Case Study
Regional Hospital Stabilizes After $700K/Month MCA Drain
A $15M medical center recovered from multiple liens, litigation, and broken billing systems with an 85% payment reduction, AR recovery tools, and a coordinated restructuring plan.
Before (Crisis State)
- 8 stacked MCAs
- $159,000/week in withdrawals
- $700,000/month drained
- 3 UCC liens across multiple processors
- Revenue holds preventing payments from reaching the hospital
- Several MCA positions already in litigation; others beginning pre-litigation
- Severe AR problems due to Medicare and payer claim rejections
- Previous engagement with a debt settlement firm worsened the situation
- Payroll, vendors, rent, equipment, and operations all at risk
- Client overwhelmed and unsure how to resolve AR or negotiate MCA relief
After (Stabilized & Thriving)
- 85% payment reduction for 60 days
- All UCC liens released
- Litigation stayed
- Immediate cash-flow stabilization within 4 weeks
- Sale-leaseback strategy positioned to generate multimillion-dollar payoff funds
- AI billing tools implemented to reduce claim denials and increase revenue by 10–30%
- Hospital now covers payroll and operations from current AR
- Clear path toward sustainable long-term growth
Client Background
A regional medical center with approximately $15 million in annual revenue found itself in a financial crisis despite strong patient demand and substantial billing volume. The hospital was struggling operationally, and years of growing reliance on outside funding led to the accumulation of eight Merchant Cash Advances (MCAs). At the same time, its accounts receivable were severely compromised due to high rates of claims rejections and denials caused by billing errors, incomplete documentation, and eligibility mismatches across Medicare and other payers. This combination—rapidly draining liquidity from MCA withdrawals and a dysfunctional revenue cycle—placed the hospital in an existential crisis.
The Crisis
Weekly MCA withdrawals reached $159,000, totaling roughly $700,000 per month. Three UCC liens were filed by funders, causing processors to freeze incoming revenue. At the same time, several funders initiated litigation, and more were preparing to follow. The CFO was under immense pressure. A previous engagement with a debt settlement company had worsened the situation, leaving the hospital vulnerable and partially unprotected. Essential operations—payroll, vendors, rent, equipment procurement—were all at risk of imminent failure.
Understanding the Financial Reality
Through a detailed review of financials, Douglass Advisory uncovered the core issues:
Claims Rejections and Denials Crippling AR
Because of incorrect or incomplete billing information submitted to Medicare and other carriers, claims were frequently rejected or denied. This prevented payments from being accepted for processing and caused weeks—sometimes months—of reimbursement delays.
Revenue Potential Was Strong — Cash Flow Was Not
The hospital had significant billing volume and strong medical demand. The problem was not revenue generation but revenue capture.
MCA Payments Consumed All Available Liquidity
The payment amounts were completely unsustainable. Without restructuring, payroll and operations would fail.
Lack of a Cohesive Strategic Plan
The hospital had no unified approach to negotiating with funders or addressing AR failures.
Restructuring Strategy
Our recovery plan involved multiple coordinated components:
1. Reduce MCA Payments by 80–85%
To immediately stabilize cash flow, we negotiated substantial temporary payment
reductions across all eight MCAs.
2. Utilize Sale-Leaseback Proceeds
A planned sale-leaseback of the hospital property would generate millions in liquidity to fund balloon payments later in the restructuring timeline, incentivizing funders to agree to lower interim payments.
3. Release All UCC Liens
Full lien release was essential to unfreeze revenue and restore normal cash-flow operations.
4. Implement AI-Driven Revenue Cycle Tools
We introduced a modern AI billing solution to:
• Detect coding errors before submission
• Flag missing documentation
• Predict likely claim denials
• Align claims with Medicare and payer guidelines
• Increase first-pass acceptance rates
These improvements typically raise hospital revenue by 10–30% simply by reducing
avoidable denials.
5. Collaborative, Transparent Negotiation
We aligned the financial model with what the hospital could truly afford and what the funders could reasonably accept, allowing both sides to operate with clarity and confidence.
Negotiation Process
Funders, once aware of the hospital’s upcoming liquidity event and improved AR operations, were eager to participate in a structured workout.
We overcame key obstacles by:
• Demonstrating the hospital’s long-term viability
• Providing realistic payment capacity backed by financial analysis
• Structuring incentives through future balloon payments
• Filing a temporary restraining order against a funder improperly collecting on a lien
Outcome
The restructuring delivered transformational results:
85% reduction in payments for the first 60 days
All UCC liens released
Litigation stayed
Cash flow stabilized within 4 weeks
AR improvements increasing revenue
Hospital returned to operational stability
Client Transformation
How They're Doing Today
Today, the hospital is thriving. Payroll and operational expenses are fully supported by current revenue. The CEO describes the outcome as a “huge weight lifted,” with confidence restored in both the business and its trajectory. With strong AR processes, reduced denials, and MCA burdens lifted, the organization now enjoys stability, flexibility, and the financial clarity needed to grow.