SPMH: Wednesday court hearing on QHR management fees

June 03, 2005
Santa Paula News

The U.S. Bankruptcy Court hearing for Santa Paula Memorial Hospital trustees’ objection to over $300,000 in fees claimed by the hospital’s former management firm is scheduled for Wednesday, June 8 at 10 a.m., according to SPMH attorney Jay Michaelson.

By Peggy KellySanta Paula TimesThe U.S. Bankruptcy Court hearing for Santa Paula Memorial Hospital trustees’ objection to over $300,000 in fees claimed by the hospital’s former management firm is scheduled for Wednesday, June 8 at 10 a.m., according to SPMH attorney Jay Michaelson.Hospital trustees are alleging that QHR, hired in 1994, mismanaged SPMH, which closed in December 2003 after 42 years of operation. Trustees filed for bankruptcy three days later. Santa Paula Memorial Hospital was one of only three in the state built entirely with community donations.In a court declaration submitted in February, SPMH Board Chairman Phil Romney alleged that QHR did not cut costs when ordered to, gave misleading and false information to directors, failed to pay federal payroll taxes, and failed to implement private pay rates specifically crafted and ordered by the board.Quorum Health Resources was retained by SPMH until September 2003. Mark Gregson, the QHR employed president and chief operating officer of SPMH, left a month before the hospital shut down.QHR claims that SPMH owes more then $310,000 in management fees, but their alleged mismanagement and incompetence only worsened SPMH’s financial woes and led to its closure, according to Romney’s declaration. The board did not become aware of QHR’s actions until after the bankruptcy was filed, according to the statement.
Among the allegations is that QHR, the nation’s largest hospital management firm, told SPMH directors that a requested department by department analysis to reduce costs and increase revenues was not within QHR’s or - any other firm’s - ability, and that no other hospital had such information. The board later learned that QHR’s statements were false.Beginning in 2000, SPMH directors frequently requested reports on appropriate staffing levels and the number of open patient beds, but it wasn’t until about the summer of 2003 that Quorum advised that beds be reduced and staff laid off, an action that should have been implemented three years earlier. Quorum also failed to pay withholding payroll taxes in 2001, a situation the SPMH was unaware of and only discovered after a letter was received from the Internal Revenue Service advising of the situation and detailing stiff penalties.One of the strongest allegations by the board is that QHR’s inaction in changing the defined benefit plan for future employees, a move requested by the board in 1996, could have saved the strapped hospital as much as $600,000 annually. The filing notes that SPMH is requesting a court order “disallowing Quorum’s claim and for a judgement against Quorum in an amount to be determined” by the court based on the evidence, as well as “for such other relief as is just and proper.”Quorum has been at the losing end of various judgements and lawsuits nationwide based on mismanagement as well as fraud, account manipulation and overstating revenues, among other allegations.On April 6, Judge Robin Riblet approved the Creditors Committee reorganization plan to sell more than half of the almost 30-acre hospital campus to a developer, and the balance, including the hospital campus, to Ventura County. Comstock Homes paid $10.6 million and the county $2.75 million to reopen SPMH as an arm of the Ventura County Medical Center. Hospital debts could soar to $15 million by the time all claims, including bankruptcy legal and administrative fees, are settled.The hearing will be held at the U.S. Bankruptcy Court, 1415 State St., Santa Barbara, Courtroom 201.



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