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Creditors criticize city's lack of action to help SE hospital survive bankruptcy
(Published November 17, 2003)
MARY LEE MALCOLM
For more than a year, Greater Southeast Community Hospital has made headlines as it hovers near collapse.
In bankruptcy for the second time in three years, it is hemorrhaging money. It lost its national accreditation. It is shadowed by accusations of political double-dealing and hampered by the damaged reputation of its owners, Doctors Community Healthcare Corp., which owns four other hospitals — also in bankruptcy, after a key creditor came under federal investigation for financial fraud.
Now doctors, lawyers, politicians and patients are demanding to know: Can this hospital be saved?
"Not unless the District government becomes more responsive to creditors’ concerns," maintains Sam Alberts, the attorney who represents the joint committee of unsecured creditors during the current bankruptcy proceedings. He contends that both the mayor’s office and the District’s Department of Health are hindering Greater Southeast’s ability to survive: the Department of Health by not paying money it owes the hospital, and the mayor by hurting Greater Southeast’s chances of obtaining a new owner.
On Nov. 4, Mayor Anthony A. Williams announced that the city was moving forward with a plan to allow Howard University to build a new hospital on "U.S. Reservation 13," an area of land in Southeast Washington formerly occupied, in part, by D.C. General Hospital, a public facility that was shut down two years ago.
The mayor’s announcement came after D.C. City Council Chairman Linda Cropp and council members David Catania, Sandra Allen and Kevin Chavous jointly submitted emergency legislation authorizing the mayor to begin negotiations with Howard. The bill was approved by a unanimous voice vote of the council.
The parties have yet to determine the amount of public financing that might be made available for the project, although Mayor Williams has repeatedly said he "would not support any proposal that involves a government owned and operated hospital."
Since the closure of D.C. General, Greater Southeast operates the only emergency medical facility located east of the Anacostia River.
Alberts said it was "exceedingly unproductive" for the mayor to have gone public with plans to start a new hospital that would operate in close proximity to Greater Southeast and compete for the same patient population. The survival of Greater Southeast depends on its being reorganized and sold — either to some entity that includes the current owners, a new group of investors or a mix of the two, Alberts said. Tentative proposals are already being considered, and a bankruptcy court hearing to set the bidding procedures is scheduled for Nov. 25.
"That announcement had a severe chilling effect on the bidding process," Alberts said. "The District really messed up by going public with that information at this time.
"Ultimately, anything that hurts the hospital’s prospects for emerging from bankruptcy as a successful business entity increases the likelihood that it will be liquidated — shut down, and its assets sold to pay its creditors what few cents on the dollar they can salvage," he said.
Alberts also contends that the District owes the hospital more than $14 million for providing indigent care under the terms of the D.C. Healthcare Alliance contract it has with the city.
James Buford, director of the Department of Health, disputes that amount.
"We’re taking a look at their claims in order to reach a final number," he said. "A large portion of their request is for what we would say are ‘denied claims,’ so we will pay some percentage of that. It’s going to be a fairly small percentage."
The new head of Greater Southeast, Joan Phillips, said in a recent interview that she is not worried about the impact a new hospital at the former D.C. General campus might have on her hospital.
"They’re talking about a facility that won’t be up and running for three to five years," she said. "We are working to cover the community’s current needs, and with the way this region is growing, there will be enough business for everybody. We are all about growth – quality care comes first, but we are trending toward growth."
Phillips started at Greater Southeast last July, when Doctors Community Healthcare hired Cambio Health Solutions, a "turnaround" firm that specializes in bringing failing hospitals back to life. The new administrator is part of a nine-person team that Cambio put in place to run – and, they hope, save – the hospital.
Before she went on the hospital’s payroll, Phillips was a vice president at Cambio. A spokesman for the company said Phillips successfully led Cambio-owned health care systems in California and New England from operating losses to profits. Her appointment was approved by the bankruptcy court.
Phillips made clear that her biggest priority at the moment is to win back the hospital’s accreditation. That process begins in December, when representatives from the Joint Commission on Accreditation of Healthcare Organizations are scheduled to revisit the facility.
Citing numerous concerns about staffing and other quality-of-care issues, the national board revoked Greater Southeast’s accreditation last August. As a result, the hospital lost valuable contracts with managed care providers, according to Dr. Jarvis Ackerman, the hospital’s chief medical officer.
"The loss of accreditation affected mostly those patients who would otherwise come for elective procedures," Ackerman said. Regaining accreditation is a key component of the hospital’s ability to rebuild its reputation and its financial position, he said.
Last August, when Greater Southeast lost its accreditation, it entered into a consent agreement with the District’s Department of Health in order to keep its operating license. The consent agreement gave the hospital 60 days to improve its performance in several vital areas, including emergency care, staffing and quality assurance. On Nov. 5 the department announced that Greater Southeast had met the conditions of the agreement, which allowed it to stay open.
"We’ve taken the first step — getting the District Department of Health to approve our license to operate," said Phillips. "Now we’re focusing on December."
Thomas Reardon, the chief restructuring officer for Doctor’s Community Healthcare and the man empowered to supervise the rebirth of Greater Southeast, also discounted the impact that a second hospital might have on Greater Southeast’s ability to attract buyers.
"I think that there’s been some misperception about that," he said in testimony before the bankruptcy court last week. "A new facility is at least five years out — if it happens."
Reardon expressed optimism that Greater Southeast is going to be able to take an economic turn for the better in the near future. The hospital lost more than $2.5 million in September, according to documents filed with the court.
"Cost structure and revenues are improving," he said. "In a couple of months, we’ll be fine."
Reardan also informed the court that Greater Southeast is ready to ask the Department of Health to raise the restriction on the number of beds that can be occupied at any one time. When the hospital received its current license, the limit was set at 150, a number attorney Alberts said would make it "impossible for the hospital to operate at a profit."
"The [health] department has to be assured that staffing and other supplies are in place — that everything is up to snuff in terms of quality," Reardan said, adding that he expected the limit would be raised to 165 "pretty immediately." The hospital has a 494-bed capacity.
While the bankruptcy court determines the fate of the hospital, others are starting to worry about what will happen if the hospital fails. DDDirector Buford said the Department of Health does not have an updated contingency plan in place in the event that Greater Southeast goes under.
"That would involve somewhat dynamic scenarios," he responded. "We’re starting to look at hypotheticals."
Councilman Adrian Fenty, who represents Ward 4, said he thinks hypothetical scenarios are not good enough. He has asked City Administrator Robert C. Bobb to come up with a detailed plan.
"If this hospital closes, the repercussions would be felt across the District, and all of our citizens need to be prepared," Fenty said in a press release issued last week.
Despite all the uncertainty, Greater Southeast’s workers appear to be pulling together to save the institution – and their jobs. Phillips said there has not been a problem with employee retention.
"We’re gonna make it," said one employee who has been with Greater Southeast for nearly a decade. "The people ’round here need us. People who work here just have to stay focused."
Copyright 2003, The Common Denominator