The hospital in Pilot Knob, Missouri, filed for bankruptcy last year, and only one creditor stands in the way of a successful reorganization: the U.S. Department of Agriculture, which lent money to Iron County through a program designed to enhance economic opportunity in rural areas.
The USDA, which is owed almost $7 million, contends that it should be paid ahead of other creditors, including providers of critical medical supplies. A federal bankruptcy judge has scheduled a hearing on the hospital’s disclosure statement, to which the USDA has objected, Tuesday in Cape Girardeau.
The hospital’s chief executive, Joshua Gilmore, finds the objection baffling. Bond documents say the hospital needs to pay the USDA out of net revenue, which is the amount it gets paid for providing care minus all operating costs.
The hospital hasn’t had any net revenue in several years, Gilmore says. In other words, it’s losing money, which is why it ended up in bankruptcy.
Medicare has cut hospital payments by 2 percent since 2013, which means Iron County Medical Center loses money on its elderly patients. Private insurers keep getting pickier about what they’ll reimburse, but law and morality require the hospital to care for any critically ill person who comes to its door.
There’s plenty of sickness in Iron County, about 85 miles south of St. Louis, where life expectancy at birth is five years below the state average. According to a state agency, Iron has the second-highest medical need among Missouri’s 114 counties.
The hospital sees about 6,000 emergency room patients a year, and a similar number of visits to clinics specializing in rheumatology, respiratory care and other services.
Gilmore, who’s been CEO for two and a half years, says the community is behind his efforts to turn the hospital around. So is the state, which has agreed to terms for settling the hospital’s Medicaid obligations.
“Things were looking good,” he said. “Unfortunately the USDA has decided they are pretty much the only ones entitled to be paid through this process.”
Even worse, Gilmore says, the USDA is threatening to undo an agreement the hospital reached with federal Medicare officials. The U.S. Justice Department represents both agencies in court, but he says the Medicare folks have been as cooperative as the USDA has been obstinate.
“I can’t stand by and let them bully us in a way that puts closing the hospital very much on the table,” Gilmore says.
Daniel Doyle, an attorney with Lashly & Baer in St. Louis, is representing the medical center. Under the reorganization plan, he says, the USDA’s claim would remain as it was: It would hold a bond that gets paid only when the hospital makes money.
“It’s unprecedented,” he said of the agency’s legal argument. “There’s nothing to it except the USDA’s imagination.”
This bankruptcy is a microcosm of the nation’s broken health-care system. The federal government veers between compassion and cost control, some states stint on care for the needy and many small towns find themselves in health-care deserts. Iron County Medical Center is itself a special-purpose government subdivision set up to solidify the finances of a hospital formerly owned by the county.
Of all the government agencies with a stake in the case, the only one not focused on keeping the hospital alive is the one that’s supposed to promote the quality of rural life. Something is very wrong with this picture.