- The Washington Times - Sunday, April 15, 2007

The decline and possible shutdown of Prince George’s largest health system, including Prince George’s Hospital Center, has been exacerbated by massive losses at Laurel Regional Hospital over the years, financial records show.

According to financial records, Laurel Regional has lost more than $25 million since 2002. The deficits have grown from $2.5 million in fiscal 2002 to more than $7 million last year.

Most attention concerning the financial problems at nonprofit Dimensions Healthcare System focus on its largest flagship hospital, Prince George’s Hospital Center. But audited financial statements show the company’s possible closure, which could be announced as early as this week, also has much to do with the largely overshadowed operations at Laurel Regional Hospital.

Dimensions runs the two hospitals, as well as the Bowie Health Campus and the Gladys Spellman Specialty Hospital and Nursing Center, under a long-term lease deal with the Prince George’s government.

Dimensions is expected to decide by Wednesday whether to close or file for bankruptcy.

However, Dimensions officials say closing Laurel Regional, while keeping open Prince George’s Hospital Center, is not an option.

“Management believes that closing Laurel Regional Hospital in isolation to the other facilities will not work,” Dimensions officials wrote in an e-mail response to questions from The Washington Times last week.

“Despite its losses, this hospital makes a contribution margin to the fixed overhead costs of the system. Furthermore, all of the facilities operated by Dimensions are tied together as part of the obligated group of the outstanding bond debt, as well as the lease agreement with Prince George’s County.”

Prince George’s Hospital Center posted a profit of more than $19 million last year, though officials attribute that to county and state bailout money without which the facility would have operated millions of dollars in debt.

The problems at Laurel, which has 146 beds and 670 employees, surfaced as an area of concern among county officials.

In a Nov. 29 memo to Prince George’s County Executive Jack B. Johnson, a consultant called Laurel Regional one of the state’s most inefficient hospitals and said it would have closed without bailout money over the years from state and county officials.

Dimensions officials have said Laurel Regional’s deficit last year was largely the result of an accounting restatement reflecting a change in how the health system classifies bad debt.

In addition, Dimensions says officials had expected Laurel Regional to become more profitable because of increasing development.

“The solution to Laurel’s problems is to increase patient volumes,” the company said in its written statement to The Times. “With the aging population and the growth in Laurel due to the expansion of Fort Meade, the need for hospital and emergency services in the community will only increase.”

Dimensions has received more than $70 million since 2002 to help keep it afloat from state, county and a trust fund, according to a recent analysis by Moody’s Investor Service.

Last week, another major Wall Street rating firm downgraded Dimensions’ bonds, citing the failure of the Maryland legislature last week to pass a bill to provide for a permanent bailout of the health system.

Analysts for Fitch Ratings also cited “further deterioration in Dimensions’ operational and financial profiles, including extremely weak balance sheet indicators without governmental support.”

Barring another bailout by Prince George’s government, Dimensions’ board of directors could vote to declare bankruptcy, which would freeze the company’s liabilities. But the company’s chief executive, G.T. Dunlop Ecker, is recommending against the move, saying officials don’t have enough upfront cash to pay legal fees.

Attorney Sam Alberts, a partner at the District-based law firm White and Case LLP, who represented creditors in the recent bankruptcy of Greater Southeast Community Hospital in the District, said some financially troubled health systems will get cash by financing their accounts receivable.

Such arrangements involve selling outstanding invoices at a discount to a finance company in exchange for upfront cash.

“It’s a very cash-intensive business, and where hospitals make their money is on receivables,” Mr. Alberts said. “It’s very common way to get them over that hump.”

“If they wanted to go into Chapter 11 bankruptcy protection, that would be one way to go. And even they weren’t able to turn around because of more systemic problems, a Chapter 7 liquidation might be a better way to go than just turning off the lights.”

LOAD COMMENTS ()

 

Click to Read More

Click to Hide