washingtonpost.com
SE hospital believes nonprofit status could help finances

By Tim Craig
Washington Post Staff Writer
Sunday, January 24, 2010; C01

United Medical Center, formerly known as Greater Southeast Community Hospital, is seeking a nonprofit charitable status to help stave off a financial crisis that appears to have worsened -- two years after it received nearly $80 million from the District.

The proposed change comes as hospital officials and city leaders scramble to ensure the financial viability of the only hospital in the city east of the Anacostia River. If approved, the status would be part of a broader deal to change the facility's ownership and increase its access to cash.

Although the change in status would not change the hospital's mission to serve any patient who needs care, hospital executives say registering as a nonprofit charity would make it easier to serve some of the city's poorest residents.

"We will be a true safety-net hospital," said George Lowe, a consultant for United Medical Center. "We are anyway, but we just don't have the designation."

Despite being the closest hospital for an estimated 140,000 city residents, United Medical Center has operated in a precarious state, some say.

The Washington Post recently reported on United Medical Center's financial woes, and according to paramedics, an ambulance carrying a critically ill senior citizen was diverted from the facility last weekend because some hospital staff employees said they did not have enough life-saving supplies. Hospital officials denied that the diversion was needed but acknowledged that the facility was running low on supplies.

The shortage underscores the struggle the privately owned hospital has faced for years. According to hospital officials, some vendors will not deliver supplies until after payment checks clear. "We can be a strong community hospital, but we just have to get some of these challenges leveled," said the hospital's chief executive officer, Frank G. DeLisi, who confirmed the nonprofit strategy in an interview with The Post. "I am confident we can get where we need to be long-term as a nonprofit."

Financial implications

By obtaining status as an Internal Revenue Service-approved nonprofit, the hospital might attract more charitable donations because contributions would be tax-deductible; would qualify for higher Medicaid and Medicare reimbursement payments, a crucial move for a hospital where eight of 10 patients have government-sponsored insurance; and would save at least hundreds of thousands of dollars in annual tax liabilities, DeLisi said. The conversion to a 501(c) status could take up to 18 months.

But the change would likely spell the end of the city's two-year experiment of partnering with New Hampshire-based Specialty Hospitals of America, a for-profit company, to keep United Medical Center in business. On Jan. 13, The Post reported that the hospital, which was renamed in 2007 after an infusion of millions of dollars in taxpayer money, was having trouble paying its bills.

According to D.C. Council members, the hospital has an operating deficit of as much as $20 million and a bank recently denied its request for a $5 million line of credit. In recent years, the D.C. government has pumped $79 million into the troubled facility to modernize it.

Short of supplies

The hospital's financial challenges took another twist last weekend. Kenny Lyons, president of the union that represents city paramedics, said an ambulance carrying a critically ill patient from a retirement community in Southeast was turned away from the hospital last Sunday because the hospital did not have enough supplies.

Lyons, whose story was first reported by WJLA-TV (Channel 8), also said it has become routine for hospital employees to raid arriving ambulances for basic supplies to treat patients.

"They were asking units that came to the hospital for some of the basics, like IV bags," Lyons said. "They didn't even have the needles to start the IVs."

A hospital employee, who asked not to be identified because she was not authorized to speak to the media, backed up Lyons's claim last week. "We didn't even have cups for the patients to take their medicine with," the employee added.

In an interview Thursday, DeLisi denied that conditions warranted turning the patient away. He said the hospital is investigating the incident because "no one official" ordered that the patient be taken to another hospital because of insufficient supplies.

He also downplayed Lyon's claim that the hospital has taken supplies from city ambulances, saying he thinks it happened once. "That is not an uncommon practice," DeLisi said. "We give them supplies as well."

But he acknowledged that supplies were "running tight" last weekend, saying the hospital, , is operating "as lean" as it can. DeLisi said the facility, which nearly went bankrupt under its previous owner, made a $100,000 supply order Jan. 14 but that the vendor failed to deliver the supplies until the check cleared after Martin Luther King Jr. Day. "The hospital has a many-year history of not paying its bills, so people want their money upfront," DeLisi said.

The hospital has eliminated 40 full-time positions over the past 10 days.

Medicaid rate rising

DeLisi and council member David A. Catania (I-At Large), chairman of the Health Committee, say they have a plan to restore the hospital to more stable financial footing.

The hospital is struggling mostly because of low reimbursement rates from government-backed insurance plans, they say. Currently, it is reimbursed 85 cents for $1 of care provided for Medicaid patients.

DeLisi said only 10 percent of its patients have private insurance -- the same percentage of uninsured patients who never pay for service. The lack of patients covered by private insurance makes it nearly impossible for the hospital to operate without a deficit, Catania said. "The problem is, the more they serve, the bigger the deficit, because they lose money on almost every patient they serve," he added.

But starting March 1, Medicaid will start reimbursing United Medical Center 95 cents per $1, pumping an additional $4 million annually into the hospital, Catania said.

City leaders maintain that closing the hospital is not an option.

Catania, who has staked his reputation on saving the facility, said it has been "transformed" since 2007 because the city invested millions in capital and equipment upgrades, including dialysis machines, respirators and radiological equipment.

In a few months, the hospital plans to open an $11 million pediatric emergency room run by Children's National Medical Center.

"We are going to have a few more weeks of things being tight, but at the end of the day, the hospital is not at any risk whatsoever of closing," Catania said.

Lyons isn't so confident.

"It's almost unbelievable a hospital would run out of supplies, whether it was a holiday weekend or not," he said. "This is just totally unacceptable."

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