Rennova Health's CEO is working to assure a senator that his company will raise the money necessary to keep its three rural Tennessee hospitals up and running, although he provided little detail into how the embattled company plans to do that.
Sen. Marsha Blackburn (R-Tenn.) wrote to Rennova's Seamus Lagan in late January questioning whether the West Palm Beach, Florida-based lab test and software company can truly run hospitals and whether it has the capital to do so. Her letter cited reports that Rennova was behind on paying its hospital workers.
In his response letter, Lagan said Rennova hopes to finish ongoing discussions that he believes will raise "significant and adequate capital." The letter did not say what type of transaction the company is considering.
"To be very clear, I cannot guarantee that we will succeed and I am not representing that we have any definitive agreement about to close," he said, "but we are in discussions with a number of parties and remain hopeful that we can successfully close an adequate funding arrangement in the near future to secure the future success of these hospitals."
Lagan said the company's finances took a hit when it had to close Jamestown (Tenn.) Regional Medical Center in June after the CMS cut off Medicare payments. That followed an inspection that found vendors had stopped delivering supplies because they weren't getting paid. Lagan said the losses Rennova and its remaining hospitals suffered as a result of that closure are "almost immeasurable." He enclosed his May 2019 letter to CMS officials requesting a funding extension while the company corrected deficiencies at the facility. The request was denied.
Rennova lost $163 million in the nine months ended Sept. 30, 2019 on about $13 million in revenue, according to its latest financial report. Rennova also reported a total stockholders deficit of $68 million as of the same period.
Lagan wrote that that the hospitals were struggling financially prior to Rennova taking over, and noted that his company has provided $11 million in cash to the facilities and their employees. Rennova reopened Big South Fork Medical Center in Oneida after it had been closed a second time in recent years. And Lagan said Jellico (Tenn.) Community Hospital's previous owner intended to close the facility before Rennova assumed ownership.
In response to Blackburn's specific question of whether Rennova has the expertise to run hospitals, Lagan wrote that the company has hired a capable team to run the facilities, and offered to send their resumes.
Blackburn also asked whether Rennova's Big South Fork and Jellico hospitals are in compliance with the CMS' conditions of participation. Lagan said they are.
Recent CMS inspection reports of those two hospitals obtained by Modern Healthcare show they are currently in compliance, although both had temporarily shut down their laboratory services in recent months after being cut off by vendors who weren't being paid.
Big South Fork vendors told the CMS in September they hadn't been paid in about nine months. At that time, the facility owed lab supply vendors more than $100,000, a radiology company $65,600 and a medication dispensing contractor more than $48,000. A subsequent inspection in December 2019 showed a laboratory vendor had been paid $17,500 and had resumed some services.
Documents show vendors also temporarily stopped delivering to the Jellico hospital in June due to unpaid bills, but that the situation had been corrected in July.
