With Roseland Community Hospital on the brink of closure, President and CEO Dian Powell has resigned a day after officials said she inaccurately blamed the hospital's financial insolvency on missing payments from the state.
Powell on Monday said the hospital could be forced to close to new patients on Wednesday because the state hadn't paid $6 million it promised for development and operation of an adolescent behavioral health unit that opened in 2011.
A day later, the hospital said her statement was inaccurate. Instead, it said, the state issued an advance supplemental payment of $958,240 to help keep Roseland afloat amid mounting debt.
Board Chairman Genivee Chapman was appointed interim CEO.
The small, 162-bed nonprofit hospital on Chicago's Far South Side also said it has no plans to close Wednesday after a round of "promising talks" with Gov. Pat Quinn's office, said Sharon Thurman, a Roseland vice president.
"At this point in time, there's not a plan to interrupt our services, but we certainly stand ready if it's necessary," Thurman said.
Roseland has warned for weeks that it is in danger of insolvency.
In April, it asked the Rev. Jesse Jackson to plead its case to Quinn that it immediately needed $7 million to help pay down an $8 million backlog of payments to vendors.
At the time, the hospital, which serves a large percentage of patients who don't have insurance, said it would be forced to significantly cut back services.
The governor's spokeswoman, Brooke Anderson, said Wednesday that the governor's top health care advisers have met several times with Roseland officials over the past six weeks, including Monday.
"Unfortunately, the executives have failed to respond to our requests for a viable plan to properly run the hospital," Anderson said. "To be clear, the hospital and its board of directors have serious management issues that need to be addressed. Roseland Hospital is in deep debt, and they have mismanaged their resources into the situation they are in today."
Roseland swung to a $2.4 million operating loss for the fiscal year ended March 31, 2011, according to the most recent financial statements available. That's down from $5.9 million in operating income a year prior.
The hospital said it is on pace to lose $5.4 million in this fiscal year.
Roseland has cut more than 100 employees, furloughed another 47 and enacted pay cuts for five executives. It also plans to reduce other expenses, modify contracts with vendors, and eliminate or reduce some worker benefits. Roseland said the combined cuts will produce an annual savings of $8.4 million.
Roseland has relied for years on supplemental payments to keep it afloat. The hospital annually receives millions in such payments, mostly from the Illinois Medicaid program. In 2011, it took in $11.8 million. The state also placed the hospital on an "expedited schedule," allowing it to receive reimbursement much faster than other hospitals in the state.
About 17 percent of its patients have no insurance, and most of those don't pay their hospital bills. Of those who are insured, the vast majority are covered by the government-funded programs Medicare and Medicaid, which pay rates far lower than commercial insurance.
Roseland also has no major affiliations with academic medical centers or larger health systems, leaving it unable to provide certain services to its patients, placing it at a competitive disadvantage in the market.
With the nation's health care industry amid the largest transformation in a generation, small, independent hospitals that lack affiliations with larger systems, reliable donors and patients with commercial insurance face the specter of elimination.
It's a trend that's starting to play out throughout the country and one that's expected to continue over the next few years.
Without sufficient capital to invest in electronic medical records, facility improvements and to acquire or align with physician practices, hospitals like Roseland "are not well-positioned … and are really at a point where they can't go into debt any further," said Doug Swill, a health care attorney with Drinker Biddle & Reath.
"Those hospitals are likely to close and unlikely to find the strategic partnerships they need," Swill said. "Those systems are not attractive to anybody."