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D.C. moves to control failing hospital in SE

By Tim Craig
Washington Post Staff Writer
Friday, April 30, 2010

United Medical Center, formerly known as Greater Southeast Community Hospital, is in such financial distress that it has been unable to pay its electrical bill and taxes, has failed to meet retirement plan obligations, and has defaulted on its employee life insurance plan, according to newly released documents.

In a filing Wednesday in D.C. Superior Court, city officials asked the court to seize control of the medical center from Specialty Hospitals of America, citing alleged fiscal mismanagement and concerns that the parent company is "draining resources" from the hospital.

UMC owes Pepco $1 million on electric bills, the Internal Revenue Service $3.9 million in back taxes and Maryland and Virginia $1.7 million in payroll taxes, according to the documents. At the same time, several hospital executives have been making $1 million annually for what appeared to be little work, Attorney General Peter Nickles alleges.

"This is the tip of the iceberg," said Nickles, who is investigating the hospital's finances and management.

In 2007, D.C. Council member David A. Catania (I-At Large) put a deal together that prevented the closure of the only hospital in that part of the city east of the Anacostia River. The arrangement called for Specialty, a for-profit company, and the city to own the hospital jointly and for the hospital to be managed by its own board of directors.

The city has invested $100 million to modernize the facility in the past 2 1/2 years, but city officials now say the arrangement with New Hampshire-based Specialty has failed. They plan to have the city operate the hospital until a new owner can be found.

Although hospital officials said in early 2008 that the long-troubled hospital was on the verge of turning around, it has been losing about $1 million a month since last year, according to the documents.

"UMC is in imminent danger of financial insolvency and its continued operations will be placed in jeopardy unless a receiver is appointed," according to documents, which also assert that the hospital is at least $30 million in debt.

On March 11, the hospital ran out of money to pay for basic supplies, according to the court documents. To keep the 184-bed hospital open, the city gave it a $120,000 grant March 12 to "ensure" that it had "adequate patient supplies."

The hospital has been struggling to meet its employee retirement obligations. It was depositing employee 401(k) contributions at the last possible moment under Department of Labor guidelines, a practice the city characterized in court documents as an "interest-free loan from UMC employees of over $100,000 per month." This month, it missed the deadline.

In addition, the employee life insurance plan was canceled this month when the hospital failed to make outstanding payments of $80,000.

Jim Rapport, chairman of Specialty, declined to comment on the specifics of the city's allegations.

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