This story has been updated with a statement from a Crotholl and Morrison spokesperson.
The end of legal wrangling over Senovia Gutierrez’ status on the Tulare Local Healthcare District’s (TLHCD) Board of Directors — she has officially been recognized as a board member — was overshadowed by a new threat: Healthcare Conglomerate Associates (HCCA) could consider shutting the hospital down if the board doesn’t allow the company to seek a loan.
The hospital management company won’t keep footing Tulare Regional Medical Center’s (TRMC) bills, the board was told Wednesday at the September regular board meeting.
That’s important, because the hospital’s cash position is at a new low of $2,089,000 while its accounts payable is at $26,690,000.
Dr. Benny Benzeevi, CEO of the hospital management company, claims that HCCA has extended $14 million to the hospital district so far — and that a “cash infusion” is needed, because they won’t be footing the bill anymore.
“HCCA provided substantial revolving funding to the hospital over the years, to a cumulative total of $14m, not to mention that HCCA has not been paid its fees for several months,” he stated. “But in light of the light of the current destructive political environment, HCCA will not continue to do so.”
He stated that there were two financing companies that could provide a loan to the hospital, and stated that if the board took away the company’s authority to seek and execute a loan, the company might start looking into closing the hospital.
“The rescission of our ability to borrow money will mean immediate consideration of plans to close the hospital,” Benzeevi said. “The choice is yours.”
Benzeevi didn’t provide any further information on the loan sought or the two companies in the running, and TLHCD Board President Kevin Northcraft stated that he didn’t receive any information from Benzeevi, either.
By the point Benzeevi made his remarks, the board had already rescinded the company’s authority to seek loans by voting to affirm the decision made at a July 27 board meeting.
“Dire Financial Situation”
“The deterioration of the hospital over the past year can be objectively and directly attributed to the destructive opposition since last year by the very group now supporting the board majority under the guise of saving the hospital,” Benzeevi stated. “The results speak for themselves.”
The hospital’s numbers have been trending lower and lower, the hospital’s CFO, Alan Germany, told the board. As of the fourth quarter of 2017:
- The hospital’s average daily census has dropped to 33.8, from 40.3 the prior year and 38.9 in 2015.
- The hospital has had an average of eight admissions per day, compared to the same number from the last year and nine a day in 2015,
- Deliveries have dropped to 1.3 per day, compared to the same in 2016 and 2.1 per day in 2015,
- Surgeries have dropped to 379, compared to 551 in 2016 and 593 in 2015,
- Emergency department visits dropped to 73 per day, compared to 87 per day in 2016 and 98 per day in 2015.
Germany stated that part of the problem was the “political instability” surrounding the hospital, stating that patients may choose to go to other facilities due to concerns over the hospital’s viability.
The hospital’s operating revenue in Fiscal Year 2017 was $78,640,000, while its expenses totaled $76,672,000.
An email from Marc Levinson, an attorney with Orrick specializing in “insolvency planning, bankruptcy cases, out-of-court reorganizations and workouts,” reveals that the district has had “liquidity problems” since June.
During his report to the board, Germany confirmed some reports in the Voice and other outlets that the district was in disputes with vendors over payment.
Officials with HCCA had not previously commented on those reports.
Germany stated that dietary and housekeeping services were contracted out to The Compass Group, a company which bills itself as a leading “foodservice and support services company.”
The Compass Group is the parent company of Crothall Healthcare and Morrison Healthcare, companies which provided those services to the hospital.
“Crothall and Morrison made the decision on September 8, on a Friday morning at 8:30 — they brought all their employees in and said ‘okay, we’re terminating you,’” Germany told the public. “That really put patient care very much in jeopardy.”
Germany stated that although officials had made a $600,000 payment to the company in August to “get them to try to stop these sort of actions,” and he claims the company is demanding an additional $1.1 million.
A statement from a spokesperson with Crothall and Morrison states that negotiations went on for nearly a year.
“We had been working in good faith with Tulare and its management firm for more than a year so they could make past due payments current. After a third Past-Due notice last week, Tulare made it clear they no longer intended to make us whole, so we regrettably removed all of our services from the hospital, which was in accordance with our agreement,” the spokesperson stated. “The impacted associates were informed of the change, and we are relocating several of them and working to place others in similar roles at company accounts in nearby locations.”
He stated that HCCA had hired on the housekeeping staff that was previously employed by Compass.
Germany also stated that the hospital’s dispute with Southern California Edison comes down to a misunderstanding between TLHCD, HCCA, Edison and Harris Construction.
He claims that the hospital received a monthly bill from Harris Construction of roughly $3,000 for “temporary power for the tower,” before Edison contacted them to seek payment.
“We, assuming that Harris [Construction] had an ongoing arrangement with them for the tower, for payment, and lo and behold they said it hadn’t,” Germany said, claiming that the hospital never received power bills for the tower.
Germany also discussed the Hillman Clinic, operated by the district in a building owned by Tulare County.
Though speaking positively on the services provided at the clinic, Germany was dour on the actual building.
“There’s been cases of homeless people sleeping in the attic out there,” Germany said. “This is going to sound terrible, but it’s the truth — there’s mice and rats out there.”
“I’ve met with the county and talked about this, and lo and behold — now they’re suing the district for back rent, in the amount of $148,000,” he continued.
During the meeting, Cynthia Larsen of Orrick, Herrington & Sutcliffe LLP, was introduced to the board after objecting to the board’s ratification of actions taken at the board’s special meetings in July and August.
In legal filings, Levinson was introduced as another attorney from the Orrick firm working with HCCA in dealing with the healthcare district.
Larsen’s page on the Orrick website states that she “has more than 25 years of experience in business and governmental litigation and appeals,” and that she “focuses on the representation of public agency and private clients in complex disputes involving public agency and governmental law, insurance and insurance insolvency, government contracts and procurement, business torts, health care, environmental and employment law.”
Levinson’s page states that he “concentrates on insolvency planning, bankruptcy cases, out-of-court reorganizations and workouts. He represents secured and unsecured creditors, acquirers of assets from insolvent companies, debtors, indenture trustees, committees, public entities and bankruptcy trustees.”