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Hospital’s owners paid lobbyists as tax bill rose

D.C. facility could face auction

- The Washington Times - Sunday, June 20, 2010

The parent company of United Medical Center, which has received about $100 million from D.C. taxpayers in recent years, continued paying big fees to its cadre of lobbyists last year even as millions of dollars in local and federal taxes went unpaid at the Southeast Washington hospital.

Specialty Hospitals of America, a for-profit company based in New Hampshire, paid at least $300,000 to the lobbying firm Carmen Group, according to local and federal lobbying disclosure reports. The expenditures came at a time when the finances of United Medical Center were becoming increasingly dire, public records show.

Last year, for instance, the Internal Revenue Service placed a lien for more than $3.8 million for unpaid payroll taxes against Capitol Medical Group, which is owned by Specialty Hospitals. Those weren't the only unpaid bills.

Other bills included about $160,000 in water and sewer charges and separate liens by contractors Dominion Mechanical Contractors and Hitt Contracting Inc., which said they hadn't been paid hundreds of thousands of dollars each for construction and other work at the hospital.

The financial problems have D.C. officials considering auctioning off the hospital as early as next month, just a few years after it emerged from bankruptcy under previous owners.

Vanessa Dixon, a local health care organizer at the D.C. Health Care Coalition who has long favored having a public hospital in Washington, said the lobbying expenditures don't make sense to her when so many other bills are piling up.

"It's a case of misplaced priorities," Ms. Dixon said. "Lobbying is a luxury. It's not clear to me what they're doing with their money."

According to disclosure reports, the lobbyists for the company petitioned Congress as well as officials in the U.S. Centers for Medicare & Medicaid Services, and the D.C. government on reimbursement issues.

Executives at Specialty Hospitals say the money spent was well worth it. The cost of retaining the Carmen Group, at $25,000 per month, ultimately helped to ensure millions of dollars of increased funding for the hospital, officials said.

Jim Rappaport, chairman of Specialty Hospitals, said one example of the firm's work came after the previous hospital owner, Envision Hospital Corp. in Arizona, failed to provide federal regulators with required surveys, prompting the Centers for Medicare & Medicaid Services to reduce federal funding to the hospital.

"Carmen Group was able to convince CMS that [the hospital] should not be punished for Envision's failure and was able to overturn the decision," Mr. Rappaport said. "This effort means an additional $3-4 million revenue over five to six years to the hospital."

In addition, he said, the lobbying firm helped in a separate issue to increase funding from $4.8 million to $12 million in connection with uncompensated care services. The Carmen Group declined to comment on its work for the company.

"They had the contacts and the professional expertise to handle it in a much more expedited manner than we did at the time," Mr. Rappaport said of the lobbyists' hiring.

Still, financial problems loom.

Citing tax and other unpaid bills, the D.C. government filed court papers in April in a move to take over United Medical Center, which was formerly known as Greater Southeast Community Hospital, and is the only hospital east of the Anacostia River.

The District's D.C. Superior Court filing also stated that the city had provided more than $100 million for patient care since the fall of 2007. That's when city officials, using $79 million, approved a public/private partnership with Specialty Hospital of Washington, a subsidiary of Specialty Hospitals of America.

Under the deal, the city used the money to back the sale of the hospital from Envision Hospital Corp. to Capitol Medical Center — a subsidiary of Specialty Hospital of Washington, court filings show.

While the city's court filing notes "dramatically improved" quality of care at United Medical Center since 2007, including a pediatric unit, city officials said their investment now was "at risk" because of the worsening finances.

"Despite these investments, however, either through mismanagement or lack of good faith, [Specialty Hospitals of America] misrepresented UMC's financial outlook until the end of 2009 and failed to disclose the existence of pertinent information. … Today, despite nearly 12 months of rosy projections and assurances from [Specialty Hospitals of America], UMC stands on the brink of financial insolvency," the court filing stated.

D.C. officials later withdrew their move to take over the hospital by way of the courts, and instead recently said United Medical Center could be sold to the highest bidder next month at an auction, barring an agreement with Specialty Hospitals of America.

The company has sharply disputed the city's accusations and has laid blame on D.C. government officials for not reimbursing the hospital for all of the services it has provided to patients.

In an e-mail to The Washington Times, Mr. Rappaport called the hospital's financial troubles "very simple."

"For the better part of two years, the District through its Medicaid program and its Alliance (city-funded health plan) program was paying 68 percent of actual costs for services provided to those patients," he said. "This led to a shortfall of almost $10 million in revenue for those services."

In addition, he said, the hospital should have been receiving at least $12 million for providing uncompensated care, instead of the $4.2 million to $4.8 million it received in 2008 and 2009, respectively.

"If the hospital had been compensated … the hospital would have had no financial problems," Mr. Rappaport said.

As for the construction bills, Mr. Rappaport said estimates for renovation work at the hospital ended up costing nearly $5 million when estimates originally were around $2 million.

The added work also meant that some beds at the hospital were taken out of service and that major expansion of services was delayed nearly a year, according to Mr. Rappaport.

"The loss of beds was extreme disruptive," he said, though adding that officials were still able to obtain approvals by the Joint Commission, the nation's largest hospital-accreditation organization.

Herman Brown, executive director of the D.C. Nurses Association, whose membership includes United Medical Center nurses, said the organization is concerned about the hospital's finances. Unsure of the future of the hospital ownership, he said he doesn't think D.C. officials will allow it to close.

"They can't let it fold," Mr. Brown said. Whether the current owners stay or go, he added, the nursing staff "just would like some stability."

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