Galesburg Cottage clinic to file for bankruptcy; intends to remain open through process

Tom Martin
Galesburg Register-Mail
Knox Clinics Corp., connected to Galesburg Cottage Hospital, is filing for Chapter 11 bankruptcy.

GALESBURG — Knox Clinic Corporation in Galesburg will file for Chapter 11 bankruptcy, according to a letter employees Tuesday afternoon.

The clinics at 834 N Seminary St. are connected to Galesburg Cottage Hospital, which lost its accreditation and was notified in December about losing Medicare and Medicaid payments. 

More:What's next for Cottage Hospital? Can the longtime hospital stay open without Medicare, Medicaid funding?

A letter from Cottage Hospital CEO Sanjay Sharma told employees the clinics, not the hospital, will file for Chapter 11 bankruptcy, which will allow it to reorganize and preserve services.

"It has become necessary, considering recent developments, for clinics (not the hospital) to file for Chapter 11 bankruptcy. What this will allow us to do is reorganize the clinics and emerge safely to preserve the services we can," the letter from Sharma said.

"The plan is to continue to operate the clinics during bankruptcy. We intend to come out of this process stronger and more sustainable for the long term. I will continue to update you as decisions progress. All these changes have had to be make quicker than in an ideal scenario, but I know we can continue to work together and be on the other side of this a more sustainable organization," Sharma's letter to employees concluded.

A chapter 11 bankruptcy generally provides for reorganization, usually involving a corporation or partnership. A chapter 11 debtor usually proposes a plan of reorganization to keep its business alive and pay creditors over time. People in business or individuals can also seek relief in chapter 11.

More:Galesburg's Cottage Hospital 'poses immediate risk' to patients, regulatory agency says

On Wednesday morning, Courtney Bibo, Cottage Hospital director of community and staff relations, had no comment about the bankruptcy or the hospital losing Medicare and Medicaid payments.

Within 30 minutes, Bibo sent an email confirming the bankruptcy.

"The clinic has filed chapter 11 bankruptcy to reorganize to ensure its viability in the medium and long term," the release aid. "The hospital is not included in this bankruptcy."

In the release, Bibo said "The Clinic Corporation intends to continue to operate throughout the process and emerge with a more sustainable model."

More:OSF adds two Galesburg pediatricians formerly with practices at Cottage

News of the hospital losing accreditation and Medicare and Medicaid payments broke Dec. 28. Since that time neither Sharma nor Bibo have responded to questions from the media about what losing those payments mean for the hospital. Medicare and Medicaid payments represented 72% of the hospital's net inpatient and outpatient revenue in 2020. Payments for Medicare and Medicaid patients at Cottage Hospital will continue for patients admitted before Jan. 15.