Creditors who say they are owed millions of dollars hope to force two D.C. hospitals into bankruptcy, threatening the city’s only facilities dedicated to the long-term care of those suffering from serious and complex maladies.
Specialty Hospital of Washington operates two facilities in the District, the former Rogers Memorial Hospital in Capitol Hill and the former Hadley Memorial Hospital in the Bellevue neighborhood of far Southwest. In addition to long-term care, both specialize in acute care and skilled nursing, treating people who need close medical supervision and often require such therapies as mechanical ventilation and orthopedic traction.
Should a judge grant the petition, other creditors are likely to make claims on Specialty’s assets. The list includes the District government, which says it is owed as much as $23 million in Medicaid reimbursements; Pepco, which sued Specialty last year over unpaid bills; and BB&T bank, which also sued the company last year after it defaulted on corporate loans. BB&T’s attorneys entered the bankruptcy case last week.
The prospect that hundreds of medically fragile patients could be disturbed by the financial upheaval has city officials on high alert.
Wayne Turnage, director of the D.C. Department of Health Care Finance, said he has been monitoring the situation for months and has developed plans to move Specialty’s patients to other facilities if necessary. But given the risks of moving those so seriously ill, he said, every other option is being explored.
“We are cognizant of the fact they are the only long-term, acute-care facility in the city,” he said. “And I think it’s important for the residents of the District to have that option.”
Specialty has been in financial distress for months, racking up tens of millions of dollars in tax liens, court judgments and unpaid bills, according to court records and news reports. On Wednesday, six creditors, including the Capitol Hill facility’s landlord, petitioned a Delaware bankruptcy court to intervene, citing unpaid bills of $2.7 million.
“We decided we couldn’t wait any longer,” said Donald R. Hartman, general counsel for the Capitol Hill Group, which owns the property at Eighth Street and Constitution Avenue NE.
Hartman said that Specialty has not made a full rent payment since November and has not paid hundreds of thousands of dollars in taxes and utility bills, for which the company is responsible under its lease. In the bankruptcy filing, the landlord said it is owed $1.7 million.
Others are seeking smaller amounts. Among them is a group of doctors claiming $836,820 in unpaid bills.
Lisa Proctor, a spokeswoman for Specialty, noted that the court has not ruled on the creditors’ request to take the company into Chapter 11 reorganization and said it is “not in bankruptcy.”
“We are open for business,” she said. “We have medicine, supplies and services to continue the care without interruption to our patients and residents. We are continuing to work with our vendors, our partners and key stakeholders. . . . Again, the emphasis is, we are not in bankruptcy.”
Turnage estimated that virtually all of Specialty’s 179 skilled-nursing beds are filled with Medicaid patients. Twenty to 30 Medicaid recipients are in its 142 long-term, acute-care beds.
Despite long-standing plans to turn part of the hospital campus into condominiums, Hartman said the Capitol Hill landlord’s intention is to keep the hospital “open and operating” there. The petitioning creditors, he said, have asked the court to appoint a trustee to run the hospital and stabilize it so that a new operator can be brought in.
“Obviously, there’s not a lot of confidence in the current team,” he said.
Last year, the hospitals’ operator expressed confidence in their future. “Like all hospitals in the District, we’re all stressed to some degree,” Frank Wilich, president and chief operating officer of parent company Specialty Hospitals of America, told the Washington Business Journal in November. “We’ve been through tough times before, and we’ll get through this tough time.”
The parent company was recruited by the District government in 2007 to run the troubled Greater Southeast Community Hospital, which was then renamed United Medical Center. But Specialty defaulted on its financial obligations to the city, which took over the hospital in 2010.
Wilich did not respond to an e-mail and phone call seeking comment.