- The Washington Times - Tuesday, November 9, 2004

A health care company that runs two D.C. hospitals is facing questions about its finances after missing a court-ordered, $15.4 million debt payment six months after emerging from bankruptcy protection.

Doctors Community Healthcare Corp., which runs Hadley Memorial Hospital and Greater Southeast Community Hospital in the District, last month failed to make the first of three scheduled “bullet payments” under a bankruptcy reorganization plan approved in April, according to U.S. Bankruptcy Court records.

The company is owned by Paul R. Tuft, a major contributor to Mayor Anthony A. Williams’ 2002 re-election campaign.

Bankruptcy law experts say the missed payment raises questions about finances at the company.

“It’s pretty serious when you miss a payment that soon,” said David Skeel, visiting professor at the Georgetown University Law Center. “That’s not when you expect to run into trouble, so soon after bankruptcy.”

Attorneys for the company said yesterday that Doctors Community is not in financial trouble, but declined to say why the company could not make the payment deadline.

“There is not a serious problem,” said company lawyer Andrew M. Troop. “There are discussions going on with the [liquidating] trust, and it would be inappropriate for me to comment any more in light of those discussions.”

Under the reorganization plan, Doctors Community must pay a liquidating trust $35.5 million over the next several years. One of the primary functions of the trust is to collect money from the company to distribute to creditors.

The plan includes monthly installments of nearly $240,000 for four years as well as lump-sum payments of $15.4 million this year, $8.4 million next year and $5.5 million in 2006, according to court records.

Doctors Community was set to make the first of the three multimillion-dollar “bullet payments” on Oct. 1, but it notified lawyers for the trust on Sept. 29 that company officials needed more time, according to court records.

City officials are watching the proceedings closely because Greater Southeast is the only hospital on the east side of the Anacostia River and the primary facility for the city’s poor. It lost millions of dollars last year, operated at nearly 25 percent deficit and almost closed after failing city health inspections.

Mr. Tuft and executives at Doctors Community and their family members were among the top contributors to Mr. Williams’ re-election campaign, together donating more than $60,000.

Greater Southeast received a contract to manage a city-funded health care plan for the poor created after the closing of D.C. General Hospital, but city officials assumed management of the plan after Doctors Community declared bankruptcy in November 2002.

Despite the problems at Greater Southeast last year, a new management team has overseen a turnaround at the 450-bed facility in recent months, winning back the hospital’s full accreditation and the approval of city health inspectors.

But questions remain about the finances of the hospital’s parent company, Doctors Community, which also owns a hospital in Chicago and a hospital in California, according to court records.

The missed payment was revealed in a Nov. 4 U.S. Bankruptcy Court filing, in which the liquidating trust is seeking a court order for Doctors Community to turn over business records concerning its plans to manage a pair of St. Louis-area hospitals. The trust wants to know more about Doctors Community’s dealings with Argilla Healthcare Inc.

Argilla plans to buy Forest Park Hospital and St. Alexius Hospital in St. Louis from Tenet Healthcare Corp.

Health care consultant Thomas M. Reardon formed Argilla on Oct. 25, telling Tenet officials that Doctors Community will manage the facilities, a Tenet spokesman said yesterday.

Mr. Reardon previously worked as the chief restructuring officer in the sale of Doctors Community during its bankruptcy proceedings.

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