The Tulare Local Healthcare District is in breach of its obligations to Healthcare Conglomerate Associates (HCCA), the company has claimed in a recent letter, including upwards of $8 million in money owed to the hospital management company.
HCCA is putting the district on notice: if it doesn’t pony up at least $8,176,749.25 to the company within 10 days, the district will be in default of the Management Services Agreement, the contract which prior board members signed with the company.
If the district is in default, that could trigger the agreement’s massive break-up fee, which is at least $8.4 million by itself.
At the same time, Southern California Edison claims that the hospital is in breach of its financial obligations for electric service, and could shut off electric service to the hospital’s tower, potentially impacting construction efforts.
Marshall Grossman, the attorney representing HCCA and its CEO, Dr. Benny Benzeevi, states that coughing up the cash may not be enough to get them out of the woods.
That’s because the company is repeating its claims in a prior letter that statements by Kevin Northcraft and Mike Jamaica have caused an impediment to HCCA’s day-to-day operations at the hospital.
“Certain actions resulting in damage and liability to HCCA are not capable of being cured […] If you consider otherwise, please so state and explain how they may be cured in reply to this letter.”
Broke down into specific categories, the company claims the district owes them:
- $5,532,047.79 for “expenses and charges incurred in connection with the Leased Employees” since July 31, 2015,
- $2,118,634.60 in funding for operating and non-operating expenses since December 21, 2016,
- $526,066.86 in management fee payments since August 1, 2017,
- Unspecified amounts in “monthly expenses” incurred by the hospital management firm “on behalf of the District” since August 31, 2017.
The letter doesn’t make clear whether the $5.5m amount includes any amounts that HCCA may have set aside towards the possible purchase of the hospital, a practice authorized under the hospital’s “option agreement.” Any purchase would have to be approved by voters of the district.
Northcraft, elected chairman of the board by Michael Jamaica and Senovia Gutierrez, states it’s the first he’s heard of any issues.
“I haven’t received a phone call, text, email, in-person, anything from HCCA,” Northcraft said. “Except their attorney, arguing that democracy doesn’t exist for our district.”
Requests for comment from Benzeevi were not returned by publication time. When a response is received, this article will be updated.
He also stated that HCCA should be looking inward, not to the district, for money. That’s because the Management Services Agreement states that the district is to transfer money in its “Gross Revenue Fund” to the company daily.
“Every dime we have is turned over to HCCA every day,” Northcraft said. “If they’re not generating revenue and they have total control of the hospital, then that’s on them, not us.”
But the hospital management firm isn’t the only one looking for cash: Southern California Edison has stated that the hospital hasn’t paid its bills for electricity usage at the hospital’s beleaguered tower construction project.
“Southern California Edison has been working with representatives from Tulare District Hospital for months to ensure it can continue with construction of a vacant tower. After many conversations, Tulare District Hospital has refused to pay for electricity usage to the tower. As it does for all similarly situated customers, Southern California Edison on Aug. 29 served a five-business day utility shut-off notice to Tulare District Hospital,” a statement from the electric utility read.
Any move to cut off service to the tower wouldn’t affect those at the main hospital, the statement stressed.
“Should Tulare District Hospital refuse to pay, the resulting shut off will affect only service to the vacant tower. The medical care of patients will not be impacted. SCE never takes lightly the decision to disconnect any customer. However, SCE has determined that Tulare District Hospital’s refusal to assume responsibility for its utility account and electrical service to the tower is grounds for disconnection. SCE officials will continue to work with Tulare District Hospital’s executives to try and resolve this issue. So far, a satisfactory resolution has not been reached,” the statement continued.
Northcraft told the Voice he hasn’t been put in the loop on any of those talks.
“A lot of people, a lot of employees are at risk due to HCCA’s incompetence,” Northcraft said. “We’re getting no information whatsoever, so any problems are at the foot of HCCA.”