A lab test company turned hospital operator may owe hundreds of thousands of dollars to former employees of a rural Tennessee hospital it abruptly shuttered.
A class-action settlement agreement between West Palm Beach, Florida-based Rennova Health and former employees at Jamestown Regional Medical Center in Jamestown, Tennessee, is scheduled for final court approval Sept. 10.
Rennova Health closed the 85-bed hospital in June 2019, the day after CMS cut off Medicare payments when the agency discovered the facility lacked key supplies such as blood and medications. Hundreds of vendors had stopped making deliveries after invoices went unpaid, among other serious operating issues. Rennova did not respond to a request for comment.
According to the class-action complaint against Rennova Health filed in U.S. District Court for the Middle District of Tennessee, the more than 100 doctors, nurses and other employees who worked at the hospital learned about the closure from a sign posted to the door.
The lawsuit, brought by former hospital employees Joshua Slaughter and Karen Anette Bilbrey Cooper, alleges that's a violation of the federal Worker Adjustment and Retraining Notification (WARN) Act, which requires 60 days' notice before closing certain job sites.
Rennova must pay $425,000 by Oct. 1 or within three days of final approval, according to the draft agreement. The money will go to 86 class members. The plaintiffs' attorneys will seek one-third of the settlement amount plus expenses.
WARN Act cases can be difficult because they're often brought against financially distressed companies, said Benjamin Gastel, the lawyer at Branstetter, Stranch & Jennings in Nashville who represents the former Jamestown Regional Medical Center employees.
"Any time you can get class members relief, especially the monetary relief we've obtained, I think is a good result for the class and for our two class representatives," he said. "I'm very encouraged by the settlement and I think that it will most likely get approved by the court."
Rennova Health will pay up if the judge approves the final settlement, Gastel said. But the company's latest financial statement shows a precarious operation that's bleeding money, including a $54 million net loss in the quarter ended March 31.
Rennova's accumulated deficit was almost $923 million as of March 31. Rennova Health also owes millions of dollars in settlements and judgments favoring former vendors and other plaintiffs, including including the federal government and Florida for unpaid taxes
The ex-Jamestown hospital employees filed their lawsuit against Rennova Health in June 2019, the month the hospital closed. A judge approved a default judgment against Rennova two months later because the company had not responded to the lawsuit. Rennova's financial statement reveals other default judgments in the company's history.
Earlier this year, Rennova was forced to close another rural Tennessee hospital, Jellico Community Hospital, after the city of Jellico terminated its lease following a pattern of problems similar to those in Jamestown. Rennova bought the Jellico hospital in 2019.
Rennova Health now operates just one hospital: Big South Fork Medical Center in Oneida, Tennessee, which it bought in 2017.