Roxborough hospital beset by woes

Posted: July 10, 2004

When Roxborough Memorial Hospital was sold to Tenet Healthcare Corp. 19 months ago for $23 million, hospital officials hoped they had assured the 115-bed institution's future and raised enough money to pay off its debts.

But now the nonprofit organization that got the $23 million in the sale, known as Memorial Hospital, Roxborough, has filed for Chapter 11 bankruptcy protection in Philadelphia, and hospital creditors do not expect to collect all they are owed.

And while Tenet continues to operate the hospital, the for-profit hospital company is struggling under government investigations into its billing practices and numerous lawsuits.

Tenet pledged to keep Roxborough open for at least three years after the purchase and has invested $5 million in upgrading the facility, the company said yesterday.

But since Roxborough was purchased, Tenet has closed one of its area hospitals (Parkview), sold another (Elkins Park) and is trying to sell Medical College of Pennsylvania Hospital in Philadelphia's East Falls neighborhood.

No one from Memorial Hospital, Roxborough responded yesterday to a phone message. The organization's lawyers at Stevens & Lee said the firm does not comment on litigation.

In its voluntary petition for Chapter 11 protection filed June 30, the organization said it had debts of $1 million to $10 million, with assets in the same range.

Since May 2003, the organization has tried to craft a settlement by negotiating with an unofficial committee representing five of its largest creditors, according to court documents.

The organization's inability to resolve two lawsuits, however, blocked a deal.

"I don't expect creditors to be paid in full," Fran Lawall, a Pepper Hamilton lawyer representing the creditors. "The distribution, in part, is going to be determined by what happens with these lawsuits."

In one lawsuit, the organization sued Tenet in Philadelphia Court of Common Pleas, alleging that the company breached the sale agreement by failing to pay more than $159,000 it had collected from the hospital's old accounts receivable.

The lawsuit has been moved to bankruptcy court, as has a second suit involving $850,000.

After the hospital was sold to Tenet, the organization continued to own and operate a home health-care service. That service was subsequently sold to Home Health Corp. of America for $1.85 million.

But before paying the organization the final $850,000, Home Health filed suit in Montgomery County alleging a scheme to boost the sale price of the home health-care service.

Tenet has faced investigations by several federal agencies, including the Securities and Exchange Commission, the Justice Department, the IRS, and the Department of Health and Human Services, as well as state regulators, since late 2002, when it was revealed that the company was receiving unusually large payments from Medicare.

In addition, several class-action lawsuits have been filed against the company, including one in Pennsylvania alleging it overcharged uninsured patients in an effort to get extra money from Medicare.

Contact staff writer Josh Goldstein at 215-854-4733 or jgoldstein@phillynews.com.

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