- The Washington Times - Sunday, November 2, 2003

The owners of bankrupt Greater Southeast Community Hospital — which faces closure this week — plan to retain control through deals with new subsidiary corporations and by borrowing huge sums of cash.

Doctors Community Healthcare Corp. (DCHC) of Scottsdale, Ariz., has filed a reorganization plan that would resolve the company’s bankruptcy and allow it to continue operating Greater Southeast, the District’s only hospital east of the Anacostia River, which has received tens of millions of D.C. dollars since 2001.

The prospect of DCHC emerging from bankruptcy next month with control of Greater Southeast already has angered one D.C. Council member.

“There is no way the current crop of owners can reinvent themselves after bankruptcy,” said David A. Catania, at-large Republican.

“And there is no way I will vote to give this company one more nickel,” Mr. Catania said. “I will be very disappointed if the current ownership is in any way, shape or form associated with the hospital.”

Greater Southeast began asking for city funds anew last week, as creditors threatened to seek a court-ordered closure. City officials say the hospital loses about $2.65 million per month.

According to D.C. Health Department records, the city government has paid at least $30 million to Greater Southeast through the D.C. Healthcare Alliance since DCHC bought the hospital in December 2000. The Health Department is expected to announce this week whether conditions at Greater Southeast have improved enough during the past two months to restore its license.

Under DCHC’s reorganization plan, outside investors would provide upfront cash in exchange for minority ownership in new corporations under the control of Doctors Community, according to court records.

In one such deal, former Greater Southeast chief Ana Raley and Solanges Vivens, former head of the Washington Center for Aging, promise to pay DCHC Chairman Paul Tuft $500,000 each for a combined 20 percent share in Hadley Memorial Hospital Corp., a subsidiary of Doctors Community.

Mr. Tuft does not propose to use his own money in that deal or in any similar arrangements in the reorganization plan, according to court records. Instead, the arrangements rely on funds from investors who mostly are former or current business associates of Mr. Tuft’s.

In another deal, Maryland accountant Tanya Curtis has agreed to pay Doctors Community $500,000 in exchange for 5 percent ownership in Greater Southeast Community Hospital Corp., another DCHC subsidiary.

Mr. Tuft also proposes to set aside 15 percent of the ownership of the corporation for Greater Southeast physicians.

The reorganization plan includes two separate borrowing agreements with lenders that resemble the deal Doctors Community had with now-bankrupt National Century Financial Enterprises Inc. (NCFE) of Dublin, Ohio.

Before both companies went bankrupt last year, National Century gave Doctors Community cash by buying its accounts receivable, then charged DCHC fees and interest on the transactions.

Last November, the FBI raided NCFE offices while investigating hundreds of millions of dollars missing from the company’s reserve funds. National Century had held an 11.5 percent ownership stake in Doctors Community.

DCHC has a history of buying financially distressed hospitals, such as Greater Southeast, which is going through its third bankruptcy in five years.

City officials made Greater Southeast the primary contractor in the D.C. Healthcare Alliance — Mayor Anthony A. Williams’ $500 million plan to privatize medical services for the poor — after D.C. General Hospital closed in June 2001.

According to DCHC company payroll records obtained through court filings, DCHC executives spent huge sums on travel, salaries and bonuses in the year before declaring bankruptcy as Greater Southeast’s financial losses mounted and its condition worsened.

The corporation paid $4.3 million to another company co-owned by Mr. Tuft for travel expenses. DCHC executives also spent at least $675,000 on lobbying expenses and political contributions to D.C. elected officials.

The DCHC reorganization plan would grant Mr. Tuft and other company executives exemptions from claims filed by DCHC creditors. DCHC payroll records show that Mr. Tuft received $2 million in salary in 2001 and $3 million in salary advances.

The plan also would exempt David Denslaw, DCHC vice president of mergers and Mr. Tuft’s father-in-law; Alan Tuft, senior vice president and Mr. Tuft’s brother; and Susan Engelhard, former DCHC general counsel and daughter of Mr. Tuft’s ex-wife.

The plan mentions no specific capital improvements for Greater Southeast or Hadley. Management changes would include a proposal for new members to serve on Greater Southeast’s board of directors, including former D.C. Police Chief Ike Fulwood, Greater Southeast chief of medical staff Dr. Edward Potter and Miss Curtis.

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