HCCA’s On The Way Out at Southern Inyo Hospital

Healthcare Conglomerate Associates will soon lose its management contract to oversee operations of the Southern Inyo Hospital after a bankruptcy court hearing Wednesday.

The Southern Inyo Healthcare District, which owns the hospital, and HCCA came to an agreement before the hearing: HCCA would not dispute the rejection of the contract so long as they were given time to leave and allegations of financial malfeasance were withdrawn.

The agreement gave the company 14 days to exit the Southern Inyo Hospital after the filing of any ruling. That means the company could leave as soon as mid-December.

Status

According to Ashley McDow, a bankruptcy attorney with BakerHostetler representing the Southern Inyo district, the hospital intends to hire its own CFO and management, rather than contract out operations to another management company.

The hospital has hired an Associate Administrator/Chief Clinical Officer, Brian Cotter, according to the Inyo Register, replacing HCCA CFO Alan Germany’s role overseeing day-to-day operations at the hospital.

The Southern Inyo district is continuing to work on a vote-by-mail proposal for a bond measure to ensure the hospital’s survival, McDow said. The measure was planned before the district’s move to separate from HCCA.

Perceived, or Actual, Conflicts

Because of concerns over conflicts of interest raised by HCCA, the Southern Inyo district was forced to hire an outside attorney, Samuel Maizel of Dentons US LLP, to assist in rejecting their contract.

The BakerHostetler firm was initially brought in by HCCA to assist the Southern Inyo Healthcare District through the bankruptcy process, and the same firm was used in Tulare, representing both the Tulare district and HCCA.

But some two weeks before the Southern Inyo district filed to reject its contract with HCCA, the company was kicked to the curb by BakerHosetler.

“BakerHostetler represented both the [Southern Inyo] District, HCCA and Benzeevi at one time,” an attorney for HCCA said at a November 1 hearing. “That relationship was terminated by BakerHostetler roughly two weeks prior to the motion to reject the contract having been filed; September 29 the termination, the motion to file was October 17th, I believe.”

Malfeasance

Riley Walter, the bankruptcy attorney representing the Tulare Local Healthcare District, was present during the hearing via telephone. He objected to the part of the agreement that would see the allegations of financial malfeasance — including transfers of money and equipment between the Southern Inyo district and the Tulare district — withdrawn.

The judge in the case, Hon. Fredrick E. Clement, said that the withdrawal of the accusations didn’t mean that they would be stricken from the record or sealed — the Southern Inyo district would simply state that they should be withdrawn from his consideration.

Mark Levinson, an attorney representing HCCA, called the allegations “very, very nasty.”

“Some day we’ll come back and deal with them,” he said.

Those allegations, as stated in prior declarations by the Southern Inyo Healthcare District’s lawyers, include a claim that the Tulare district may owe Southern Inyo up to $418k.

The Southern Inyo district additionally claimed that HCCA had transferred $700k to Tulare to repay a line of credit extended by the company to the Southern Inyo district. Allegedly, that line of credit was at a zero balance at the time of the transfer, and the money was instead used to repay outstanding management fees owed to the company.

The Tulare district also claims it’s owed money due to financial commingling, but in reverse: on November 4, the Tulare district recently filed a $2.5m claim against Southern Inyo.

Walter stated that the claim is just a placeholder — as facts are discovered, that amount could go lower or higher.