The chief of Big South Fork Medical Center’s parent company has responded to a scathing letter from U.S. Senator Marsha Blackburn, R-Tenn., that questioned the company’s ability to operate rural hospitals in the North Cumberland region and demanded answers to a series of questions.
Seamus Lagan, the CEO of Rennova Health, issued a response to Blackburn’s letter late Tuesday evening. In it, he reaffirmed his company’s commitments to keeping its hospitals in Oneida and Jellico open, and said that both hospitals remain in compliance with standards set by the federal U.S. Centers for Medicare and Medicaid Services (CMS).
Lagan’s response came just hours after Blackburn pointedly told reporters that Rennova Health “will be hearing from us” if he did not respond to her letter by the end of the day. She had set February 11 as Rennova’s deadline for response.
“Recent media reports regarding facilities owned by your company…have been concerning,” Blackburn said in the January 28 letter. “Inability to make payroll is very concerning for any business. I am particularly concerned when I read that two other Rennova Health facilities experienced the same trouble.”
Blackburn’s letter came one week after reports were published that employees at Big South Fork Medical Center were 10 days behind schedule in receiving their paychecks — the third time that had happened since June.
“…While the recent well publicized difficulties cannot be denied, I would point out that Rennova Health, Inc. has at this time provided approximately $11 million in cash to our Tennessee hospitals and their employees and continues to provide cash on a monthly basis,” Lagan said in his response. “We firmly believe that the viability of rural hospitals is greatly improved by operating a small cluster of hospitals in the same geographic location and it is for that reason we acquired the current operations.”
Lagan went on to point out that Rennova purchased BSFMC out of bankruptcy after the Oneida facility had been closed for a second time, and acquired Jellico Community Hospital after the hospital’s previous owner had informed the state that it intended to close the facility.
As for Jamestown Regional Medical Center, which was closed in June after losing its CMS certification, Lagan said the closure could have been avoided and revealed a May 16 letter to the Department of Health & Human Services requesting additional time to correct deficiencies that had been unveiled at the Fentress County hospital during a CMS survey several months earlier. That request was ultimately denied.
“We accept that there were mistakes made by management in the transition of certain services provided by the previous owner that led to disruption of cash flow and the financial struggles you refer to, but I continue to believe that my request to the Department of Health and Human Services was reasonable and if permitted could have resulted in the continued operation of the hospital for the community,” Lagan said.
He added the termination of the hospital’s CMS agreement caused “immeasurable” losses to Rennova and its hospitals in Oneida and Jellico.
“We continue to believe in the viability of the hospitals we own and have made significant and determined progress throughout 2019 to regain compliance with our financial reporting requirements as a public company so that we can restructure and secure additional capital to reopen the Jamestown facility and ensure the success of our other hospitals for the future,” Lagan added.
In response to Blackburn’s questions, Lagan said that Rennova has “very capable expertise on the ground in Tennessee” to manage its hospitals, and added that the entire company would be “in a much different financial position today” had the closure of the Jamestown hospital not occurred. “That said, we cannot change the history and can only endeavor to finish up ongoing discussions that we believe will realize significant and adequate capital for Rennova in the near future.” Finally, Lagan told Blackburn that his company’s hospitals in Oneida and Jellico are in good standing with CMS.
Earlier in the day, Blackburn did not pull punches as she addressed Rennova Health in a conference call.
“We are very disappointed with what we have learned about how Rennova has gone about operating these facilities, and as I said earlier we’re going to continue to work on this issue,” she said. “We’ll see what happens with their response later today.”
Rennova’s financial challenges have cast doubt on the company’s ability to keep its hospitals open in Oneida and Jellico. While payroll has been delayed, Big South Fork Medical Center was placed on diversion last week. While walk-in patients continued to be treated at the hospital’s emergency room, ambulances were rerouted to hospitals in Campbell, Anderson and Knox counties. The hospital was taken off diversion several days later, and an employee said that all services were up and running, including CT scans, laboratory services and admissions.
Rennova reported $13.6 million in losses in 2018, according to federal filings with the Securities & Exchange Commission, and in a financial disclosure said that “there can be no assurance that we will be able to achieve our business plan, which is to acquire and operate clusters of rural hospitals.”
Lagan addressed a similar point in his response to Blackburn Tuesday evening, as he discussed Rennova’s plans to reopen the hospital in Jamestown.
“To be very clear, I cannot guarantee that we will succeed and I am not representing that we have any definitive agreement about to close but we are in discussions with a number of parties and remain hopeful that we can successfully close an adequate funding arrangement in the near future to secure the future success of these hospitals,” Lagan said.
As a final point, Lagan reconfirmed “the determination of the management and staff at our facilities to deliver a compliant and quality health care service for which we can receive a fair and timely reimbursement and continue in partnership with the community for future years. We remain committed to this sector and would welcome discussion, advice and engagement that results in longevity of the needed service the communities deserve.”
Blackburn isn’t the first politician to take issue with Lagan and Rennova. Last summer, as Jamestown Regional moved closer to closure, state lawmaker John Mark Windle, D-Livingston, publicly called Lagan an “Irish gangster,” a reference he later repeated. He also referred to the Rennova CEO as “a crook,” and said that Rennova had broken the law and should be investigated.
Lagan later filed a defamation lawsuit against Windle, seeking $100,000 in damages. The lawsuit has been scheduled for trial in early 2021, though Windle is seeking to have it thrown out by arguing legislative immunity, which is granted lawmakers in their official capacity by the state’s constitution.