White Rock Medical Center, LLC and six affiliated entities filed for Chapter 11 bankruptcy protection this week, alleging that misrepresentations and operational disruptions by Pipeline Health System Holdings forced the 218-bed Dallas hospital serving primarily low-income patients into financial distress.
Case Background
The debtors, which operate White Rock Medical Center in East Dallas and are involved with Heights Hospital in Houston, filed voluntary petitions on January 20-21, 2026, in the United States Bankruptcy Court for the Southern District of Texas, Houston Division (Case No. 26-90115). In a declaration filed January 23, the Chief Operating Officer of White Rock Medical Center detailed how Pipeline's alleged misrepresentations during the 2023 sale transaction exceeded $11 million—more than the hospital's $9 million purchase price—and created cascading operational challenges.
Hospital Operations and Community Role
White Rock Medical Center functions as a safety-net hospital in East Dallas, providing essential healthcare services to vulnerable populations. The facility has served the community for over six decades and maintains Level IV Trauma designation with around-the-clock emergency services, intensive care capabilities, and comprehensive diagnostic services.
In 2025 alone, the hospital handled approximately 30,000 to 35,000 unique patient visits across emergency, inpatient, outpatient, and ancillary services. Nearly 80 percent of patients rely on government insurance programs such as Medicare or Medicaid, are self-pay, or are uninsured. Safety-net hospitals serve low-income communities regardless of patients' ability to pay, typically operating on thin profit margins while depending substantially on public funding.
The debtors also maintain connections to Heights Hospital in Houston through various affiliated entities. That facility is owned by Platinum Heights, LP, which filed its own Chapter 11 case in 2025 under Case No. 25-90012.
The 2023 Acquisition Transaction
Heights Healthcare of Texas, LLC acquired White Rock Medical Center through a Membership Interest Purchase Agreement with Pipeline Health System Holdings that became effective September 20, 2023. The transaction closed in October 2023 with a total purchase price of $9 million. The buyer paid $3.6 million at closing, with the remainder structured as a $2.4 million installment payment and a $3 million promissory note. By July 2024, the parties had restructured the debt with a new promissory note totaling approximately $7.06 million.
Pipeline also entered into a Transition Services Agreement to provide information technology and management services following the sale. These arrangements created secured obligations in favor of Pipeline, backed by the buyers' personal property including management rights, accounts, and deposit accounts. As of the petition date, Pipeline's secured claims total approximately $5.37 million.
Alleged Misrepresentations and Undisclosed Liabilities
According to the declaration, problems surfaced immediately after closing. Pipeline had warranted that it provided complete and accurate balance sheets, income statements, and accounts receivable data for White Rock Medical Center as of July 31, 2023. The debtors discovered that Pipeline had significantly overstated accounts receivable while significantly understating liabilities, resulting in impairments the debtors estimate exceed $11 million.
The declaration alleges Pipeline had stopped paying certain vendors and employees before closing without disclosing these facts to the buyers. After the transaction closed, vendors refused to continue business with the hospital or would only operate on cash-on-delivery terms. Critical departments including Human Resources and Finance had been gutted and were critically short-staffed. The hospital's chief executive officer had not been paid for months and was seeking back pay from the new owners.
Pipeline allegedly sent notices to all vendors that the buyers were now responsible for all White Rock Medical Center debts, creating what the declaration describes as a rush-on-the-bank type effect. By December 2023—just two months after closing—Pipeline threatened to cease providing transition services within 30 days unless the buyers became current on outstanding obligations, and threatened to sell all hospital assets.
Electronic Health Records Access Revoked
On May 31, 2024, Pipeline revoked the debtors' access to the Cerner electronic health records system with 24 hours' notice. This action severed the hospital's connection to all digital clinical records, billing infrastructure, and patient scheduling systems.
The declaration states this move created dangerous and immediate risks to continuity of care, while also triggering a liquidity crisis by hampering the debtors' ability to collect accounts receivable. Throughout the transition period, Pipeline had also restricted the buyers' access to hospital servers it had not turned over, further complicating patient care and revenue collection.
The operational disruption forced the hospital to scale down services where safety could not be guaranteed, including temporarily limiting complex surgical and procedural care. These service reductions affected not only White Rock Medical Center but also North Houston Surgical Hospital, another affiliate whose operational struggles directly contributed to Platinum Heights' separate bankruptcy filing.
Current Debt Structure
The debtors face approximately $46 million in total obligations. Beyond the $5.37 million in secured Pipeline obligations, the debtors maintain approximately $7.6 million in other secured debts to various vendors, primarily secured by medical equipment in Houston and building equipment such as elevators.
The largest unsecured claim belongs to REILS, which provided a $15 million credit facility to non-debtor PH SPE LLC. All debtors are jointly and severally liable for these obligations, which now total approximately $17 million as of the petition date. Additional general unsecured claims total approximately $16.3 million, with the majority asserted against North Houston Surgical Hospital, White Rock Medical Center, and NCP Management.
The debtors attempted to negotiate a resolution with Pipeline as part of a broader restructuring transaction that would have paid off Pipeline's claims and allowed uninterrupted hospital operations. According to the declaration, Pipeline did not engage meaningfully with these outreach efforts and instead alleged additional defaults to inflate its claims in advance of a potential payout. These actions complicated value-maximizing transactions and contributed to the collapse of the plan sponsor arrangement in Platinum Heights' bankruptcy case.
Proposed Restructuring Plan
The debtors have developed a restructuring plan in coordination with REILS, which holds significant claims against both the debtors and Platinum Heights. Under the proposed framework, a REILS affiliate will serve as plan sponsor and purchase the assets of both debtor groups through a plan sale process. REILS will also provide debtor-in-possession financing to fund operations during the Chapter 11 cases.
The debtors propose a joint plan of reorganization with Platinum Heights that would provide comprehensive resolution of secured claims, unsecured claims, administrative expenses, and operational liabilities for both hospital groups. While the debtors opted not to seek joint administration with Platinum Heights' year-old bankruptcy case due to procedural complications, they believe a coordinated reorganization plan represents the only viable path forward. The declaration states that this joint plan is now the only viable option to resolve their liabilities after Platinum Heights' previous plan of reorganization failed to consummate.
First-Day Relief Requests
Alongside the declaration, the debtors filed several first-day motions designed to minimize disruption to hospital operations during the Chapter 11 transition. These requests include authorization to pay employee wages and benefits, recognizing that physicians, nurses, administrators, and other staff are critical to continued patient care and hospital functioning.
The debtors also seek authority to pay certain critical vendors whose services and specialized medical goods are essential to operations. The declaration notes that disruption of these vendor relationships could have catastrophic impacts on hospital operations and jeopardize patient lives.
Other first-day motions address utility payments, tax obligations, insurance premiums, and maintenance of existing bank accounts and cash management systems. Additional procedural motions request joint administration of the seven debtor entities, permission to file a consolidated creditor list, establishment of procedures to protect patient information in compliance with healthcare privacy regulations, and a 30-day extension of the deadline to file schedules and statements of financial affairs.
Case Details
The declaration was filed by the Chief Operating Officer of White Rock Medical Center, who has served in that position since 2023. The case is proceeding in the Houston Division of the United States Bankruptcy Court for the Southern District of Texas under Case No. 26-90115. The debtors have requested joint administration of all seven entities' cases for procedural efficiency.
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