The chief executive of the nation's largest health-care-industry financier resigned yesterday, and the company fired about half its employees, as its continuing troubles led to the bankruptcy of a national provider of home health care.
The resignation of Lance K. Poulsen from National Century Financial Enterprises Inc. came while several of the firm's clients met in a nearby state court for the third straight day, trying to force the company to come up with millions of dollars in late payments that have pushed some hospitals, nursing homes and other struggling health-care providers to the brink of bankruptcy.
Late yesterday, the judge amended the terms of financial agreements between National Century and some of its clients. But the ruling was "too little, too late," according to Jeffrey B. Sams, an attorney for Tender Loving Care Health Care Services Inc., a national home-nursing company that filed for bankruptcy protection yesterday.
National Century has dispensed fast cash to financially troubled health-care providers. In return, it takes control of its clients' receivables -- money that insurers and government health programs are obligated to pay providers -- and packages them into bonds that it sells to investors.
In court papers, cash-strapped clients said the late payments affected the paychecks of 1,600 emergency-department physicians providing care in 200 hospitals in 30 states; workers in 33 clinics in North Carolina, Georgia and Florida, and another 800 emergency doctors in 50 locations in 23 states.
"Resigning was a necessary step toward preserving employment for the professionals at NCFE . . . and to keep progress moving forward so NCFE's customers receive funding," Poulsen said in a statement
Poulsen's abrupt departure came two weeks after bond rating services questioned National Century's financial health, saying the company misused bond reserves and suggesting that it was in danger of collapse.
Moody's Investors Service has twice lowered its rating on about $3.35 billion in bonds -- including once three days ago -- and accused it of inappropriately spending cash reserves to fund the purchase of new receivables. Fitch Ratings dropped its ranking on the bonds serviced by National Century after the company failed to provide information about its financial condition.
Jay Eisbruch, a senior vice president at Moody's, said it is too soon to judge the impact of Poulsen's resignation on National Century's chances of survival or on its investors and customers. "That's the open question," he said.
A team of legal experts hired by investors is trying to sort out the company's financial condition, even as customers struggling to survive prepare their own legal actions.
The first visible fallout from National Century's troubles was the Tender Loving Care bankruptcy filing. The home health-care provider has 7,500 employees and operates in the Washington area and across the United States. It is a subsidiary of a 15-month-old Massachusetts company, Med Diversified Inc. A Med Diversified official estimated that the company was owed about $7 million by a National Century subsidiary, known as NPF XII.
In recent weeks, dozens of health-care providers that did business with National Century instructed health insurers and the federal Centers for Medicare & Medicaid Services to send reimbursements directly to them, not to National Century. The court fight in Ohio was triggered when a National Century subsidiary got a temporary restraining order preventing customers from doing that.
Other companies affected include North Carolina-based PhyAmerica Physician Group Inc. and Florida-based ESC Holdings Inc., both of which provide emergency-room doctors to hospitals nationwide.
Another customer, Doctors Community Healthcare Corp., which owns Greater Southeast Community Hospital and Hadley Memorial Hospital in the District, is looking for new financing. "We have obtained short-term financing to help us get through this spot," said Paul R. Tuft, the company's chief executive.
In a complex set of instructions yesterday, the judge said she would allow some receivables to be redirected, but not enough to satisfy National Century's customers.