Woes pile up for crit­i­cal ac­cess

HMC’S bank­ruptcy adds to hos­pi­tals’ strug­gles

Modern Healthcare - - THE WEEK IN HEALTHCARE - Paul Barr

Crit­i­cal-ac­cess hos­pi­tals, al­ready fac­ing the threat of re­duced re­im­burse­ment from Medi­care, took an­other hit when the owner of 12 such hos­pi­tals filed for bank­ruptcy. HMC/CAH Con­sol­i­dated, Kansas City, Mo., filed for Chap­ter 11 bank­ruptcy Oct. 10, cit­ing a lack of fi­nan­cial liq­uid­ity re­sult­ing from an out­side lender al­legedly not meet­ing the terms of a fi­nanc­ing agree­ment.

HMC’s busi­ness model took a ma­jor blow as a re­sult of the loss of that fi­nanc­ing, with the com­pany reporting a pro­jected loss of $2.3 mil­lion in fis­cal 2011 af­ter record­ing losses of $9.3 mil­lion in 2010 and $4.3 mil­lion in 2009, ac­cord­ing to its bank­ruptcy fil­ing. Had it not lost the fi­nanc­ing, though, HMC con­tends it would have pro­jected a loss of only $800,000 for fis­cal 2012.

HMC’s stated ap­proach re­lies heav­ily on lend­ing from third par­ties. The com­pany seeks to ac­quire strug­gling crit­i­cal-ac­cess hos­pi­tals for lit­tle or no money down and then im­prove the ef­fi­ciency of the hos­pi­tal and build a re­place­ment fa­cil­ity that is more ap­peal­ing to ru­ral pa­tients, ac­cord­ing to its bank­ruptcy fil­ing.

An­other key com­po­nent of the model is that 70% to 90% of the cost of the re­place­ment hos­pi­tals would be fi­nanced through loans backed by the Agri­cul­ture Depart­ment or the Hous­ing and Ur­ban De­vel­op­ment Depart­ment, ac­cord­ing to the fil­ing. The bal­ance of the con­struc­tion costs would come from HMC or an out­side lender, HPCG Hos­pi­tal In­vest­ment, Scotts­dale, Ariz.

As a re­sult of not get­ting funds to ex­e­cute its strat­egy, the HMC fil­ing states that four of its crit­i­cal-ac­cess hos­pi­tals breached their agree­ments on their build­ing projects and HMC saw its costs go up sig­nif­i­cantly for a sep­a­rate ac­counts re­ceiv­able fi­nanc­ing agree­ment.

HMC sued HPCG and two other par­ties in state court in Mis­souri—a case that was tem­po­rar­ily moved to fed­eral court—for a va­ri­ety of al­leged rea­sons, in­clud­ing breach of con­tract, fraud, and breach of im­plied duty of good faith and fair deal­ing, ac­cord­ing to its state suit on file with the fed­eral court.

Dennis Davis, chief le­gal of­fi­cer, board sec­re­tary and spokesman for HMC, did not re­turn calls seek­ing com­ment.

Dou­glas Nieder and Thomas Lar­son of the law firm Lewis, Rice & Fin­ger­ish, who are iden­ti­fied as at­tor­neys rep­re­sent­ing HPCG in the fed­eral ver­sion of the law­suit, did not re­turn phone calls.

The fi­nanc­ing strug­gles at HMC come amid a bat­tle by ru­ral health­care ad­vo­cates to keep Medi­care fund­ing at crit­i­calac­cess hos­pi­tals and other ru­ral fa­cil­i­ties con­stant as Congress con­sid­ers ways to bal­ance the bud­get.

The out­look re­gard­ing the cuts, which would po­ten­tially come as a re­sult of the work of the Joint Se­lect Com­mit­tee on Deficit Re­duc­tion, is not good, said Brock Slabach, se­nior vice pres­i­dent for mem­ber ser­vices at the National Ru­ral Health As­so­ci­a­tion, Kansas City, Mo. “We’ve not seen any pro­posal that says they’re go­ing to spare ru­ral providers,” Slabach said in ref­er­ence to sug­ges­tions made to the su­per­com­mit­tee.

In­cluded in some of the pro­pos­als is the op­tion of elim­i­nat­ing the crit­i­cal-ac­cess hos­pi­tal pro­gram and other ru­ral hos­pi­tal as­sis­tance pro­grams al­to­gether, a move that would re­duce di­rect govern­ment spend­ing by more than $60 bil­lion over 10 years, Slabach said. “They’re talk­ing about re­ally crip­pling the pro­gram with some of these pro­pos­als,” he said.

Slabach said that cut­ting ru­ral health­care fund­ing at all would be a mis­take given that the fa­cil­i­ties are some of the more ef­fi­cient Medi­care providers. An anal­y­sis of Medi­care cost re­ports con­ducted on be­half of the NRHA found that 5.3% of all Medi­care hos­pi­tal spend­ing goes to crit­i­cal-ac­cess hos­pi­tals, yet care at those hos­pi­tals makes up 8.7% of all Medi­care pa­tient days. “It’s our con­tention that we’re not a siz­able part of the Medi­care spend­ing prob­lem.”

More­over, many crit­i­cal-ac­cess hos­pi­tals al­ready are strug­gling. The NRHA es­ti­mates that more than 40% of all crit­i­cal-ac­cess hos­pi­tals are op­er­at­ing at a loss.

If re­im­burse­ment falls, that means more crit­i­cal-ac­cess hos­pi­tals will close, said Ethan Lip­kind, chair­man of Michi­gan Ru­ral Health­care Preser­va­tion, a not-for­profit seek­ing to cre­ate a net­work of crit­i­cal-ac­cess hos­pi­tals in Michi­gan. “ It is ex­tremely chal­leng­ing—we find our­selves in a dif­fi­cult environment,” he said.

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.