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Management Company To Run Rural Kansas Hospital After Bank Moved To Foreclose

The judge found that 'immediate and irreparable harm' was likely to result if a receiver wasn't appointed to take charge of Hillsboro Community Hospital.
File photo
The judge found that 'immediate and irreparable harm' was likely to result if a receiver wasn't appointed to take charge of Hillsboro Community Hospital.

A Marion County, Kansas, judge on Friday appointed a receiver to run Hillsboro Community Hospital after its lender moved to foreclose on the 15-bed facility earlier this month.

The judge found that “immediate and irreparable harm is likely to result if a receiver is not appointed to operate and manage the Hospital in order to ensure that it remains open and retains as much of its value as possible.”

The judge named Cohesive Healthcare Management + Consulting LLC of Shawnee, Oklahoma, to operate the hospital while the foreclosure action proceeds. The company specializes in providing administrative services to critical access hospitals, according to its website.

The appointment came after the city and the Bank of Hays jointly requested the appointment of a receiver. The bank alleges the hospital defaulted on a 2015 construction loan and owes it nearly $10 million.

The hospital had been run by EmpowerHMS, a North Kansas City company that has snatched up distressed rural hospitals in the Midwest and elsewhere with the promise of turning them around.

In recent weeks, Empower has experienced cash flow problems, causing it to fall behind on payments to its hospitals’ vendors and employees.

Earlier this month, Hillsboro, a town of about 3,000 residents 50 miles north of Wichita, threatened to cut off Hillsboro Community Hospital’s electricity over delinquent utility bills. EmpowerHMS came up with a payment at the last minute to avoid the shutoff.

In a statement on Friday, an attorney for the Bank of Hays called the circumstances facing the hospital “factually and legally complex.”

“The city realizes access to healthcare by the citizens of Hillsboro and the surrounding area is important,” Tyler E. Heffon, the attorney, said in the statement. “The court’s approval of our joint request to appoint a receiver that can provide immediate assistance at the hospital was essential to maintaining community access to healthcare while the foreclosure lawsuit proceeds through the court system.”

The mayor of Hillsboro, Lou Thurston, said in a statement that the city wants “to undertake reasonable steps to assist in keeping the hospital open during the bank’s foreclosure lawsuit, and securing the appointment of an outside, disinterested receiver to operate and manage the hospital on an interim basis is a critical step in this regard.”

Officials of EmpowerHMS could not be reached for comment late Friday afternoon.

EmpowerHMS took over Hillsboro Community Hospital in 2017 when it acquired Rural Hospitals of America, which operated rural hospitals in Kansas and Missouri.

EmpowerHMS's cash flow difficulties appear to stem in part from insurers’ increasing unwillingness to enter into contracts with its hospitals. Last year, Blue Cross Blue Shield of Oklahoma dropped EmpowerHMS’s hospitals from its network, citing what it called questionable lab billing practices at the hospitals.

In addition to Hillsboro Community Hospital, EmpowerHMS owns Oswego Community Hospital in Oswego, Kansas, and Horton Community Hospital in Horton, Kansas. In Missouri, it owns I-70 Community Hospital in Sweet Springs. It also owns hospitals in Oklahoma, North Carolina, Arkansas and Tennessee.

Hillsboro’s city administrator, Larry Paine, said the court’s appointment of a receiver “assures the hospital will remain under the care of competent operators and open while the legal process continues.”

Dan Margolies is a senior reporter and editor at KCUR. You can reach him on Twitter @DanMargolies.

Copyright 2019 KCUR 89.3

Dan Margolies is editor in charge of health news at KCUR, the public radio station in Kansas City. Dan joined KCUR in April 2014. In a long and varied journalism career, he has worked as a reporter for the Kansas City Business Journal, The Kansas City Star and Reuters. In a previous life, he was a lawyer. He has also worked as a media insurance underwriter and project development director for a video production firm.
Dan Margolies
Dan was born in Brooklyn, N.Y. and moved to Kansas City with his family when he was eight years old. He majored in philosophy at Washington University in St. Louis and holds law and journalism degrees from Boston University. He has been an avid public radio listener for as long as he can remember – which these days isn’t very long… Dan has been a two-time finalist in The Gerald Loeb Awards for Distinguished Business and Financial Journalism, and has won multiple regional awards for his legal and health care coverage. Dan doesn't have any hobbies as such, but devours one to three books a week, assiduously works The New York Times Crossword puzzle Thursdays through Sundays and, for physical exercise, tries to get in a couple of rounds of racquetball per week.