PA Hospital's Financial Woes Trigger Harsh Repercussions

Usually this column features success stories about community and rural healthcare leaders who are a force for good health, economic growth, and stability in their communities.

We cannot, however, ignore the gloomy "Side B" stories of hospital bankruptcies and closures that appear with unsettling regularity just about every day in newspapers across the United States.

That is what's happening now at Saint Catherine Medical Center Fountain Springs in Ashland, PA, a town of about 10,000 souls located 52 miles southwest of Wilkes-Barre. The 67-bed, investor-owned, acute-care hospital, which was built in 1967, this week filed an emergency petition for Chapter 11 protection in a federal bankruptcy court.

Because the filing was a rush job, it's still not clear how much the hospital owes, or to whom. That will be sorted out in the coming weeks and months.

Federal officials have appointed attorney William G. Schwab as the Chapter11 trustee of the medical center. He told local media that "when all is said and done 2012 will not be the date of the last admission." Schwab also said he hopes to "do what is right" for the employees, community, patients, physicians, and shareholders. He didn't have many details to share this early in the process.

Judging by news accounts, the bankruptcy filing seemed inevitable after the Pennsylvania Department of Health in March found deficiencies and violations that threatened patient health and put their safety in immediate jeopardy.

In a March 23 letter to Merlyn Knapp, the medical center's CEO, state health officials cited a lack of "proper equipment and supplies" for surgical services. "Until you can provide the department with evidence that the operating room equipment has been properly inspected, there is sufficient equipment, and there are adequate supplies, the ban on admissions also applies to your surgical services department."

Knapp said in a media release that "we do not agree with some of the findings and are currently working on a plan to address and appeal those findings."

It didn't matter. The state ordered an immediate ban on new admissions, surgical services and emergency and outpatient procedures.

Whatever else was left was not enough to keep the hospital running, so things went downhill from there. On April 3, the Centers for Medicare & Medicaid Services told Saint Catherine that because of the deficiencies identified by the state the hospital no longer met the federal requirements for participation in Medicare. That sealed the deal, and the hospital filed for Chapter 11 days later.

"We are evaluating all future options for Saint Catherine Medical Center, including a potential sale and re-opening of the hospital," Knapp said.

And now comes the fallout.

The bankruptcy filing left about 100 employees uncertain about their job prospects, or if they would get paid for the time they've worked, and vacation time accrued, etc. Local media reported a testy 25-minute closed-door meeting this week between employees and hospital owner Robert M. Lane.

Echocardiographer Christine Hamilton, who's worked 13 years at the hospital, told the local News-Item newspaper that the meeting was "a waste of time."

"All (Lane) said is he doesn't know anything and the bankruptcy lawyers would be handling everything. That was pretty much it. He pretty much talked in circles," she said. "He was asked why our money was stolen from us, and his answer was that he didn't know what was going on and that the CEO and the CFO were running the hospital."

Knapp said in a media release that the hospital intends to "do our best for our employees."

That includes a job fair next week that will focus on job retraining, adult education options, budget assistance and unemployment compensation.

"We are concerned for the welfare of our employees and have been working with the local Career Link Center and other organizations to provide a program that will enable our employees access to many different organizations," Knapp said.

It's not clear how the closing will affect healthcare delivery in Ashland and Schuylkill County, which was recently deemed to be among the least healthy counties in the Keystone State by the 2012 County Health Rankings & Roadmap survey.

The county surpasses the state average in negative measures of population health such as per capita premature death, obesity, smoking, and excessive drinking. And there are about 2,000 county residents for every one primary care physician, which is more than three times the national benchmark. So, it probably won't help health outcomes if there is one less hospital to serve the county.

And there is the fallout in lost tax revenues and trickle-down economic activity that comes with losing 100 or so relatively well-paying jobs in a somewhat remote county with an unemployment rate of about 8.5%.

We talk a lot about hospitals as powerful economic engines for most communities, and they are. Many of these hospitals provide quality healthcare and economic stimulus with a trickle effect that improves the lives of thousands of people in the service area.

Unfortunately, in this era of tremendous flux in healthcare, an equally urgent story is that of the hospitals that teeter on insolvency, with their employees, patients and the communities they serve left anxious, angry and confused about their job prospects, care access, and economic status.