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Management Company To Run Rural Kansas Hospital After Bank Moved To Foreclose

File photo
The judge found that 'immediate and irreparable harm' was likely to result if a receiver wasn't appointed to take charge of Hillsboro Community Hospital.

A Marion County, Kansas, judge on Friday appointed a receiver to run Hillsboro Community Hospital after its lender moved to foreclose on the 15-bed facility earlier this month.

The judge found that “immediate and irreparable harm is likely to result if a receiver is not appointed to operate and manage the Hospital in order to ensure that it remains open and retains as much of its value as possible.”

The judge named Cohesive Healthcare Management + Consulting LLC of Shawnee, Oklahoma, to operate the hospital while the foreclosure action proceeds. The company specializes in providing administrative services to critical access hospitals, according to its website.

The appointment came after the city and the Bank of Hays jointly requested the appointment of a receiver. The bank alleges the hospital defaulted on a 2015 construction loan and owes it nearly $10 million.

The hospital had been run by EmpowerHMS, a North Kansas City company that has snatched up distressed rural hospitals in the Midwest and elsewhere with the promise of turning them around.

In recent weeks, Empower has experienced cash flow problems, causing it to fall behind on payments to its hospitals’ vendors and employees.

Earlier this month, Hillsboro, a town of about 3,000 residents 50 miles north of Wichita, threatened to cut off Hillsboro Community Hospital’s electricity over delinquent utility bills. EmpowerHMS came up with a payment at the last minute to avoid the shutoff.

In a statement on Friday, an attorney for the Bank of Hays called the circumstances facing the hospital “factually and legally complex.”

“The city realizes access to healthcare by the citizens of Hillsboro and the surrounding area is important,” Tyler E. Heffon, the attorney, said in the statement. “The court’s approval of our joint request to appoint a receiver that can provide immediate assistance at the hospital was essential to maintaining community access to healthcare while the foreclosure lawsuit proceeds through the court system.”

The mayor of Hillsboro, Lou Thurston, said in a statement that the city wants “to undertake reasonable steps to assist in keeping the hospital open during the bank’s foreclosure lawsuit, and securing the appointment of an outside, disinterested receiver to operate and manage the hospital on an interim basis is a critical step in this regard.”

Officials of EmpowerHMS could not be reached for comment late Friday afternoon.

EmpowerHMS took over Hillsboro Community Hospital in 2017 when it acquired Rural Hospitals of America, which operated rural hospitals in Kansas and Missouri.

EmpowerHMS's cash flow difficulties appear to stem in part from insurers’ increasing unwillingness to enter into contracts with its hospitals. Last year, Blue Cross Blue Shield of Oklahoma dropped EmpowerHMS’s hospitals from its network, citing what it called questionable lab billing practices at the hospitals.

In addition to Hillsboro Community Hospital, EmpowerHMS owns Oswego Community Hospital in Oswego, Kansas, and Horton Community Hospital in Horton, Kansas. In Missouri, it owns I-70 Community Hospital in Sweet Springs. It also owns hospitals in Oklahoma, North Carolina, Arkansas and Tennessee.

Hillsboro’s city administrator, Larry Paine, said the court’s appointment of a receiver “assures the hospital will remain under the care of competent operators and open while the legal process continues.”

Dan Margolies is a senior reporter and editor at KCUR. You can reach him on Twitter @DanMargolies.

Dan Margolies has been a reporter for the Kansas City Business Journal, The Kansas City Star, and KCUR Public Radio. He retired as a reporter in December 2022 after a 37-year journalism career.
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