Hospital commission, Allegiance headed to court over lease termination

Thursday, October 24, 2019

By Samantha Jones

The Eureka Springs Hospital Commission has officially severed ties with Allegiance Health Management, but it could be a while before Allegiance leaves Eureka Springs.

On Monday night, chairman John House noted that the commission sent Allegiance a letter three months ago stating Allegiance is in default on its lease because the company has allegedly failed to make proper repairs to the hospital. Allegiance responded within 10 minutes of the deadline, House said, to say those repairs were bogus but the company had completed some of them.

"I got over to the hospital a few times and saw no evidence anything was getting done," House said. "Admittedly, I am not an engineer, so I talked to several of the employees there who said there was never anybody doing any work."

House said the commission's attorney asked Allegiance for a list of the completed and ongoing repairs, saying Allegiance was told to get back to the commission within 30 days. According to the lease agreement, House said, Allegiance can have an extension on repairs so long as the company lets the commission know what the repairs are and how long it will take to complete them.

"They could have an extension if they were working on something that needed more time," House said, "but they needed to let us know by that 30 days. They never did."

House said he spoke with the commission's attorney and decided to move forward with the commission's vote on Aug. 19 to terminate the lease agreement with Allegiance if the company failed to communicate with the commission regarding necessary repairs and other breeches of the agreement. That's exactly what has happened, House said. He said Allegiance has continued to delay communication with the commission.

In addition to allegedly failing to make necessary repairs at the hospital, House said, Allegiance has had a hard time keeping patients at the hospital. House said the hospital hasn't admitted any patients since Oct. 1, saying he believes that is one of Allegiance's scare tactics. Allegiance has failed to keep a hospitalist on staff, House said, and has not been admitting patients in weeks. The only patients in the hospital during that time, House said, have been in the emergency room.

"That's also a breech of contract," House said.

On Tuesday, Oct. 15, House said, the commission's attorney sent a letter to Allegiance saying the company has violated the terms of the lease and must respond by Friday, Oct. 18. Allegiance did not respond by that date, House said, which indicates the company contests the commission's desire to terminate the lease agreement.

"Here's the thinking behind that. If we say we didn't hear from them so they must be in agreement," House said, "and six months go by and they say, 'We're not leaving,' now you've waited six months to see they are contesting it."

House said the commission's attorney has spoken with Allegiance's legal counsel, saying Allegiance allegedly wants to leave Eureka Springs by the end of October. That's not possible, House said, because Allegiance would have to stay on for at least six more months as the hospital transitions to new management.

"Legally, they cannot abandon it for six months," House said. "You can't just pull up the stakes and run out of town and expect us to walk in there and magically take over. This is an incredibly complicated process. This is not a simple task and they know that."

House continued, "I don't know if this is a scare tactic on their part. I just don't know because they don't communicate with us."

House said the commission's attorney has asked Allegiance what the company's terms would be to terminate the lease but hasn't received a response.

"Our attorney has said 'We're telling you we're terminating this lease. If you want to work out something to get out sooner, then you need to let us know what that something is,' " House said, "and it's crickets. We hear nothing back from them. At least four times this has happened."

The next step, House said, is to go to court and get a declaratory judgment saying Allegiance has violated the terms of its lease agreement with the commission.

"By filing this suit, Allegiance can no longer stall us," House said. "They have to respond. Right now they're just kind of, 'Oh, we'll get to you eventually' and then you never hear back from them. You can't do that with a judge and court."

Commissioner Christopher Baranyk said the commission needs to act before the hospital loses its staff.

"What's ultimately going to happen is that talent pool is going to find a new job," Baranyk said. "The only reason the hospital is still there is because of the care of the nurses and doctors."

Commissioner Michael Merry moved that the commission proceed with seeking the declaratory judgment as advised by legal counsel and the commission unanimously agreed to do so.

The commission moved on to discuss hiring a consultant to make the transition easier, with House saying no one on the commission has the time or expertise to take on that job.

"None of us have done this before and there are people out there that this is what they do and they have experience," House said.

The commission unanimously agreed to place ads in state and local newspapers seeking a hospital consultant.

The commission's next regular meeting is scheduled for 6 p.m. Monday, Nov. 18, at the ECHO community room.

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  • This happening is not a surprise to me. My wife worked there 10 years ago. Back then she said it was only a cash cow for Allegiance because of the money that was provided by the government payers due to it being a Critical Access Hospital. Allegiance has been milking the hospital for every dollar it could get for at least 10 years. It's about time the Hospital Commission became aware of what quite a few people already knew was taking place. Maybe we need some new commission members that have a clue about how a hospital is operated so the hospital will not be in this situation again.

    -- Posted by JW60 on Wed, Oct 30, 2019, at 1:13 PM
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