Morrison Hospital Association - Chapter 11 Case Summary

Business Description

Located in Whitefield, NH, Morrison Hospital Association (the "Debtor") is a not-for-profit corporation providing essential healthcare services to meet the region's growing need for care for aging adults. The Debtor operates three facilities across two campuses:

• The Morrison Skilled Nursing Facility ("Morrison Skilled Nursing Facility") is a nursing home providing 24-hour skilled nursing care with 57 beds, and Sartwell Place Assisted Living ("Sartwell") is an assisted living facility offering 20 units, both operating out of the 6 Terrace Street campus.
• Summit by Morrison ("Summit"), located at 56 Summit Drive on a separate, nearby campus, is a senior living community opened in 2018 providing independent living, assisted living, and memory care services, with 15 cottages, 33 independent living apartments, 24 assisted living studio apartments, and 12 memory care studio apartments.

The Debtor generates revenue overwhelmingly from the provision of healthcare services and is paid by third-party payors, including Medicaid, Medicare, Veterans' Administration, and private insurance companies.

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Corporate History

Originally established in 1903 as a private hospital and a nurses training school, the Debtor has been providing quality healthcare to residents of northern New Hampshire for more than a century.

• The development of Summit was largely financed through loans with the United States Department of Agriculture ("USDA"), with the Debtor executing multiple loan agreements with the USDA in the aggregate principal amount of $24,973,000 in February 2018.
• The Debtor is also the beneficiary of the George H. Morrison Trust, which was established by the founder of the Debtor and is maintained at Merrill Lynch.

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Operations Overview

Workforce

As of the Petition Date, the Debtor had 96 full-time employees, 8 part-time employees, and 54 per diem employees (collectively, the "Employees"), of whom 143 are paid on an hourly basis and 15 are salaried. The Debtor is a large employer in the northern New Hampshire area.

• Employees hold positions critical to the Debtor's ongoing operations, including roles related to operations, accounting, nursing, pharmacy, dietary services, administration, and support services.
• From time to time, the Debtor also contracts with various staffing companies to fill vacancies in healthcare positions, though these individuals are not classified as employees and are not paid directly by the Debtor.

Employee Benefits

The Debtor provides vacation, sick, and personal time to all Employees, combined into one bank of hours per Employee ("Annual Leave"). Employees accrue Annual Leave on a weekly basis, with maximums ranging between 96 and 216 hours per year depending on length of service and hours worked.

• Employees may use their time or "cash out" any Annual Leave above 40 hours once per year, with cashed-out leave paid at half rate and subject to normal wage deductions.

The Debtor also funds the following benefits to eligible Employees:

• Health insurance for eligible Employees;
• Accidental Death and Dismemberment Insurance through Mutual of Omaha, with the Debtor paying $50 per month;
• Life Insurance through Mutual of Omaha, with the Debtor paying approximately $150 per month;
• Reimbursement for purchases made by eligible Employees on behalf of the Debtor in the ordinary course, which amount is de minimis;
• 401(k) with the Debtor paying approximately $1,100 per week for employer-side contributions.

Cash Management System

The Debtor maintains an integrated cash management system through bank accounts at Bank of New Hampshire ("BNH") and Bar Harbor Bank & Trust for the collection, concentration, and disbursement of funds used in its operations.

• Revenue and receipts are posted to the General Operating Account at BNH and swept nightly to an Insured Cash Sweep Account ("ICS"), which then funds the Operating Account and Payroll Account for daily operating expenses and payroll.
• The Operating Account at Bar Harbor Bank & Trust is held as a reserve and to secure the Debtor's credit card obligations, which are paid in full each month.
• The Debtor also maintains USDA expansion accounts, Donations Accounts, a Funded Depreciation Account, Summit waitlist deposit accounts, and an Investment Management Account at Community Financial Services Group.

Disbursements are made primarily from the General Operating Account and Payroll Account through check, wire transfer, or ACH. It can take several months from the provision of services to when payment is received from third-party payors.

Resident Payment Practices

In the ordinary course and consistent with industry custom, residents pay the Debtor in advance for a full month of services at the beginning of each month. If a resident does not stay for the entire month, the Debtor refunds the prorated portion of prepaid fees attributable to services not rendered.

• Resident refunds are typically less than $5,000 per month.

The Debtor also maintains resident trust checking accounts at Passumpsic Savings Bank for each of its three facilities, administered for the benefit of the residents. The Debtor holds no interest in these accounts and merely offers the service of general administration of funds held for the residents' own use.

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Prepetition Obligations

As of the Petition Date, the Debtor reports approximately $23.8 million in total secured debt obligations. The prepetition capital structure includes the following:

Credit Union Loan

• Approximately $847,000 is outstanding under a loan agreement executed on October 20, 2016, with Service Credit Union (the "Credit Union") in the original principal amount of $2,608,000. The loan was originated to finance the renovation of the Debtor's real property at 6 Terrace Street.
  • The Credit Union Loan is secured by a first-priority mortgage on the Terrace Street Property, a collateral assignment of leases and rents for the Terrace Street Property, and an all-asset security interest in the Debtor's remaining assets.
  • The Credit Union filed its UCC-1 Financing Statement with the New Hampshire Secretary of State's Office on October 19, 2016, with a Continuation Statement filed on October 5, 2021.

USDA Loans

• Approximately $22,994,000 is outstanding under multiple loan agreements executed on February 17, 2018, with the USDA in the aggregate original principal amount of $24,973,000. The loans were originated to finance the development of the Summit campus.
  • The USDA Loan is secured by a first-priority mortgage on the Summit Drive Property, a second-priority mortgage on the Terrace Street Property, and an all-asset security interest in the Debtor's remaining assets.
  • The USDA filed its UCC-1 Financing Statement with the New Hampshire Secretary of State's Office on February 8, 2018, with a Continuation Statement filed on September 25, 2022.

Both the Credit Union and the USDA assert perfected security interests in, among other things, the Debtor's accounts receivable, general intangibles, and contract rights by virtue of their respective UCC financing statements.

Prepetition Employee Obligations

• As of the Petition Date, the Employees were owed and had accrued various sums for prepetition services. A pro rata portion of compensation paid after the Petition Date constitutes prepetition wages of approximately $82,000, comprising $63,000 for hourly Employees and $19,000 for salaried Employees.
  • The average gross wages in the pay period ending April 4, 2026, were $114,803.55, comprising $87,809.03 for hourly Employees and $26,994.52 for salaried Employees.
• The Debtor estimates the value of Employees' accrued unused Annual Leave at approximately $217,091.48 as of the Petition Date.

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Events Leading to Bankruptcy

Financial Distress

While the Debtor has generally been able to pay its day-to-day expenses, servicing the USDA debt has not been manageable. Through a series of financially disadvantageous roadblocks at the outset of the opening of Summit, coupled with financial difficulties plaguing the healthcare industry following the Covid-19 pandemic, the Debtor is facing financial distress.

Chapter 11 Filing

On April 10, 2026, the Debtor commenced its chapter 11 case by filing a voluntary petition for relief under chapter 11 of the Bankruptcy Code in the U.S. Bankruptcy Court for the District of New Hampshire. The Debtor commenced the proceeding to reorganize and restructure its debt with the USDA and present a plan to its other creditors.

• Use of cash collateral on an interim basis is essential to the Debtor in order to avoid immediate and irreparable harm to the estate, residents, and employees. Without access to cash collateral during the first 14 days of the case, the Debtor would be unable to fund payroll for essential staff — including nurses, therapists, dieticians, and administration — pay insurance premiums, pay vendors, suppliers, and utilities, and cover other necessary operating expenses.