Bankrupt hospitals draw watchdog scrutiny over patient care

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Bloomberg--The U.S. government is sounding the alarm over patient safety in the bankruptcy of Americore Holdings LLC, highlighting concerns about the human toll of financial distress at American hospitals.

The U.S. Trustee -- a Department of Justice program that monitors bankruptcy cases -- is concerned about conditions at two hospitals Americore runs after court testimony indicated the company is strapped for cash, court papers show.

“The United States Trustee needs immediate access to the debtors’ financial information,” attorneys for the agency wrote in court papers last week. “This information will allow the United States Trustee to take appropriate actions to protect the bankruptcy estate, as well as the safety of the patients currently in the care of these debtors.”

Americore Chief Executive Officer Grant White said those concerns are unfounded. “Patient safety is not an issue anywhere,” White said in an interview Friday. Keeping patients safe is the “number one priority” for the company, he said.

Financial distress is on the rise in hospitals across the country, pressured by shifting demographic trends, policy uncertainty and reimbursement rates from federal programs that may lag costs. At least 30 hospitals entered bankruptcy in the U.S. last year, according to a Bloomberg analysis of court papers.

White said that The Centers for Medicare and Medicaid Services visited one of the company’s hospitals in January and “fully cleared” the facility.

CMS, a federal agency that administers government-subsidized healthcare, conducted an on-site visit and off-site interviews at St. Alexius Hospital in St. Louis and found it to be in compliance with the conditions for participating in its programs, according to a person with knowledge of the matter. A representative at the Missouri Department of Health & Senior Services wasn’t immediately available to comment.

Americore, which operates both St. Alexius and Izard County Medical Center in Calico Rock, Arkansas, has repeatedly delayed filing detailed financial information with the bankruptcy court, leaving some stakeholders with little idea of how desperate the company is for cash.

St. Alexius has about 180 staffed beds and Izard County about 25, according to the American Hospital Directory. Executives at the hospitals didn’t return calls seeking comment.

The U.S. Trustee in court papers last week pointed to testimony from an Americore employee, who said in a Jan. 17 bankruptcy hearing that St. Alexius hospital was having to choose between paying employees and buying supplies. White said as of Friday that St. Alexius has “the necessary supplies and everyone has been paid,” adding the hospital has the capital needed to keep patients safe.

White declined to comment on why financial statements haven’t been filed.

The intersection of business and patient care has become a flash point in recent months following the controversial shut down of Hahnemann University Hospital in Philadelphia, which filed for bankruptcy in June less than two years after a private investor acquired it. Doctors, nurses and residents protested the closing of the hospital, which provided care to low-income citizens.

Hospitals under financial strain may struggle to maintain quality and patient safety relative to financially-stable hospitals, according to a 2019 study from researchers at the State University of New York. “The results suggest that money does matter,” the study said.

White, a former investment banker, founded Americore in 2017 with the intent of revitalizing rural hospitals. The company has operated as many as five hospitals since its inception, but it runs just two now. One closed on the order of a state health authority last year and it sold the others. Americore filed for bankruptcy in late December as it ran short of cash and clashed with a lender.

Both a creditor group and the U.S. Trustee have asked for a court-appointed official to take the reins from White. The U.S. Trustee said in court papers that White has “grossly mismanaged” Americore and “not operated the hospitals in a manner that is consistent with public safety and welfare.”

White said he “got into this to make sure people are taken care of,” adding that the hospitals function independently of one another and he isn’t involved in the day-to-day operations. Claims from the U.S. Trustee that White puts his personal interests above patient safety are “100% not true,” he said.

The company is under investigation by federal authorities and the Pennsylvania attorney general related to unpaid wages, taxes and billing issues at Ellwood City Medical Center, which is now closed. The Federal Bureau of Investigation was conducting law enforcement activities at the hospital as recently as late as January, a spokesperson for the bureau told Bloomberg on Thursday.

Americore’s latest request to delay filing detailed financial information, along with creditor and U.S. Trustee requests to have a court-appointed official run the company in bankruptcy, are set for a court hearing on Feb. 20.

The case is Americore Holdings LLC, 19-61608-grs, United States Bankruptcy Court for the Eastern District of Kentucky (London).

Bloomberg News