Wayne State University is fronting what could potentially total more than $16 million in payments for the School of Medicine's faculty practice, University Physician Group, to rebuild after bankruptcy.
U.S. Bankruptcy Court in Detroit last Monday approved UPG's reorganization plan and exit from bankruptcy after the nonprofit medical practice suddenly filed for protection in November.
After "extensive negotiations" with UPG, Wayne State agreed to provide financial assistance under a restructuring support agreement, according to a version of the reorganization plan submitted April 9.
Wayne State is, in essence, acting as a bank, providing exit financing to UPG for general unsecured creditor claims (it's excluding claims by Wayne State and an affiliated nonprofit Fund for Medical Testing and Education).
A 15-year term loan from Wayne State will be used to pay 80 percent of unsecured claims that are currently projected at approximately $10.7 million, but could rise as court proceedings are finalized, according to a document in U.S. Bankruptcy Court in Detroit.
The Detroit university is also providing a revolving loan of at least $2.5 million that could range up to $7.5 million for UPG's working capital needs.
A Wayne State representative declined to provide additional comment on the restructuring plan.
The November bankruptcy filing was driven by discovery earlier in that year that financial losses of the 20-year-old faculty practice plan were double the $5.5 million expected and a new, more drastic turnaround plan was required, at the time. Over the past decade, UPG's number of physicians declined by 50 percent, which hurt clinical revenue and made its leased network of suburban offices untenable, the filing said.
The court-approved reorganization strategy created with consulting firm AlixPartners will help determine the future of UPG. It is expected to carry UPG from its 2018 loss of $8.1 million to $3 million in profit by 2022, according to the release and reorganization documents.
To carry out the reorganization, the practice plan's leadership formed six interdisciplinary teams to "transform and modernize" financial operations, its footprint, patient access, doctor compensation, business relationships and organization culture, among other things, last week's news release said.