Quorum Health Resources accused in hospital failures

The company in charge of managing Franklin Foundation Hospital has, in at least one case that the Banner-Tribune has uncovered, been accused of financially ruining a hospital and driving it into bankruptcy whereby the management firm’s parent company subsequently purchased the facility.
Quorum Health Resources (QHR), the firm that currently manages FFH, was accused in Mississippi of deliberately ruining the financial viability of the hospital and hiding the deceit from the hospital board. After Natchez Regional Medical Center (NRMC) in Mississippi came out of bankruptcy protection and was put up for sale, Quorum’s parent company, Community Health Resources (CHR), bought the institution.
In at least one other case in California, Quorum was managing a hospital when it was forced to file for bankruptcy and was subsequently bought by CHR.
In as many as eight separate cases in West Virginia, Pennsylvania, Massachusetts, Oklahoma and at more institutions in Mississippi and California, Quorum was accused of financially mismanaging hospitals but in those cases, Community Health Resources did not purchase the facilities.
Quorum employees were accused of hiding the failing finances of the facilities from the hospitals’ boards by a wide variety of means, case records show.
In the case where Quorum employees were allegedly successful in bankrupting a hospital and their parent company was reportedly successful in buying it afterwards, the chief executive officer and the chief financial officer were both accused of being part of the conspiracy.
Court documents obtained by the Banner-Tribune regarding the NRMC case also reveal that Quorum removed their own employees when they indicated something was wrong with the facility’s finances. Quorum operated what the documents call a “revolving door” of CEOs and CFOs at NRMC.
According to court documents, “When Quorum was retained in 1992, Natchez Regional had previously enjoyed many years of financial stability and had many millions of dollars of cash on hand.”
The documents continue, “On February 12, 2009, having long previously hired and entrusted its day-to-day management to the Quorum defendants, Natchez Regional was forced to file for bankruptcy protection in order to maintain its existence and ability to serve the community following mismanagement and improper reporting of misleading and/or inaccurate financial information to the Board of Trustees by the Quorum defendants.”
The Quorum-hired CEO and CFO were not only accused of hiding the hospital’s faltering finances but were also accused of telling the board of trustees that the hospital was earning money and even encouraged the board to spend money they didn’t have on a variety of projects. The CEO and CFO were also accused of pressuring hospital employees to use Quorum’s group purchasing plan which was shown to be more expensive than other options.
The documents state, “Bankruptcy protection was sought only after the Quorum defendants, who purportedly specialized in healthcare and hospital management and who touted Quorum as a ‘national leader in hospital management’ having served ‘nearly 1,000 hospitals’, enriched themselves with fees while economically destroying the hospital.”
“The Quorum defendants failed in their duties and obligations to Natchez Regional by, among other things, failing to report accurate and non-misleading financial information to the board, mismanaging the operations and finances of the hospital and acting with self-interest and disloyalty thereby causing tremendous financial damage to the hospital.”
The case between NRMC and Quorum was settled out of court and the outcome was sealed as per Quorum’s request. Quorum’s parent company, CHR, bought the hospital after NRMC came out of bankruptcy.
The second case where Quorum was managing a hospital that was forced into bankruptcy and was subsequently purchased by their parent company after the fact was in Watsonville, Calif.
The hospital was managed by Quorum when it closed in 2003 and filed for bankruptcy amid a dispute over whether management fees were still owed to the company.
According to an article in the Santa Cruz Sentinel, the Watsonville Community Hospital was, as of 2015, owned by Quorum’s parent company, Community Health Resources (at the time, the company was called Community Health Systems.) There has since been corporate restructuring and now, Watsonville Community Hospital is once again owned by Quorum (now known as Quorum Health Corp.)
In Santa Paula, Calif., the Santa Paula Memorial Hospital (SPMH), managed by Quorum, was forced to close their doors in 2003 and filed for bankruptcy. In an article published in the Santa Paula Times, Quorum employees were said to have ‘failed to provide the hospital’s board of directors with a department by department income and expense analysis.”
The article continues to state that Quorum employees failed to “timely reduce staffing levels consistent with reduced patient census” and “failed to timely pay all payroll taxes” and “failed to take steps to reduce the economic burden of the SPMH employee benefit pension plan.”
In another article published in the Santa Paula Times, Quorum was accused by the hospital board of trustees of “mismanagement and incompetence that only worsened SPMH’s financial woes-and led to its closure.” The article also said Quorum was accused of “not cutting costs when ordered to, giving misleading and outright false information, failure to pay federal payroll taxes and not implementing private pay rates.”
In Watonga, Okla., Quorum was accused of breach of contract in a lawsuit by the city after the hospital there was forced to file bankruptcy in 2004. According to an article in The Oklahoman, in the case of Watonga Municipal Hospital, Quorum employees were said to have “both negligently and intentionally hid, misled and covered up their improper accounting practices and management responsibilities.”
The hospital board in the Watonga case also sued Quorum. The results of the two lawsuits were not immediately available at time of press.
Quorum’s legal representation and other representatives have consistently declined the opportunity to comment on the stories cited in this article and declined previous attempts by the Banner-Tribune.