In response to CMS terminating its reimbursement, Pontiac General plans to lay off 248 employees in waves over the next month, including mental health technicians.
The Chapter 11 bankruptcy filing, filed in U.S. Bankruptcy Court in Detroit late last week, provides little detail into Pontiac General’s financial position, but the filing lists only $1 million to $10 million in assets and $1 million to $10 million in liabilities, hinting the reorganization is largely due to the loss of funding from CMS.
However, Pontiac General anticipates the layoffs to last fewer than six months as it works to come into compliance with CMS, the hospital said in a notice to the state last week.
“Pontiac General, however, believes that this exclusion from receiving Medicare funds is temporary and will last for less than six months, and thus the layoffs are not expected to be permanent,” the notice reads. “Pontiac General does not anticipate that the entire facility will be affected and that there will not be a complete shutdown of the facility.”
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It’s unclear what units of the hospital will remain open.
Emails to the company’s CEO and majority owner Sanyam Sharma were not answered.
Pontiac General has a long history with operational failures and financial struggles.
Founded in the early 1900s as the first hospital in Oakland County, Pontiac General was owned originally by the city of Pontiac as a safety net provider. But the city sold it in 1993 and it became North Oakland Medical Centers. After 15 years of unprofitability, it filed for bankruptcy in 2008.
A group of 42 physicians and McLaren Health Care acquired the troubled hospital out of bankruptcy and renamed it Doctors’ Hospital of Michigan. Three years and zero profits later, McLaren sold its 35% stake to physician investors.
From 2009 to 2014, the Doctors' Hospital lost more than $73 million. A $2 million judgment against the hospital and accreditation problems led to the physician investors filing Chapter 11 bankruptcy in July 2015.
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Sharma entered the fray when his family’s private equity firm Sant Partners acquired the hospital out of its second bankruptcy. The Sharma family got the hospital by writing off a $1.5 million loan it had made to Doctors’ Hospital and assuming $13 million of the hospital’s outstanding debt.
The family made Sharma CEO of the reminted for-profit Oakland Physicians Medical Center LLC, doing business as Pontiac General Hospital, in 2016 at just 24 years old.
Under Sharma, Pontiac General faced more challenges.
Sharma was wrapped in a pay-to-play scheme in which parents paid the hospital — $400,000 in one lawsuit — for placement in the hospital’s family medicine residency program. It also faced employee complaints and failed state inspections.
The hospital also expanded its psychiatric ward in recent years to more than 100 beds. That, too, led to controversy as media reports allege the hospital was keeping patients against their will.
This story first appeared in Crain's Detroit Business.
