By PHYLLIS ZORN

Staff writer

If a company managing the operation of Hillsboro Community Hospital is not appointed to manage its parent company as well, the hospital is in imminent danger of being closed by the state.

That’s the position taken by the city of Hillsboro and mortgage holder Bank of Hays in an emergency motion filed Wednesday in district court asking that the receiver, Cohesive Healthcare Management and Consulting, be put in charge of the hospital’s parent company, CAH Acquisition Co #5, HMC/CAH Consolidated Inc.

Cohesive was appointed to operate the hospital Jan. 18 in an emergency ex-parte hearing requested by Hillsboro and Bank of Hays. Now the city and the bank want a ruling that expands Cohesive’s power, including the power to place CAH into voluntary bankruptcy.

The motion lists several reasons for the request.

State threatened to revoke license

“The receiver has discovered the issues raised in the first receivership motion were merely the tip of the iceberg,” the motion states. “Had the receiver not taken over on Jan. 18, the Kansas Department of Health and Human Services would have almost certainly terminated the hospital’s license in short order, leaving employees without jobs and the citizens of Hillsboro and the surrounding area without a nearby hospital; and the only way the receiver will be able to keep the hospital licensed, staffed, and running properly is to give the receiver control of CAH.”

Termination of Medicare payment threatened

A document filed in support of the motion reveals KDHHS issued a 29-page statement of deficiencies after a Jan. 9 hospital inspection just prior to the ruling that put the hospital into receivership. In that deficiency statement, KDHHS notified the hospital it planned to recommend termination of HCH’s status as a Medicare provider by April 9 if the deficiencies are not corrected.

No governing body present

KDHHS found the hospital in violation of a requirement to have a governing body to ensure policies are administered. It also found HCH failed to ensure the staff could provide emergency services.

“Without the ability to manage the corporate affairs of CAH, the receiver is unable to bring the hospital into compliance,” the document states.

Parent company under criminal investigation

HAC’s parent company, EmpowerHMS, and other companies related to CAH are under federal criminal investigation by the Department of Justice, the court filing states.

A deposition report filed as part of a lawsuit in U.S. District Court in Western Missouri states a lawyer for HAC told a lawyer for the plaintiffs they were contacted Jan. 4 and Jan. 7 about a DOJ investigation that might involve parties in the lawsuit. HAC therefore invoked its Fifth Amendment rights.

Other courts are taking action against CAH entities

A federal court in Tennessee appointed a special master to review the affairs of a hospital because of claims of mismanagement. A federal court in Oklahoma issued a restraining order preventing CAH from terminating any hospital services in the city of Prague, Oklahoma.

“These cases, along with the situation in Hillsboro, should guide the court in finding that CAH entities nationwide are mismanaging hospitals. … The situation in the city of Hillsboro is not an isolated event, and the court should increase the powers of the receiver … to prevent irreparable harm to the city of Hillsboro and its residents,” a memorandum in support of the motion to modify appointment of the receiver states.

Hearing set for March

A hearing on the emergency motion to modify appointment of the receiver is set for March 5 in Marion County District Court.

When CAH was notified of the district court’s Jan. 18 decision appointing a receiver, it notified district court that it would file an appeal of that decision to Kansas Court of Appeals. That appeal was docketed in the appellate court Thursday, the day after Hillsboro and Bank of Hays filed their motion asking for an emergency extension of the receiver’s powers.

Oswego CAH hospital abruptly closed

Oswego Community Hospital, managed by EmpowerHMS, abruptly closed its doors Thursday.

On Friday, I-70 Community Hospital in Sweet Springs, Missouri, voluntarily surrendered its license.

EmpowerHMS enters management agreement for hospitals

According to articles last week in the Kansas City Star, documents filed with the federal Securities and Exchange Commission show that EmpowerHMS CEO Jorge Perez entered into an agreement Jan. 7 giving 10-year management contracts for its hospitals to Miami-based iHealthcare. In exchange, Empower expects to get millions of dollars in “success fees.”

Several EmpowerHMS executives make up iHealthcare’s leadership and Perez will continue to be involved with management of the hospitals included in the agreement.

HCH, Oswego Community Hospital, and Horton Community Hospital in Kansas are among the 13 facilities included in the agreement, as is the hospital in Sweet Springs, Missouri.