Mark Friedman at Arkansas Business does a deep dive into the mess at Crittenden Regional Hospital, which filed for bankruptcy last month. This after the hospital and community leaders successfully pushed for a penny sales tax to save the hospital (that tax has now been enjoined; voters will have a chance to repeal it later this year before anything is collected).
We’ve reported before that Crittenden County Judge Woody Wheeless had seen a pattern of neglect from the leadership of CRH since he was elected county judge almost two years ago. He said his “confidence was lost in the hospital board 20 months ago.” The county had an agreement with the hospital board to see monthly financial reports (the county owned the property and leased it to CRH). But Wheeless said he never once got the reports: “I’ve constantly asked the CEO [Gene Cashman] for them, and he’s always saying, ‘I’ll get those to you, I’ll get those to you next week.’ And next week never came.”
If Wheeless had ever gotten those financial reports he kept asking for, the news would have been ugly. Friedman, relying on an affidavit given by Cashman as part of the bankruptcy proceedings, reports:
Directors of Crittenden Regional Hospital learned on Aug. 19 that its monthly revenue was only $2 million — about half what they had previously been led to believe — while expenses were about $5 million, the CEO of the shuttered hospital revealed in a bankruptcy court filing.
Yikes. How could this have happened? Based on the affidavit, Cashman and co. are putting all of the blame on a single scapegoat, former CFO Brad McCormick. According to Cashman, McCormick had falsely been reporting monthly revenue of $4 million per month.
On the surface, this just doesn’t smell right. McCormick owned no stock in the hospital and had nothing to financially gain from acting alone to wildly over-report revenue. On the contrary, this level of malfeasance would presumably make it hard for him to ever work as a CFO again. McCormick is now CFO at Natchitoches Regional Medical Center in Louisiana and isn’t commenting.
Meanwhile, keep in mind that Cashman, an employee of Methodist Le Bonheur Healthcare in Memphis, was brought in at great expense to act as CEO and try to save the financially struggling institution as part of an agreement with Methodist to provide consulting services for CRH. Cashman was utterly clueless about the revenue picture until late August? Remember how he kept telling Wheeless “I’ll get those to you next week”? Seems like maybe he shouldn’t have procrastinated!
Friedman also reports that CRH was looking for a buyer:
The affidavit by Eugene Cashman also revealed that Crittenden Hospital Association, the nonprofit that operated the county-owned facility at West Memphis, was quietly looking for a buyer even as it successfully lobbied voters to approve a countywide sales tax specifically to shore up the hospital’s finances.
This is in line with what I’ve heard from insiders off the record. Multiple potential buyers showed interest, with one making a tentative $12 million offer, a deal that fell apart when the buyer declined to cover the hospital’s monthly deficit.
The other thing that struck me from the affidavit: Cashman states that it was impossible to find a loan to keep the hospital going until the money from the sales tax started coming in. That tax would bring in $30 million over 5 years — that’s cash coming in with no additional expenses. They couldn’t have worked out a deal with the county to devote some of that money to a lending institution? What about the underwriters for the bonds — Crews and Associates? Did they really turn down a loan under those circumstances?
I’m expecting more drip, drip, drip on this. Note that Friedman’s article didn’t even get into the thicket of the current lawsuit alleging that the hospital withheld money from employees’ paychecks for health insurance premiums, but never actually paid the claims, potentially leaving their employees on the hook for tens of thousands of dollars in medical care they were told was covered by their health insurance.
Things are getting ugly in Crittenden County.