Tulare Regional Medical Center could be managed on an interim basis by Sante Health and Community Medical Centers, both of Fresno, according to legal filings from the Tulare Local Healthcare District. But that’s only possible if a bankruptcy judge allows the district to reject its contract with Healthcare Conglomerate Associates (HCCA) at a hearing Thursday afternoon.
The district will head back to court seek a judge’s approval to reject the contract with the company.
If the judge doesn’t allow the rejection of the contract, one consultant for the district states that it could be forced to temporarily close the hospital.
“While this is not the ideal option because it results in the temporary closure of the hospital, which is not what the Board or the public wants,” Richard Gianello, a consultant with HFS/Wipfli LLP, stated in a legal filing, “it may be the only option if HCCA’s contract is not rejected and/or it continues to refuse to work with the [district] in transitioning out.”
HFS/Wipfli is a consulting firm retained by the board to assist in transition away from HCCA and toward a new management firm.
In opposition filings, officials with HCCA state that the board’s declaration of fiscal emergency was made in bad faith and that the board is using bankruptcy as a way to get out of the multiple contracts prior board members signed with the company.
HCCA’s opposition filing also claims that Citizens for Hospital Accountability, the group which has endorsed Kevin Northcraft, Mike Jamaica and Senovia Gutierrez — the majority of the board — has materially harmed the district and attacked its “perceived enemies” through “falsehood, innuendo, and name-calling.”
Dr. Benny Benzeevi, HCCA’s Chief Executive Officer, has claimed that calls have been made to the office of Rep. Devin Nunes impersonating his wife, and that unknown person(s) have called the hospital claiming that the,“Federal Attorney General is coming.”
Community, Sante, and Interim Management
Community Medical Centers and Sante won’t come in unless HCCA is out, Gianello writes.
“HCCA has suggested and alluded to its intent to sue for tortious interference any company who attempted to provide services to the [District]. Selection of CMC and Sante Health as interim manager is the preferred avenue for the District as it could potentially keep the hospital operational and may provide a good basis on restructuring the hospital with an eye towards increasing revenue and profits,” Gianello writes.
In exhibits included with his declaration, the district’s transition plan is made clear: use “unencumbered buildings and land” as collateral for a loan with Community Medical Centers.
Community would finance the hiring and payroll of staff and providers “for the first 30-60 days.”
The district would work to ensure that existing staff was employed with the new CMC/Sante/TRMC partnership, and utilize staffing agencies if there is not enough staff.
It would also work to “recruit providers who historically used TRMC back to TRMC,” likely including physicians who previously left the hospital after the prior board voted to disassociate with the prior medical executive committee, an issue still under review in the Tulare County Superior Court.
Gianello also states that HCCA’s contract is “not in line with the fair market value of comparable services being provided.”
“HCCA is considerably over market with price and is unfavorable to Debtor from a price perspective,” Gianello claims. “In addition, since HCCA is paid a 30% markup of employees compensation there has been no incentive to operate the hospital at an appropriate staffing level due to the substantial reduction in occupancy and utilization of hospital services that has occurred over the past year.”
Anonymous employees have previously claimed to the Voice that the hospital has been overstaffed for the level of patients being seen.
HCCA: Board’s “Game Plan” To Claim Bankruptcy Is Only Option
The management company’s legal filings claim that a group of “dissident physicians” actively back Citizens for Hospital Accountability and the Tulare board’s efforts.
“When the MSA was signed, I had personal knowledge of the fact that there was a powerful physician group which sought to control the Hospital and its finances which, if achieved, would permit them to operate the Hospital as if it were an extension of their private pracitces,” Benzeevi wrote in a declaration.
HCCA’s focus was on the “larger interest of the Hospital rather than those physicians’ financial interests,” Benzeevi wrote, causing those physicians to turn against the hospital; he further claims that the physicians turned “even more completely against HCCA” after the board voted to disassociate with the prior medical executive committee.
The company’s opposition, written by Marc Levinson, an attorney for HCCA, claims that the district’s board acted imprudently, capriciously and in bad faith in moving to reject the company’s contracts and declare a fiscal emergency.
“The Board cared only to advance the politically charged environment it had fostered over a two year period to terminate the District’s relationship with HCCA,” Levinson wrote. “In doing so, it ignored all of HCCA’s efforts to get the District on sound footing and instead rushed to file for bankruptcy.”
Credit Extended from HCCA
Benzeevi’s declaration also elucidates prior reporting from the Visalia Times-Delta on promissory notes which, at the time of publication, were seemingly signed by Benzeevi on behalf of the district to pay his own company.
Benzeevi lays out a list of numerous “requests for funds,” funding requests allowed under the Management Services Agreement. If the district could not provide HCCA the funding, the district would issue promissory notes “for funds advanced by HCCA for ongoing District operations.”
One promissory note provided by Benzeevi as an example differs from documents received by, and published by, the Times-Delta.
A request for funds for December 21, 2016, was provided to the court by Benzeevi and to the Times-Delta in a prior Public Records Act request.
Benzeevi’s copy includes a note from Dr. Parmod Kumar, the former Vice-Chairman of the Board, and states that the district must provide funds by 7am December 21.
“The District is unable to advance the funds at the this time,” Kumar notes, signing the document with his name and position.
The copy provided to the daily paper under the Public Records Act doesn’t include Kumar’s signature, and appears to include a digital approximation of Benzeevi’s signature. Benzeevi’s copy of the note appears to be written on paper and scanned.
It also lists a different time for payment due: 7pm on December 21.
The Potential Loans
Legal filings from both sides reveal the loans that Alan Germany, CFO of HCCA, and Benzeevi previously claimed were available.
MedEquities Realty Trust and Leasing Innovations are the two companies that engaged in discussions with the two HCCA officials.
Correspondence with the two companies and HCCA are dated in August. Members of the board voted July 27 to rescind HCCA’s approval to seek and execute loans; because there was controversy over Senovia Gutierrez’ status on the board, HCCA did not consider the July meeting a valid, legal, or binding meeting.
Much more was available about a potential loan with Leasing Innovations.
The company had previously filed a universal commercial code lien against the hospital, pursuant to a “State and Municipal Lease-Purchase Agreement No. HGF070117.”
The documentation made available shows the same agreement number in the paperwork described by HCCA as a potential loan, includes signed paperwork, and a first invoice.
Benzeevi did not return a request for clarification on the status of the potential Leasing Innovations loan.
The loan would have provided $7,000,000 in funding across 72 payments of $121,600; totalling $1,755,200 in interest across the life of the loan.
Scant documentation was made public in filings regarding the MedEquities loan.
A letter of intent, dated September 25, 2017, states that MedEquities was ready to provide HCCA with “an immediate combined $20,000,000 capital funding,” comprised of a $8m “bridge mortgage loan” and a $12m “acquisition/leaseback” of the Evolutions building.
“I personally, along with my staff, am ready to meet in Tulare in the coming weeks with [Benzeevi and Germany] and your team to discuss and help facilitate a right-sized capital funding/facilities development structure (in a potential combined capital amount up to $100 million from MRT),” William C. Harlan, MedEquities president, wrote.
Harlan stated that his funding would ensure that the tower project would be completed and “bolster and enhance the Hospital’s current cash position.”
TLHCD: “While HCCA May Be Unhappy With The Loss of A Cash Cow..”
“While HCCA may be unhappy with the loss of a cash cow, this is not the test for rejection,” the district’s attorney wrote in response. “This decision is supported by sound business judgement and the Contract should immediately be rejected.”
“After HCCA threatened to shut down the hospital and reported. For the first time of the dire financial condition of the hospital, and it was out of money, the Board had no choice but to seek Chapter 9 protection,” the filing continues.
The filings also mention recent revelations that the Southern Inyo Hospital was served with a search warrant by members of the Tulare County District Attorney’s office, and claims by the Southern Inyo Healthcare District that its money was transferred to and from its accounts to Tulare.
“Based on HCCA’s actions and the new revelations of financial mismanagement, the public has lost any confidence it may have had in the services and operations of HCCA, as reflected by the number of patients who are utilizing the hospital,” the district’s filing states.
The district also claims that the company threatened to shut down the hospital on multiple occasions.
One threat to close the hospital is seen in documents filed by the management company.
“Without the District providing clarity as to how it will fund the payroll, HCCA will have no choice but to dismiss its employees at the end of the present payroll cycle at 12:01am on Saturday, October 8,” Levinson wrote in an email to Riley Walter, the district’s bankruptcy attorney. “HCCA will continue to honor its obligations under the MSA to continue to manage operations after the closure of the Hospital.”
The district and HCCA will be back in court on October 19 at 2:00pm in Courtroom 13 of the US District Court, 2500 Tulare St, Fresno.