The rural Tennessee hospital purchased by a struggling Florida lab company last year is veering dangerously toward closure.
West Palm Beach, Fla.-based Rennova Health bought Jamestown (Tenn.) Regional Medical Center from Community Health Systems in June 2018. It was a perplexing deal given Rennova had reported a $51 million net loss from continuing operations in 2017 and was being sued by landlords, contractors and employees over unpaid bills and wages.
It appears those problems have followed Rennova to Jamestown, where vendors say the hospital owes it millions of dollars, employees have complained about not getting paid and federal regulators had threatened to cut off Medicare funding. Rumors swirl constantly in Jamestown over whether the hospital will continue to stay open. A call to the hospital on Thursday was not returned.
"I don't know if they're going to be open tomorrow or the next day," said Jimmy Johnson, county executive for Fentress County, where the hospital is located. "It's just on a day-to-day basis."
The CMS learned of problems at the hospital in February after the state investigated staff complaints about not getting paid and a concern about the electricity being turned off, a spokeswoman wrote in an email. The agency directed the hospital to fix deficiencies within 90 days or its Medicare billing privileges would be revoked.
A Feb. 5 CMS inspection report of the Jamestown hospital provided to Modern Healthcare found it owed nearly $3 million to 165 vendors, 11 of whom had stopped providing services. The facility also lacked an annual budget and governing board.
Hospital administrators told inspectors on Jan. 30 the hospital had switched to a new computer system that had delayed payments to the facility from insurers and others. They said they expected payments to resume, but were applying for loans in the interim.
The following day, hospital leaders told inspectors they had worked out arrangements to continue services with several vendors, including for emergency department physicians, on-call physicians, environmental services and imaging. The hospital's food services vendor had already discontinued services, so the hospital hired staff and contracted with a dietitian. Leaders also said the hospital had found a new anesthesia provider after the former firm discontinued services.
As of May 16, the CMS had not cut off the hospital's Medicare funding, but the agency continues to monitor its status toward compliance, the spokeswoman said.
But ambulances are still taking patients elsewhere. Micah Dunford, director of Fentress County's ambulance services, said leaders at Jamestown Regional Medical Center told him to divert patients to other hospitals. Ambulances are taking patients roughly 40 minutes to an hour away to hospitals in Cookeville, Crossville and Livingston. Dunford said the hospital told him the directive had come from a state agency, but he did not speak to a state official directly.
Dunford said he's not worried about safety issues as a result of the diversions.
"I have some of the best trained guys in the state that work here," he said.
Rennova CEO Seamus Lagan wrote in an email that the hospital's financial trouble started in December when it transitioned from CHS' billing services provider to another company. Managers, some of whom are no longer with the company, mistakenly uploaded a redundant chargemaster that resulted in billing errors and delays, he said. The hospital currently has an interim CEO in place and Rennova hopes to appoint a new CEO by the end of May, Lagan said.
"This current short-term turmoil in no way changes the objective and strategy that Rennova has adopted to own and operate this or other TN hospitals for the longer term," Lagan wrote.
Rennova has not released its financial results for the full year 2018, but the company reported about $97 million in net income from continuing operations in the third quarter compared with a $9.8 million net loss from continuing operations in the third quarter of 2017. The net income came from a $109 million noncash gain on derivatives in the quarter, a category that didn't exist in the prior-year period. In an email, Lagan explained the derivative category "varies wildly based on the difference in share price and the conversion price of debt" as well as warrants the company could exercise.
Rick Kes, a senior healthcare analyst with RSM, said some companies can issue loans that have embedded derivatives, so a decrease in value of the company's stock would reduce its liability and spike its derivative value.
That may have been what happened to Rennova, whose stock is currently priced at virtually zero.
Rennova said it drew $5 million in revenue in the third quarter of 2018, compared with about $800,000 in the prior-year period.