the authority’s attorney, said the disclosure statement had been amended after UMB Bank, the trustee for $10 million of bonds the authority sold in 2007, requested “minor additions.”

Atoka County Medical Center

“We’re ready to proceed to get this disclosure statement approved and get our ballots out, get this plan confirmed,” he told the judge at a hearing.

The plan would fully pay principal and interest on the bonds. The authority, which filed for bankruptcy in 2017, proposed the reinstatement of the bonds and bond documents covering the outstanding principal of $7.655 million, along with interest.

The unrated, tax-exempt revenue bonds backed by a county sales tax and other hospital revenue and assets were sold to build a replacement medical center in the southeastern corner of Oklahoma. A federal loan was also used to finance the Atoka County Medical Center, which was completed in 2009 with expanded surgical and outpatient specialty services for the county of about 14,000 residents.

Oklahoma’s partly energy industry-sparked economic woes between 2013 and 2016, uninsured rural patients, low Medicaid and Medicare reimbursement rates, a decline in the number of local physicians, and the state’s hesitancy to expand Medicaid led to the bankruptcy filing, according to the disclosure statement. Oklahoma expanded Medicaid in 2021 after voters approved a 2020 ballot measure to do so.

The authority said the hospital subsequently adopted an internal leadership structure and that its finances stabilized after undertaking cost-cutting and other measures.