Becker's Hospital Review

40 CFO / FINANCE DC CFO Says United Medical Center Is 'Functionally Bankrupt': 6 Things to Know By Alyssa Rege W hile Washington, D.C.-based United Medical Center voted Jan. 26 to hire a new consulting firm to take over management of the facility, the CFO of the city claims the hospital still has a long way to go to recover financial- ly, e Washington Post reports. Here are six things to know about the hospi- tal's financial situation. 1. UMC's board voted Jan. 26 to hire Mazars USA, a New York City-based accounting and financial consulting firm, to run the hospital. e D.C. City Council terminated the hos- pital's management contract with Veritas, UMC's previous manager, in November. 2. A hospital board member told e Wash- ington Post Mazars USA is expected to as- sume control of the hospital in mid-February. e board member said eight companies bid for the management contract. e represen- tative declined to tell e Washington Post- the price of Mazars USA's contract, but said it would not be "appreciably different" from Veritas' $4.2 million annual agreement, the report states. 3. However, Jeffrey S. DeWitt, CFO for the city, said during an earlier board meeting Jan. 26 if Mazars USA's contract was priced above $4.2 million, administrators would need to ask the city for a subsidy to make up the dif- ference. According to Mr. DeWitt, the hospi- tal is operating in the red and is practically bankrupt. "You are functionally a Chapter 11 hospi- tal right now," Mr. DeWitt told UMC board members Jan. 26. "You are running with pa- tient volumes down, with expenses that are not under control, with a revenue cycle that is not fixed." 4. Mr. DeWitt reportedly told the board UMC is on track to run an annual deficit of $25 mil- lion if officials do not make sizeable changes to hospital operations — a move that would result in additional taxpayer bailouts. e Washington Post reports the city provided UMC with $7 million in December to assist with the hospital's short-term operating costs and to repay Medicare for overbilled funds. 5. Hospital board members have attribut- ed UMC's financial difficulties to declining patient admissions, which they claim have occured because of reports of questionable patient deaths at the facility, according to the report. Officials also attributed some of the hospital's financial issues to billing issues at its nursing home, which they claim is a result of the city's mismanagement. 6. Mr. DeWitt said Jan. 25 a large part of the hospital's operating losses resulted from mis- guided spending by Veritas. He also noted Veritas, not the city, was responsible for bill- ing issues at UMC's nursing home, according to the report. n Tenet Exits Philadelphia With $170M Sale of 2 Hospitals By Ayla Ellison D allas-based Tenet Healthcare has completed the sale of its last two Philadelphia hospitals: Hahnemann University Hospital and St. Chris- topher's Hospital for Children. In September 2017, Tenet entered a definitive agree- ment to sell the hospitals and their affiliated opera- tions for $170 million, consisting of $152.5 million in cash at closing and a $17.5 million promissory note, to American Academic Health System, an affiliate of El Segundo, Calif.-based Paladin Healthcare. The parties finalized the deal Jan. 11. Tenet is shedding hospitals in an attempt to lower its heavy debt load. At the J.P. Morgan Healthcare Con- ference in San Francisco on Jan. 8 Ron Rittenmeyer, executive chairman and CEO of Tenet, said Ten- et's divestiture plan, which is expected to yield more than $1 billion of proceeds, is on track. Tenet also launched a $250 million enterprisewide cost-cutting plan, which involves renegotiation of contracts with suppliers and vendors, as well as the elimination of 2,000 jobs. n Equity Firm Submits Winning (and Only) Bid for Bankrupt Arizona Hospital By Ayla Ellison G reen Valley (Ariz.) Hospital CEO John Matuska said Jan. 22 he was not surprised the hospital attracted only one bidder, according to the Green Valley News. Earlier in January, equity firm Lateral GV placed a $28.5 mil- lion stalking horse bid for Green Valley Hospital, which filed for Chapter 11 bankruptcy in April 2017. A stalking horse bid, which is an initial offer on a distressed company's assets from an interested buyer selected by the company, sets the minimum purchase price. Other potential buyers had until Jan. 22 to sub- mit bids on Green Valley Hospital's assets. Since Lateral GV placed the only bid, the hospital will begin the roughly 90-day process of transferring ownership to the equity firm. The deal is subject to customary regulatory approvals, and the hospital's licenses must be updated with the Arizona State Board of Pharmacy and other agencies, according to the report. Mr. Matuska told the Green Valley News Lateral GV has been the Green Valley Hospital's lender for 10 months, and hospital officials have a good relationship with Lateral GV's management team. He said patient care will not be disrupted during the transfer of own- ership, and none of the hospital's employees will lose their jobs. n

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