Ontario Medical Clinic Entering Creditor Protection… What’s First, and What’s Next?

When a clinic has more debt and obligations than it has equity, it is considered technically insolvent. Sometimes, a practice can be profitable, but not profitable enough to cover the debt obligations it has… and too often, a practice that is within 15% - 20% of breakeven can’t become cash-flow positive (which means that there is more cash in the bank at the end of the month than at the beginning) without finding a way to negotiate the debt down. As the clinic operators ask the Court to protect them from creditors trying to close them down, the Court may approve them entering a process where they work with a receiver to help through the challenges of getting the debt and obligations into a place the practice can continue. Your goal as clinic owner / operator is to ensure you understand the process and that the value of your clinic is as clear and transparent as possible.

Entering Companies’ Creditors Arrangement Act (CCAA) protection is a critical step for an insolvent medical clinic. This process provides an opportunity to restructure debts and find a path forward while continuing operations. Here’s what clinics need to know when considering this route, particularly how and when to involve key professionals like trustees or accountants, and how to ensure the process starts with accurate financial data.

When Should You Call a Trustee or Accountant?

Timing is crucial. Delays can result in reduced options, creditor impatience, and mounting stress. Call your accountant if:

1. Recurring Cash Flow Issues
   If the clinic is struggling to cover essential operating expenses, such as rent or payroll, consistently.

2. Unmanageable Debt
   When debt exceeds what your revenue can realistically service, especially if loan repayments impact patient care or operational priorities.

3. OHIP Payment Issues or Challenges
   Too often for Ontario clinics, incorrect OHIP reimbursements can distort financial projections, leaving clinics unable to meet obligations.

4. Notice from Creditors
   If suppliers or lenders begin issuing warnings or legal notices, early intervention can prevent escalated action.

An experienced accountant or trustee can help evaluate the clinic's financial health, assess restructuring options, and decide if entering CCAA protection is the right choice.

Providing Key Accurate Financial Information For The CCAA Process

Transparency is the foundation of a successful restructuring. Providing accurate and comprehensive data ensures trustees can craft a realistic plan for creditors and maximize recovery opportunities. Here’s what you need:

1. Revenue Details
   Break down revenue streams, especially OHIP claims, private billing, and ancillary services like diagnostics or pharmacy partnerships. Include historical data and projections.

2. Accounts Receivable vs. Paid
   Clearly outline what has been billed but not yet paid by OHIP, insurers, or patients. Highlight discrepancies or chronic underpayments. Use a 3rd party verification service like Physicians First to validate the claims opportunities, which gives partners comfort in knowing that your financial picture is impartial.

3. Expense Records
   Share a complete picture of operating costs, including:

   • Salaries and payroll

   • Rent and utilities

   • Equipment leases or loans

   • Administrative costs

4. Debt Obligations
   Provide an itemized list of liabilities, including loan agreements, supplier contracts, and lines of credit.

5. Profitability Metrics
   Calculate gross profit margins for key services. For example, how much revenue does an average encounter generate after (factoring in overhead)?

Starting the Turnaround: The Role of OHIP Claims

OHIP billing is often the first focus for optimization. Ensuring that your claims process is error-free and consistent is critical to improving cash flow. Here’s how:

• Audit Claim Submissions: Review submitted claims to identify billing errors, underpayments, or incomplete documentation.

• Streamline Processes: Implement tools or systems to track claims from submission to payment. Consider professional billing support if administrative errors are common.

• Analyze Service Utilization: Determine if specific procedures or services are underutilized due to inefficient scheduling or patient flow.

• Explore Service Expansion: Identify higher-margin services that align with community needs, such as chronic disease management or specialized diagnostics.

Final Thoughts

Entering CCAA is a significant decision but can provide the breathing room needed to restructure and recover. By acting early, involving professionals, and starting with accurate financial data—especially around OHIP billing and accounts receivable—clinics can set the stage for a successful turnaround. With the right strategies, medical practices can transition from financial distress to stability and renewed growth.