- The Washington Times - Tuesday, August 21, 2007

Creditors of Greater Southeast Community Hospital are accusing its owners of borrowing more money to pay off increasing losses and management expenses, just after D.C. officials praised signs of a turnaround for the primary hospital that serves many of the city’s low-income residents.

The hospital ownership recently defaulted on an $8.1 million deal to pay back creditors in its now closed 2002 bankruptcy, according to new court filings.

Envision Hospital Corp. executives have been “using newly borrowed funds to finance ever-increasing operating losses and management expenses,” according to the filings by a liquidating trust representing bankruptcy creditors.

The documents, filed in U.S. Bankruptcy Court in the District, signal renewed concerns about the financial stability of Greater Southeast, the only full-service hospital east of the Anacostia River.

Paul Tuft, chief executive for Arizona-based Envision, formerly named Doctors Community Healthcare Corp., wrote in an e-mail yesterday that he had not seen a copy of the complaint. He referred further questions to an attorney who could not be reached yesterday.

The company has been trying to sell Greater Southeast for more than a year.

The liquidating trust, charged with pursing claims to recoup money for creditors of the health care company, said in court filings that it recently learned of approximately $50 million in previously undisclosed legal claims that are pending against the company.

The legal claims are a concern because of questions about whether the company’s insurance policies will cover all of the company’s lawsuit liabilities, according to court papers filed by liquidating trustee Sam Alberts.

Mr. Alberts also stated that the hospital company’s executives violated the financial agreement under which Envision officials owed the trust $8.1 million in selling Hadley Memorial Hospital earlier this year.

Under the arrangement, the borrower was supposed to “maintain, keep and preserve all of its properties in good repair.” Mr. Alberts said the company’s decision to sell Hadley constituted a “material breach” of the agreement.

In court papers, Mr. Alberts asked U.S. Bankruptcy Court Judge S. Martin Teel Jr. to order Envision executives to immediately pay $8.1 million to the trust.

As of yesterday, Envision officials had not filed a response to the complaint.

It’s not clear whether the dispute will affect operations at Greater Southeast. Last month, D.C. Council member David A. Catania, at-large independent and chairman of the council’s Committee on Health, said he was “cautiously optimistic” toward recent improvements at Greater Southeast.

The hospital ran afoul of city regulators earlier this year because of overstaffing and supply shortages, but Envision officials pledged to pay $500,000 per week to upgrade equipment, pay vendors and improve staffing.

Last month, Mr. Catania sought subpoena powers to investigate the hospital after council hearings identified staffing problems and a lack of medical equipment.