Cyberattack on Change Healthcare led CarolinaEast Health System to seek a $45 million loan

CarolinaEast Medical Center in New Bern, NC. (NBN Photo)

A cyberattack on a technology company disrupted CarolinaEast Health System’s ability to process claims and payments. This resulted in CEHS asking the North Carolina Local Government Commission to approve a request to obtain a $45 million loan to cover operational expenses.

The security incident on Change Healthcare, a subsidiary of UnitedHealth Group, impacted countless health systems, hospitals, physician offices, pharmacies, and other providers.

According to a press release, the cyberattack was discovered on Feb. 21 and action was taken to “disconnect Change Healthcare’s systems to prevent further impact.”

CarolinaEast Medical Center and CarolinaEast Physicians were impacted by the cyberattack.

When asked, Brandy Popp, the director of public relations, told New Bern Now that CEHS’s connection to the healthcare clearinghouse had been restored. She stated, “As of March 28, 2024, we were able to send claims to payers.”

Popp also noted, “We do use Change Healthcare’s Assurance Reimbursement Management which helps scrub claims for errors before they are filed with payers. This was impacted by the cyberattack as well.”

CarolinaEast Health System is a NC hospital authority and state law gives them the power to borrow money.

CEHS’s Board of Directors and the Board of Physicians held special meetings on March 28. They considered “a proposed financial transaction with Truist Bank relating to obtaining a short-term line of credit for CarolinaEast Health System, CarolinaEast Medical Center, and CarolinaEast Physicians.”

The NC Local Government Commission met on April 2.

CEHS’s request to allow them to borrow a $45 million unsecured line of credit was on the agenda.

The LGC staff analysis summarized the request. It was noted that CEHS liquidated $20 million in investments.

The staff report stated, “Due to the system outage and the inability to process claims, cash inflow from insurance payments have been reduced from a daily average of $1.5M to $250,000 since late February.”

The interest rate is “one-month term SOFR + 0.99%.” The secured overnight financing rate was 5.34% on April 2.

A representative from CarolinaEast told the commission that they received $6 million in “temporary funding from Optum, which is a part of Change Healthcare.” They said CEHS will have to pay the money back once they start receiving the money from the processed claims.

The LGC unanimously approved the consent agenda, which allowed CarolinaEast Health System to obtain the loan.

The public relations director also told New Bern Now, “The Line of Credit is only temporary and we foresee within the next month, cash flow being back to normal.”

Watch the LGC meeting here.

By Wendy Card, Editor. Send an email with questions or comments.