Hospital commission considers terminating lease with Allegiance

Thursday, August 22, 2019

By Samantha Jones and Scott Loftis

The relationship between the Eureka Springs Hospital Commission and Allegiance Health Management could be coming to an end.

On Monday night, chairman John House updated the commission on the situation with Allegiance. House said he had a conversation with attorneys Meagan Hargraves and John Brown on Aug. 15, saying they addressed a letter recently sent to Allegiance notifying the company about the need for repairs at the hospital that were determined by two independent inspections.

“There has been zero reply,” House said.

He said he spoke with a news reporter who allegedly spoke with an Allegiance representative on the matter. What the reporter told him, House said, is that Allegiance allegedly claims to have met all the requirements and allegedly has multiple copies of previous inspections as proof.

“They have chosen apparently to ignore us and act as if we have nothing to do with the functioning of the hospital,” House said. “So when I spoke with the attorneys about this, I told them we would probably want to terminate our relationship with [Allegiance].”

Allegiance has until Wednesday, Aug. 21, to respond to the letter about repairs, House said. If the commission doesn’t hear from Allegiance by then, Hargraves suggested the commission send a notice of termination that would give the company 180 days to vacate the hospital.

“They recommended that we take some other action and also file a suit,” House said, “and their thinking was that we needed to take some more aggressive action, because [Allegiance] would be able to say, ‘Well, we don’t agree with your notice of termination. We think we’ve met everything.’ “

Litigation would be expensive, House said, and could cost the commission more than $100,000. House said the lease agreement ends in 2022.

“Their hope would be that we would come to some sort of agreement with Allegiance very quickly,” House said. “They’re in breach of contract and they’re in default.”

Commissioner Christopher Baranyk pointed out that Allegiance has frequently failed to pay rent on time and rarely communicates with the commission.

“We have never seen these folks here. They have never taken us seriously once,” Baranyk said. “At what point do we need to shake these folks hard enough and say, ‘Hey, this is your responsibility. You have signed a contract with us to take care of the citizens of Eureka Springs, and you’re not upholding that.’ “

House said failure to pay rent is not a provision for terminating the lease agreement.

“There’s no provision for that, but there is provision for the inspection we just did,” House said. “There’s also provision for … a portion of the lease that says they are to provide quality healthcare consistent or better than other communities like us.”

House continued, “Over the past two years, they have done the exact opposite. They have continually cut back on what they’re doing to the point that all they’re doing is acute care and physical therapy.”

If the commission ends up taking over the hospital, commissioner Tyson Burden asked if the commission would inherit Allegiance’s debt. Hargraves said the commission could consider changing the Medicare provider numbers, but that would be a difficult task.

“The only way to not assume that liability … is to get a new Medicare provider number,” Hargraves said, “but since we can’t qualify for a critical access designation starting from scratch, that’s a no-go.”

House asked what the commission’s next step would be toward terminating the lease, and Brown said the commission must wait until Aug. 21 to see if Allegiance responds to the letter about repairs. If Allegiance does not respond, Brown said, the commission could send a letter stating they have heard nothing from Allegiance and are invoking termination rights under the lease.

“We will assume Allegiance disagrees with this termination unless we hear otherwise in the next 10 days,” Brown said. “If they don’t clarify that, that will give us the basis to go to court to have what is called a declaratory judgment, which means there is uncertainty between the parties as to their rights under the lease.”

If the case goes to court, Hargraves said, it could take up to two years to resolve the matter.

“We’ll have to ask for an expedited trial, an expedited everything,” Hargraves said. “The odds are the judge will probably let us hurry it along, but we won’t have a decision before six months.”

Brown said the commission should assume Allegiance will slow-pedal the potential lawsuit.

“It’s going to be our job to light a fire under the judge to get this thing moving faster than the normal civil declaratory case,” Brown said, “because it affects public health.”

Commissioner Peggy Duncan moved to proceed in notifying Allegiance of the notice to terminate the lease if no word is given before Aug. 21, and the commission unanimously agreed to do so.

That motion wouldn’t allow the attorneys to take the case to trial, Hargraves said, if Allegiance does not agree to end the lease agreement. Commissioner Barbara Dicks moved to grant the attorneys permission to file a declaratory judgement in a court of their choosing if the commission hasn’t heard from Allegiance in response to the letter within 10 days. The commission voted unanimously to approve the motion.

Hargraves said it would be a good idea to authorize House to speak with the attorneys on day-to-day matters, and the commission unanimously agreed to do so. The commission also unanimously agreed to retain Hargraves and Brown to represent the commission in the filing of a potential lawsuit.

“The original engagement of our firm was for healthcare advice,” Hargraves said. “We’d need to open a new file … in the filing of this lawsuit.”

House ended the meeting by

addressing rumors in the community. Even though the commission is considering ending its lease with Allegiance, House said, there will be no mass layoffs at the hospital. The commission fully intends to keep the hospital going, House said.

“We are dedicated to keeping the doors open,” he said.

At press time, Allegiance CEO Rock Bordelon had not returned a call for comment. However, Allegiance purchased a full-page ad in this edition of the Lovely County Citizen to respond to some of the issues raised during the commission meeting.

“Unfortunately, without discussing any concerns with Allegiance, the Commission recently hired two people (neither of whom are engineers) to conduct a building inspection and issue a report that claims the Hospital has multiple maintenance deficiencies,” Allegiance says in the ad. “Despite the multiple concerns we have regarding the reasons behind the report, including conflicts of interest and board members who serve competitor hospitals, Allegiance is more than happy to provide a response on the record. After all, the Hospital’s mission is to serve the community. To do that, it must be willing to answer to the community openly and honestly.”

The ad goes on to say that the hospital has been surveyed “dozens of times” over the past 12 years by both federal and state surveyors and has passed all of those inspections.

The Hospital stands by its safety record and welcomes any comparisons,” Allegiance says in the ad. “The Hospital is proud of the quality of care it provides this community and remains devoted to fulfilling that mission.”

The ad also indicated Allegiance’s feeling that the situation in Eureka Springs may soon be untenable.

“Allegiance has always been committed to the success of the hospital,” the ad says. “Saving rural hospitals is our passion. However, in order for a hospital to remain successful, it must have local support. Without it, we are forced to ask ourselves why would we want to continue operating in a community that obviously doesn’t want us there for whatever reasons. It is an uphill battle with negative PR, manufactured crisis issues, continuing to cover millions of dollars in indigent care and losing money every day while operating this Critical Access Hospital. We have shouldered this responsibility for years because we believe in providing much needed healthcare to the patients we serve.

“Put yourselves in our shoes for a moment … would you want to continue to lose money, struggle with lack of support and be constantly chastised? We are a growing healthcare system with 15 hospitals presently and the largest rural healthcare provider in Louisiana.We have no desire to be where we are not supported.”

The hospital commission’s next regular meeting is scheduled for 6 p.m. Monday, Sept. 6, at the ECHO community room.

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