The board of the District's troubled public hospital voted Friday to hire a national business consulting firm to help rescue the facility from organizational and financial turmoil, setting the stage for new leadership at a hospital plagued by allegations of mismanagement and questions about patient safety.
Mazars USA, an accounting and financial consulting firm that is headquartered in New York and has offices in nine states, is the board's unanimous choice to run United Medical Center in Southeast Washington. If approved by the D.C. council, Mazars would take the reins from Veritas of Washington, whose contract the council terminated in November.
D.C. Chief Financial Officer Jeffrey S. DeWitt said the hospital, in light of its grim financial state, could require further subsidies before finalizing a deal with Mazars. Although Veritas was billed as a financial turnaround firm that could stabilize UMC when it was hired two years ago, DeWitt told the board Friday that the hospital is practically — if not legally — bankrupt.
"You are functionally a Chapter 11 hospital right now," DeWitt said, referring to a section of the U.S. Bankruptcy Code. "You are running with patient volumes down, with expenses that are not under control, with a revenue cycle that is not fixed."
Veritas employee and hospital CEO Luis Hernandez declined to comment on DeWitt's assertions about UMC's financial management, saying he was still reviewing the hospital's budgetary information. A Mazars official did not return calls Friday.
The D.C. Council must approve the contract with Mazars. Council member Vincent Gray (D-Ward 7), who chairs the health committee, said he knows little about Mazars but hopes the company can improve the hospital's quality of care and financial health.
Mazars is expected to take over in mid-February, according to hospital board member Konrad Dawson, who headed the committee that reviewed bids. Eight companies bid for the contract, Dawson said. He declined to disclose the Mazars contract price, saying it needs to be finalized but said it would not be "appreciably different" from the $3.6 million annual base rate of the Veritas contract.
DeWitt said that if the contract is ultimately priced above that amount, the difference would need to be made up through a city subsidy, since the hospital is operating in the red.
The hospital, which is owned by the District but is supposed to be self-sufficient, already received $7 million in taxpayer money in December to help it stay afloat. Without changes to its operations it is currently on track to run an annual deficit of $25 million, DeWitt said.
Under federal law, D.C.'s CFO must certify that enough money exists to pay for a contract before the District signs it – a provision put in place after a federal control board took over many city functions in the 1990s as the District teetered on the edge of bankruptcy.
Hospital board members, including D.C. Healthcare Finance Director Wayne Turnage, have attributed UMC's financial woes primarily to declining patient admissions that they assert have been driven by news reports of problems at the hospital, including the deaths of three patients under questionable circumstances.
Turnage said the hospital is also losing millions at its nursing home because of problems with billing — what hospital administrators call the "revenue cycle" — that he attributed to DeWitt's office, which oversees UMC's finances.
However, DeWitt said Friday that a sizable part of the hospital's operating losses have been caused by excess spending that was not reined in by Veritas. He also said Veritas, and not the CFO's office, was responsible for billing errors at the nursing home.
To "say volumes are down, it's all because of the media, the revenue cycle is screwed up, and we need a subsidy — that's irresponsible," DeWitt said. He said the board needs "to take a hard look" at how the hospital is being run.
Turnage said that there was little room left to cut expenses at UMC without harming the services the hospital provides to its poor and heavily Medicaid-reliant patients in Southeast D.C. and Prince George's County, Md. "If you close this gap with financial or expense reduction, you won't have a hospital," he said.
Built in the 1960s, what was once Greater Southeast Community Hospital was taken over by the District government in 2010.
In 2016, the hospital board awarded Veritas — a one-year-old company whose founders were political donors to Mayor Muriel E. Bowser (D) — a no-bid contract to run the hospital on Turnage's suggestion. Turnage, who is a member of Bowser's cabinet, has said the contributions had nothing to do with his recommendation.
In August, health regulators ordered the hospital to close its obstetrics ward after medical errors in the care of a pregnant woman who died.
Also in August, a resident of the nursing home died after crying out for help but being left on the floor for at least 20 minutes by his nurse. Hospital officials did not report key details of the case to regulators. The D.C. Department of Health launched an investigation, which is pending, after the incident was reported by the Washington Post.
In November, after the D.C. Council's Health Committee held a series of hearings into Veritas's management of UMC, the council voted not to extend the company's contract. Since December Veritas has been operating under a temporary contract extension while the hospital board looks for a replacement.