washingtonpost.com > Business > Local Business

United Medical Center owner challenges in court District's takeover of facility

By Joe Stephens
Washington Post Staff Writer
Wednesday, May 5, 2010

The company that owns Anacostia's only hospital blames the financial meltdown of United Medical Center on the District's refusal to fully reimburse the facility for patient care and city officials' decision to "divert" $25 million in hospital funding to other projects.

Specialty Hospital of Washington denied in a filing in D.C. Superior Court on Tuesday that it had hidden financial problems from city officials, whom it contends unlawfully seized control of the hospital last month. The company says Attorney General Peter Nickles chaired monthly meetings on hospital operations and knew the medical center, formerly known as Greater Southeast Community Hospital, was in trouble.

Last week, city officials asked the court to formally grant them control of the medical center, citing mismanagement. Officials said Specialty painted a glowing portrait of the hospital's financial operations while actually draining resources. In recent months, the hospital allegedly quietly fell millions of dollars behind in paying its taxes and electrical bills, failed to make payments to retirement plans and defaulted on employee life insurance.

Specialty fired back at the city in its court filing, saying there was no legal ground to sever its control of the medical center.

"The District and Peter Nickles have been fully aware of all operational and financial issues," the company said. "Any financial difficulties that UMC is now experiencing is a direct result of the District's failure to pay attention, failure to listen and failure to meet its obligations to fund the cost of care of Medicaid patients."

Specialty said it told city officials in December that it planned to write off $8 million in outstanding revenue as uncollectible, including $5 million it claims it was owed by the city and its vendors for Medicaid treatment. The city agreed to pay only 68 percent of the hospital's Medicaid expenses, instead of the 100 percent the company says it expected.

Specialty said the city engineered the financial crisis to pressure the company to give the city a nursing care facility it ran independently within the hospital complex, and which company executives estimated was worth at least $15 million.

"It's all about politics," Specialty co-owner Jim Rappaport said in an interview. "It's all about unwillingness to pay for the cost of care for those who use a safety-net hospital."

Specialty gained ownership of the hospital in 2007, under a deal engineered by D.C. Council member David A. Catania (I-At Large). The deal prevented closure of the facility -- seen as critical for the health of city neighborhoods east of the Anacostia River -- and called for Specialty's managers to co-manage the hospital.

The city has spent $100 million to modernize the facility in the past 2 1/2 years, and officials said Specialty led them to believe the long-troubled hospital had stabilized financially. But behind the scenes, city filings say, the hospital had been losing about $1 million a month and had run up at least $20 million in debt.

The District plans to operate the hospital until a new owner can be found.

© 2010 The Washington Post Company