Southwest Health faces operational, cash challenges

Thursday, May 17, 2018 5:03 PM
A $32 million expansion at Southwest Memorial Hospital includes a remodeled main entrance, new inpatient wing, medical office building, new pharmacy and EMS station.

Southwest Health System faces financial challenges, including a bond violation, but a new CEO said he believes the problems can be overcome.

Anthony Sudduth, of Community Hospital Corp,. was hired in April as the interim CEO of Southwest Health System, a private nonprofit based in Cortez that contracts to operate the publicly owned Southwest Memorial Hospital. He replaces Kent Rogers, who was recently fired along with several other top executives.

In a report to the Montezuma County Board of Commissioners on Monday, Sudduth gave the good news and the bad news.

On one hand, a $32 million expansion project is nearly complete and is currently under budget. A grand opening is scheduled for June 4. The project includes a new inpatient wing, a retail pharmacy, a new medical office building, a new lobby and a new EMS station.

On the other hand, the hospital has a cash flow problem and is out of compliance with the bonding obligation tied to the financing of the hospital expansion.

Under the bonding agreement, Southwest Health System is required to keep enough cash on hand to operate the hospital for 81 days, Sudduth said, but it only has 15 days’ worth. The daily cost of operating the hospital was not revealed.

“We’re looking for ways to improve operations, and our focus is to turn things around,” he said. “We are in negotiations with creditors to work out a forbearance agreement, and I think we are close to getting that done.”

A forbearance agreement is negotiated between a lender and a borrower to allow time for corrective actions to prevent default.

Sudduth said one of Southwest Health’s strategies to improve its cash position is rebilling Medicaid for 11,000 claims.

“We have an army of people working on that, and I think we will get positive results,” he said, adding that Southwest Health’s deadline is August.

He said it was too early to estimate how much revenue the rebilling effort would generate.

As a favor for the hospital, the county acted as a conduit for the revenue bonds so Southwest Health could secure more affordable tax-free bonds for Southwest Memorial Hospital’s expansion project. Under the arrangement, the county is not a bond obliger and is not liable in case of a default, according to county and hospital officials.

Sudduth said he is conducting an in-depth review of hospital finances.

When commissioner Keenan Ertel asked Sudduth whether he had found anything that “may jeopardize our hospital,” Sudduth said the situation was fixable.

“We have a lot that needs to be done, but it is very correctable,” Sudduth said.

Sudduth agreed to present quarterly financial reports to the Board of Commissioners.

While Southwest Memorial operations are leased to a private company, the hospital buildings – including the new ones – are all owned by the Montezuma County Hospital District formed by the community in 1975 to provide health care.

MCHD Board Treasurer Fred DeWitt said the financial challenges of Southwest are typical of many rural hospitals, and are a hurdle they will overcome.

“We’ve been here before and turned it around, and we will again,” he said. “The hospital is on the upswing and has the hardest working medical staff anywhere, serving communities in four different states.”

Also on Monday, hospital spokeswoman Haley Leonard-Saunders reported that Southwest Health System’s plan to open up a health clinic in Dolores was on hold. Southwest Health purchased the office building at 601 Central Ave., and was in the process of remodeling it.

The clinic was supposed to open in January 2018.