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Hospital fails to pay D.C.

Greater SE delinquent on its taxes

(Published December 2, 2002)

By KATHRYN M. SINZINGER

Staff Writer

City officials are preparing to file a claim for delinquent taxes against bankrupt Greater Southeast Community Hospital, the institution at the center of a controversial multimillion-dollar public contract to provide health care for the Districtís poor and uninsured.

"Itís being prepared now," a spokesman for D.C. Chief Financial Officer Natwar M. Gandhiís office told The Common Denominator on Nov. 27.

The claim, to be filed in U.S. Bankruptcy Court for the District of Columbia, is expected to be for an as-yet undisclosed amount of employee taxes owed by Greater Southeast for its 1,300 workers. A separate claim is being prepared against bankrupt Hadley Memorial Hospital, which is now a long-term care facility. Both Ward 8 facilities are owned by Doctors Community Healthcare Corp. of Scottsdale, Ariz., which along with its five hospitals sought Chapter 11 bankruptcy protection on Nov. 20.

The hospitals and their parent company declared Chapter 11 two days after the Ohio-based company that provided most of their day-to-day operating funds, National Century Financial Enterprises, sought Chapter 11 protection in U.S. Bankruptcy Court in Columbus, Ohio. National Century is a part-owner of Doctors Community Healthcare and provided immediate cash to its hospitals by buying their receivables, such as Medicare and Medicaid claims, at a discounted rate and repackaging them into bond sales. The FBI raided National Centuryís offices last month after trustees for its bond sales alleged fraud, and the companyís CEO was forced to resign.

Meanwhile, D.C. Department of Health Director James Buford has been charged by Mayor Anthony A. Williams with preparing a plan to ensure that the cityís health care delivery system Ė and especially the D.C. Healthcare Alliance of services for the poor and uninsured, which Greater Southeast heads Ė does not falter should Greater Southeast need to close its doors.

Greater Southeast is believed to have enough cash, provided through the bankruptcy court and the federal Centers for Medicare and Medicaid Services, to continue operating through mid-December while it seeks another source of financing. The cash-strapped hospital recently closed its pediatric unit and consolidated three medical units into one, as medical staffing contractors complained that they had not been paid for several months and began removing their workers from the hospital. Staffing shortages have required the hospital to divert ambulances from its emergency room to other hospitals, and its patient count was continuing to drop.

Interviews with several former D.C. General Hospital employees, who asked that their identities not be disclosed, seem to indicate that the D.C. governmentís claims against the bankrupt hospital may extend far beyond delinquent taxes. They say that much of D.C. Generalís $11 million inventory of equipment and supplies has been removed from the medical campus without proper documentation of its whereabouts since Greater Southeast took over management of the public facility.

A health department official told D.C. City Council during testimony in June 2001 that, under terms of the contract that created the D.C. Healthcare Alliance, Greater Southeast was authorized to use without charge more than 3,000 pieces of taxpayer-owned equipment that was located at D.C. General and its clinics. Recent interviews indicate that inventory included expensive imaging and operating room equipment as well as a computer system that was purchased new to ensure Y2K compliance.

City Administrator John Koskinen said an inventory of D.C. Generalís equipment was prepared prior to the turnover to Greater Southeast, but a copy of that inventory was not immediately available. Koskinen did not directly respond to questions about whether city officials had been ensured, in light of Greater Southeastís bankruptcy filing, that public property under the hospitalís control was accounted for. The current whereabouts of D.C. Generalís equipment "has not been an issue," he said.

Greater Southeast officials did not return calls for comment.

"Iíve heard that they raided the place," Councilman Kevin P. Chavous, D-Ward 7, a leading critic of D.C. Generalís closure, told The Common Denominator. "No one has been minding the store, even though we budgeted $6 million for a Safety Net Administration to monitor compliance [with the contract]. They have not hired up to ensure that monitoring takes place."

Chavous noted that Councilwoman Sandra Allen, D-Ward 8, in her capacity as chairman of the councilís Committee on Human Services has been trying with little success "for months" to get detailed information about how well the D.C. Healthcare Alliance is operating.

Chavous said the possibility that the bankruptcy court could order that Greater Southeastís assets be liquidated requires the council to "move with dispatch to try to get an accounting for the resources at D.C. General."

"Protecting the cityís assets goes beyond financial assets," he said. "We really have to go the extra mile to protect all of the cityís assets, including equipment."

Greater Southeastís bankruptcy filing puts it in Chapter 11 for the second time since May 1999, when its previous nonprofit owner sought bankruptcy protection. Doctors Community Healthcare, which already owned Hadley Memorial Hospital in Southwest Washington, acquired Greater Southeast in December 1999 through the bankruptcy court for $22.5 million, with financing provided by National Century Financial Enterprises.

D.C. officials, who had provided a loan and loan guarantees of up to $8.5 million to keep the hospital operating, fast-tracked the sale by agreeing to exempt Doctors Community Healthcare from local laws relating to a certificate of need and to the conversion of a health care facility from not-for-profit to for-profit status.

Unsecured creditors and a hospital union had objected to the 1999 sale, citing the speculative financing of National Century among their reasons. The Wall Street Journal recently quoted from internal company memos, warning National Century executives as early as November 1999 that the companyís reserve and equity fund balances were deficient by more than $100 million.

Councilman David Catania, R-At Large, presented a lengthy report in 2001 documenting what he called the "shaky" financing of Doctors Community Healthcare by National Century as part of his vehement objections to the mayorís and control boardís insistence that the city contract with Greater Southeast Community Hospital to provide indigent care.

Catania, who could not be reached for comment, and Chavous went to federal court to try to block the closing of D.C. General and execution of the control boardís contract with Greater Southeast, but their effort was unsuccessful.

Chavous, while still supporting a new public hospital for the District, said he is determined to "ensure that Greater Southeast does not close Ė even if it means finding the right public-private partnership to take over the place."

Copyright 2002, The Common Denominator