Hospital woes hit closer to home
The woes of Brown County hospitals reached a fever pitch last week. The fever spiked as the week began, with Brown County commissioners on Monday, March 11, approving a May special election for county citizens to decide whether to provide tax support for Hiawatha’s hospital; Horton’s hospital and corresponding clinic and ambulance service closing Tuesday, March 12.
Both hospitals have been in the news for months. A special committee has been meeting regularly to address financial concerns at Hiawatha Community Hospital. Meanwhile, staff at Horton Community Hospital had not been paid for more than a month — further adding to that hospital’s financial and supply issues.
These struggles — which are not confined to these two northeast Kansas rural hospitals — have local residents wondering whether they should be concerned about their local hospital and clinic.
In a January 2019 letter to the editor, LaVon Wenger, president of the Sabetha Community Hospital Board of Directors, said that “Sabetha community healthcare services are in relatively good financial shape in view of all the many challenges.”
He noted that SCH showed a net profit of $237,000 for the 2018 fiscal year. Financial statements from Great Plains of Sabetha, Inc. — legal name for SCH — show net losses in fiscal years 2011, 2013, 2015 and 2016; and net gains in fiscal years 2012 and 2014. Financials from 2017 are not yet publicly available. While these losses total a little more than $715,000 between fiscal years 2011 and 2016, they seem manageable when compared to Hiawatha Community Hospital losses in the same years, which totaled more than $6 million.
In 2015, SCH and Nemaha Valley Community Hospital came together to propose a 1/2 percent retail sales tax in Nemaha County, which would be split between the two entities — with NVCH received 55 percent and SCH receiving 45 percent. This is similar to what now is being proposed for the Hiawatha Community Hospital in Brown County, but this joint proposal by SCH and NVCH was made in advance of any crisis situations at either hospital.
At the time, Key said the two hospitals were being “proactive.”
“We are already seeing shortfalls, and you can only assume them for so long before it becomes a crisis situation. We want to get ahead of this,” Key said, in a Herald story published March 8, 2015.
In April 2015, Nemaha County voters approved — with 60 percent in favor, 40 percent opposed — the 1/2 percent retail sales tax, which is set to expire in 2025. This sales tax was projected to provide SCH with approximately $350,000 in tax support annually.
Since 2015, Key said, the hospital shows revenue of $1,258,315 from the sales tax.
This portion of county healthcare retail sales tax has “brought some relief” from financial issues affecting not just SCH but all Kansas hospitals, due to Congress’ inability to pass a budget in 2012, Key said.
“This resulted in the 2013 reduction of all Medicare payments to all providers, which includes hospitals, doctors, home health and hospice,” Key said. “Here it is six years later and hospitals, doctors and any healthcare provider of services to Medicare patients still gets dinged.”
The effect of those reduced payments has been “well over” $2 million, Key said.
“Hospital administrators across the state of Kansas continue to ask congressional leaders for restoration of that payment cut,” Key said.
One key to Sabetha Community Hospital’s relative stability is its inclusion in the Great Plains Health Alliance. The committee working toward a solution for Hiawatha Community Hospital noted it would be beneficial to find a similar situation for Hiawatha’s hospital as they look to the future.
“Sabetha Hospital has been with Great Plains Health Alliance since 1972, and throughout the years GPHA has helped navigate the annual regulation changes, whether it be financial or the conditions of participation for Medicare — making sure that the hospital stays in compliance with all regulations,” said Lora Key, CEO of Sabetha Community Hospital.
Key said the board, medical staff and administration continually look toward the future of Sabetha Community Hospital, Sabetha Family Practice and Nemaha County Home Health and Hospice, “monitoring what services can be provided and are appropriate.”
“SCH looks forward to partnering with the City on the Health and Wellness Center and what that will bring to the health of this community,” Key said.
In his letter, Wenger emphasized the importance of using local healthcare services.
“As in any business, increased revenue greatly helps the bottom line because a lot of the expenses are fixed,” Wenger said. “If the Sabetha community wants to continue to maintain a strong, vibrant local healthcare system, the community needs to support it by using our health services.”
Following months of unpaid utility bills, supply shortages and missing employee benefits, woes at Horton Community Hospital came to a head when employees failed to receive paychecks in mid-February.
The doors closed for good at Horton Community Hospital on Tuesday, March 12, though the saga is far from over.
Horton is just one of many Midwest hospitals that, until recently, had been owned and operated by Empower HMS, a company that said it specialized in reviving ailing rural hospitals. While Empower was said to be based in northern Kansas City, the offices are reportedly vacated, with the owner and majority of employees working out of Miami, Fla. Earlier this year, management of Horton Community Hospital and the 12 other Empower hospitals was transferred to Florida-based iHealthcare.
According to multiple published reports, in the past three months, Horton Community Hospital is one of three Kansas hospitals to close that had been owned by EmpowerHMS. Mercy Hospital in Fort Scott closed on Dec. 31, 2018, and Oswego Community Hospital closed in February. Additionally, Hillsboro Community Hospital was placed in receivership in January after the Bank of Hays started foreclosure proceedings on an unpaid $10 million mortgage.
The Kansas Attorney General’s Office has launched an investigation into the hospitals, but no specific details are available.
According to a report from MSC News, the current ownership of the Horton Community Hospital, listed in court documents as CAH Acquisition Company No. 3, LLC, filed for bankruptcy on Thursday, March 14.
Additionally, the Topeka Capital Journal reported that the Kansas Department of Labor is reviewing claims whether wages are owed to former hospital employees. According to the report, if the employer refuses, court action will follow.
Along with a 25-bed critical access hospital, the Horton Community Hospital operated a health clinic and ambulance service.
Ambulance services will continue to be provided uninterrupted, as the Brown County Commission — in anticipation of the closure — approved an agreement on Monday, March 11, with Town and Country EMS to provide service in the southern portion of the county. Ambulances already have been stationed at the Horton Armory building.
On May 21, Brown County voters will be deciding whether to approve a 1/2 percent retail sales tax to support Hiawatha Community Hospital. This comes following months of meetings of a joint advisory committee, which includes officials from Brown County, as well as the cities of Hiawatha and Horton. The committee was formed after the urgent situation at Hiawatha’s hospital was brought to light by then-CEO Jeff Shelton.
In early January, Shelton told Brown County government officials that the hospital needed help. It needed to cut or find additional revenue to the tune of approximately $3 million in a very short timeframe in order to avoid an immediate crisis.
In early January, Shelton implemented cuts totaling approximately $1.6 million, including the following: decreasing compensation to providers, decreasing employee fringe benefits, and cutting pay for all employees by 2 percent. However, the hospital would still need to come up with approximately $1.2 million by May, due to the overpayment of Medicare reimbursements that needed to be paid back, plus more to bring the hospital’s books back in order.
Hiawatha Community Hospital was, in fact, showing net losses well in advance of this crisis being brought forth. Financial statements for Hiawatha Community Hospital show net losses in all but one fiscal year between 2011 and 2016. Net gains/losses were as follows: 2011, loss of $519,184; 2012, loss of $574,043; 2013, gain of $833,108; 2014, loss of $1,425,506; 2015, loss of $2,110,735; and 2016, loss of $1,502,787. Financials from 2017 and 2018 are not yet publicly available.
In mid-February, the Hiawatha Community Hospital Board of Trustees announced that John Broberg had been appointed as Interim CEO. The hospital has not commented on the status of Shelton’s employment at the hospital.
According to reports from the Hiawatha World, the joint advisory committee voted on Monday, March 4, to recommend to local governments an approval for a 1/2 percent countywide sales tax and pursuit of a $2 million bond issue.
In order to get this recommendation, the hospital was asked to respond to a number of requests and recommendations made by the committee.
The committee had recommended that the hospital engage the services of a healthcare management and consulting firm to assist in regaining financial stability, similar to an entity like Great Plains. In response, the Hiawatha hospital offered instead to evaluate opportunities for affiliation with a regional health system that would improve and assist the hospital to remain a viable hospital serving the region.
Also in response to the committee’s requests, the hospital pledged to provide a rural healthcare clinic in Horton in the event, which now has transpired, that the Horton Community Hospital would no longer be able to provide healthcare to its residents.
Finally, the hospital also agreed to amend the governing bylaws to designate three of the current 10 positions as ex-officio voting members to be appointed by the governing bodies of Brown County, the City of Hiawatha and the City of Horton.
At the Brown County Commission meeting on Monday, March 11, county commissioners Dwight Kruse and Keith Olsen voted in favor of the 10-year, 1/2 percent sales tax question, while Commissioner Richard Lehmkuhl was opposed. Lehmkuhl was in favor of a shorter term of five years, which he believed would have a better chance of being approved by voters.
A special poll election has been set for Tuesday, May 21. If approved, the sales tax would be implemented on Oct. 1. It would increase Hiawatha’s sales tax to 9.5 percent, and Horton’s to 10 percent.
The money raised from the sales tax would go to pay industrial revenue bonds obtained through the City of Hiawatha for $2 million. Revenue from a countywide 1/2 percent sales tax is estimated to bring in between $600,000 and $700,000 annually. Once the bonds were paid, the revenue would go to the hospital as tax support.