John Fitzgibbon Memorial Hospital: Chapter 11 Targets $8.6M Sale to Strawberry Fields REIT

John Fitzgibbon Memorial Hospital, Inc. and its skilled-nursing affiliate Fitzgibbon Health Services filed jointly administered chapter 11 petitions in the U.S. Bankruptcy Court for the Western District of Missouri on April 21, 2026, under lead case number 26-40689. The case is a freefall sale-track filing: there is no debtor-in-possession financing, the Debtors are operating on cash collateral only, and a section 363 sale motion to Strawberry Fields REIT for approximately $8.6 million was on the docket the day after the petition.

The capital stack is small for a hospital chapter 11 — roughly $21.7 million in total liabilities, against more than $36 million in cumulative operating losses since 2018 — but the lien architecture is contested. At the petition the Debtors filed adversary proceeding 26-04017 against the Master Trustee, The Bank of New York Mellon Trust Company, N.A., alleging that BNY Mellon's UCC-1 financing statement on cash collateral was filed only 86 days before bankruptcy and is therefore avoidable as a preference under section 547. The interim cash collateral order entered April 23 expressly preserves that fight, and the second interim hearing is set for May 6, 2026.

Debtor(s)	John Fitzgibbon Memorial Hospital, Inc. and Fitzgibbon Health Services (jointly administered)
Court	U.S. Bankruptcy Court, Western District of Missouri
Case Number	26-40689
Petition Date	April 21, 2026
Total Prepetition Liabilities	$21.7 million ($10.2M secured / ~$11.5M unsecured)
DIP Facility	None — cash collateral only (interim order entered April 23, 2026)
Proposed Buyer	Strawberry Fields REIT
Proposed Purchase Price	~$8.6 million ($1 million escrow)
Master Trustee	The Bank of New York Mellon Trust Company, N.A.
Patient Care Ombudsman	Scott A. Pummell
Claims and Noticing Agent	Epiq Corporate Restructuring
341 Meeting	June 2, 2026, 1:00 p.m. (by phone)

Rural-Hospital Distress and Missed Bond Service

The Hospital, established in April 1923, operates a 60-bed acute-care facility on a 73-acre Saline County, Missouri campus, alongside the 99-bed Living Center skilled-nursing and memory-care facility, the Buckner Wellness Center, and four provider-based rural-health clinics in Marshall, Pilot Grove, and Slater. Together they form a small, geographically isolated rural health system. The Documentation in Support of Chapter 11 Petitions and Request for First Day Relief attributes the filing to a sustained deterioration in rural-hospital economics rather than a discrete operational shock.

Management lists six distress drivers in the first-day declaration. Cumulative losses since 2018 exceed $36 million, driven by what the Debtors describe as the structural mismatch between maintaining a 24/7 acute-care facility and staffing it for a smaller, lower-income population that generates insufficient reimbursement. The COVID-19 pandemic forced the suspension of elective, higher-margin procedures while operating costs, staffing shortages, and PPE expenses rose, leaving a weakened balance sheet that federal relief did not fully restore. The Debtors also flag the recently enacted "One Big Beautiful Bill Act" (OBBBA), which they expect to reduce Medicaid funding and increase the uninsured population — compounding pressure on reimbursement and uncompensated care.

A second pressure point is payer mix. The Debtors say the shift from traditional Medicare to Medicare Advantage Plans has lengthened payment cycles from roughly 14 days to 45–90 days and increased denial rates and documentation requirements. Recruitment and retention difficulties drove the Hospital toward higher-cost contract labor and premium compensation, eroding margins further. Liquidity ran out in late 2025: the Debtors missed principal and interest payments on both bond series on December 1, 2025, and the Master Trustee served notices of default on December 23, 2025.

Before filing, the Debtors had already taken sharp operating actions to conserve cash. They eliminated the intensive care unit, the in-patient behavioral health unit, and home-health and hospice services, closed two primary-care rural-health clinics and a chiropractic clinic, and cut two C-suite positions. The Hospital first engaged Juniper Advisory in 2024 to identify a strategic or financial partner for the acute-care assets. That process did not yield an acceptable option, and through 2025 and early 2026 the Debtors pursued additional balance-sheet alternatives before re-engaging Juniper to market a sale of substantially all of the assets in January 2026. Angy Littrell, president and CEO, said in a statement at filing that the chapter 11 process "gives us the time and structure needed to address financial challenges while continuing to provide the critical services our patients and residents depend on every day."

Prepetition Capital Structure and the Saline County IDA Bonds

The Debtors' prepetition liabilities total approximately $21.7 million, split roughly $10.2 million secured and $11.5 million unsecured. The capital structure is dominated by two series of revenue bonds issued by the Industrial Development Authority of the County of Saline, Missouri for the benefit of the Hospital under a Master Trust Indenture dated December 1, 1998. The Master Trustee is The Bank of New York Mellon Trust Company, N.A. (formerly BNY Trust Company of Missouri). Both bond series are secured by the Fitzgibbon Services Deed of Trust and the Hospital Deed of Trust, also dated December 1, 1998.

Instrument	Original Principal	Approx. Balance	Maturity	Collateral
2010 Series Bonds	$12.4 million	$3.8 million	Dec. 1, 2028	Hospital + Fitzgibbon Services Deeds of Trust
2016 Series Bonds	$7.55 million	$4.76 million	Dec. 1, 2035	Hospital + Fitzgibbon Services Deeds of Trust
Community Bank of Marshall note	$1,322,807.20	$1.1 million	Sept. 30, 2026	Community Bank Deed of Trust on MOB1
Wood & Huston Bank note	$270,810.80	$270,810.80	Feb. 11, 2027	Certificate of Deposit No. 45502
AmerisourceBergen credit	$250,000 (revolving)	$250,000	Revolving	UCC-1 on cash collateral
Unsecured debt	n/a	~$11.5 million	n/a	n/a

The Community Bank of Marshall note is secured by a deed of trust on a medical office building (MOB1). Wood & Huston Bank holds a small note secured by a certificate of deposit. AmerisourceBergen, the pharmaceutical distributor, holds a $250,000 revolving facility secured by a UCC-1 filing on cash collateral. The remaining liabilities are general unsecured trade and contractual obligations.

The validity of the bondholder lien on cash collateral is the central legal question in the case. The Debtors allege in adversary proceeding 26-04017 that the Master Trustee did not file a UCC-1 financing statement covering accounts and other personal property until January 26, 2026 — within the 90-day preference window before the April 21 petition. On that basis, the Debtors assert the cash-collateral lien is avoidable as a preference under section 547. If the Debtors prevail, BNY Mellon's adequate-protection package becomes a contested unsecured-deficiency dynamic rather than a secured cash-collateral negotiation.

Cash Collateral Order and No-DIP Adequate Protection

The Debtors filed an emergency cash collateral motion at the petition seeking interim and final orders authorizing use of cash collateral and granting adequate protection to prepetition secured parties. There is no DIP facility — the case is being run on cash collateral only.

The court entered an interim cash collateral order on April 23, 2026 authorizing use of cash collateral consistent with a budget, subject to a 15% aggregate, carry-forward variance, with weekly reporting on cash receipts, disbursements, and budget variances and updated budgets every two-to-four weeks. The adequate-protection package is constructed around the contested lien picture:

• Replacement liens on accounts, inventory, deposit accounts, general intangibles, and proceeds, automatically perfected, to the extent of any diminution in value.
• Express exclusion of chapter 5 avoidance actions and their proceeds from the replacement liens.
• Monthly cash payment of $5,620.20 to Community Bank of Marshall on the first business day of each month, representing accrued interest on the MOB1 note at the non-default rate.
• Special protections for the Master Trustee (BNY Mellon) and Community Bank of Marshall: their replacement liens are not subject to the carve-out for statutory and professional fees; their real-property collateral and proceeds are excluded; and they retain the right to assert section 507(b) superpriority claims if adequate protection proves insufficient.
• Reservation of rights in the pending preference adversary against BNY Mellon (Case No. 26-04017): the order does not waive or prejudice any party's claims or defenses in that action.

The objection deadline for the second interim hearing was May 4, 2026, with the hearing scheduled for May 6, 2026 at 11:00 a.m. Central.

Adversary Proceeding 26-04017 and the BNY Mellon UCC-1 Timing Challenge

On the petition date the Debtors filed adversary proceeding 26-04017 against The Bank of New York Mellon Trust Company, N.A. as Master Trustee, alleging that the trustee's UCC-1 financing statement perfecting its security interest in accounts and other personal property — the cash-collateral fulcrum of the bond debt — was filed only on January 26, 2026. That date sits 86 days before the April 21 petition, inside the section 547 preference look-back window for non-insider transfers.

The deeds of trust on the real property (the Hospital and Fitzgibbon Services parcels and improvements) are not subject to the preference claim and would remain in place; the adversary targets only the cash-collateral UCC-1.

BNY Mellon filed objections to both the cash management motion and the cash collateral motion on April 22, 2026. The interim cash collateral order tracks the contested posture by carving chapter 5 actions out of the replacement-lien grant and expressly preserving all parties' positions in the adversary. Counsel for the Master Trustee in the case are Laurence M. Frazen and William J. Easley.

Strawberry Fields Sale and the Juniper/HTG Marketing Process

One day after the petition the Debtors filed a motion to sell substantially all of their assets under section 363 to Strawberry Fields REIT pursuant to an Asset Purchase Agreement attached as Exhibit A. Strawberry Fields REIT (NYSE: STRW) is a self-administered healthcare REIT that operates 143 facilities — primarily skilled nursing and long-term care properties — across 10 states including Missouri. The motion expressly notes that the sale is not free and clear under section 363(f) — interests attach to the proceeds — and asks the court to waive the 14-day stay under Bankruptcy Rules 6004(h) and 6006(d) for an expedited closing. The headline economic terms are an approximately $8.6 million purchase price with $1 million held in escrow to secure potential post-closing claims, on an as-is, where-is basis subject to customary regulatory approvals and the absence of a material adverse change. Excluded from the sale are claims and causes of action arising under chapter 5 of the Bankruptcy Code, preserving the BNY Mellon preference action for the estate.

The marketing record is the product of a two-track prepetition process. The Debtors first engaged Juniper Advisory, LLC in 2024 to find a strategic or financial partner for the acute-care assets and re-engaged Juniper on January 22, 2026 to market a sale of substantially all of those assets. They engaged Healthcare Transactions Group, Inc. on February 18, 2026 to market The Living Center separately. Together, the two advisors contacted approximately 155 potential strategic and financial partners — national and regional health systems, private-equity sponsors, and specialty operators — and approximately 40 of those parties executed confidentiality agreements and entered the virtual data rooms. The Best and Final Deadline was April 15, 2026 at noon Central.

The Debtors did not propose a bidding-procedures order or a stalking-horse construct. Citing severe liquidity constraints, the risk of value erosion, and the risk of patient-service disruption, they propose to proceed directly with the Strawberry Fields transaction on an expedited timeline rather than attempt a postpetition auction. The motion contemplates a forthcoming assumption-and-assignment notice setting proposed cure costs; the buyer must pay all established cure costs and provide adequate assurance of future performance, and the motion asks that anti-assignment provisions in the assumed contracts be deemed unenforceable under section 365(f). The response deadline on the sale motion is May 13, 2026.

U.S. Trustee Objections and Patient Care Ombudsman

The U.S. Trustee filed a single response to the first day motions on April 22, 2026, taking no objection to the cash-collateral, joint-administration, insurance, schedules-extension, or utility motions, but raising four targeted issues. On the wages motion (Docket 18), the UST objected to payment of any wages exceeding the statutory cap under 11 U.S.C. § 507(a)(4), specifically questioning physician and insider bonuses, noting "[t]he Debtor cites no statutory or case law authority for the payment of such expenses above the statutory cap." On the cash management motion (Docket 22), the UST did not object to use of accounts at Commerce or other accounts within FDIC limits, but objected to a section 345 waiver for accounts holding uninsured funds and asked that uninsured funds be moved to an authorized depository. On the confidential patient information motion (Docket 15), the UST argued the motion should be continued for failure to serve the Department of Health and Human Services, asserted the Debtors were over-reading the HIPAA Privacy Rule, and urged the court to permit redaction (initials plus town/state) rather than sealing of patient identifiers. On the Epiq retention application (Docket 23), the UST did not object to the engagement but objected to a section 330 fee-review waiver, arguing that preparation of schedules is not "purely ministerial." The UST also indicated intent to solicit a creditors' committee from the top-20 (rather than top-30) unsecured creditor list.

By stipulated order on April 22, 2026, the court directed the appointment of a Patient Care Ombudsman, and the U.S. Trustee appointed Scott A. Pummell the same day. The PCO's role under section 333 is to monitor the quality of patient care during the chapter 11 case and to report to the court.

The first-day hearings on the joint-administration, cash-collateral, schedules-extension, employee-wages, utility, cash-management, insurance, and Epiq retention motions were held on April 22, 2026. The court entered the interim cash-collateral and interim cash-management orders on April 23, an interim utilities order on April 24, the joint-administration order on April 28, and orders on prepetition insurance, the schedules extension, the cash-management system on a final basis, and Epiq's retention on April 30. Schedules and SOFA are due May 26, 2026, and the section 341 meeting of creditors is set for June 2, 2026 at 1:00 p.m. by phone.

Key Timeline

Frequently Asked Questions

Who is the claims agent for John Fitzgibbon Memorial Hospital?

Epiq Corporate Restructuring serves as the claims and noticing agent. The U.S. Bankruptcy Court for the Western District of Missouri authorized the retention on April 30, 2026. Epiq maintains the official claims register and distributes case notifications to creditors and parties in interest.

Is there debtor-in-possession financing in the Fitzgibbon case?

No. The Debtors are operating on cash collateral only. The court entered an interim cash collateral order on April 23, 2026 authorizing use of cash collateral consistent with a budget, with a 15% aggregate carry-forward variance and adequate protection for the prepetition secured parties.

Who is the proposed buyer and what is the headline price?

Strawberry Fields REIT is the proposed buyer under a section 363 asset purchase agreement filed on April 22, 2026. The headline price is approximately $8.6 million, with $1 million held in escrow to secure potential post-closing claims.

What is adversary proceeding 26-04017 about?

The Debtors sued The Bank of New York Mellon Trust Company, N.A., the Master Trustee for two series of revenue bonds, alleging that BNY Mellon's UCC-1 financing statement covering cash collateral was filed January 26, 2026 — within the 90-day preference window before the April 21 petition — and is avoidable under section 547. If the Debtors prevail, the bondholders' lien on cash collateral is stripped.

When is the section 341 meeting?

The section 341 meeting of creditors is set for June 2, 2026 at 1:00 p.m. Central, by phone.

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