University of Maryland
The deal could cut in half what was an estimated $33 million in losses, according to hospital financial statements. But it does not cover all of the losses hospital officials sought to recoup — they were at odds with Medicare officials and argued they were only responsible for care given the first two weeks of December. Medicare officials said the hospital wasn't entitled to any reimbursement over the three-month span.
"We've been back and forth with them regarding when we would be able to bill back to, based on the process we went through and different inspections and what have you," said Mary Lynn Carver, a University of Maryland Medical System spokeswoman, on Monday. "We just reached a compromise on the date."
Medicare officials could not be reached for comment Monday night.
The medical system faced the dilemma because it chose to apply for a new Medicare certification, seeking to avoid being held liable for anything that occurred under St. Joseph's previous owners, Denver-based Catholic Health Initiatives. The system bought the hospital as it struggled with troubles that began when cardiologist Mark Midei was accused of putting unnecessary stents in heart patients. Midei has denied any wrongdoing. A civil trial over a case 21 patients filed against him began April 9.
While owned by Catholic Health in 2010, St. Joseph reached a $22 million settlement with the federal government over allegations of a kickback scheme involving the cardiology practice where Midei once worked.
University of Maryland assumed ownership of the hospital Dec. 1 after a sale process that drew wide interest for its significant size and base of patients. The deal was valued at $206.3 million.
But days later, the hospital failed an inspection by Medicare officials, leading to the extended gap without a federal certification. The hospital lost about $400,000 for each day it was without the certification because 45 percent of its patients are covered by Medicare, according to its financial statements. The Medicare program covers Americans age 65 and older, as well as some younger people with disabilities or renal disease.
Hospital officials submitted a plan Dec. 14 to federal officials correcting problems at the hospital, which hospital officials argued entitled them to reimbursement as of that date.
St. Joseph regained the Medicare certification Feb. 21.
The negotiations between Medicare and St. Joseph may have been trying because there are few precedents for such situations, said Joshua Nemzoff, president of Nemzoff & Co., a New Hope, Pa.-based hospital acquisitions consulting firm. A hospital's Medicare certification typically transfers from one owner to another in acquisitions.
On top of that, the review Medicare performs is complicated and exhaustive, exploring aspects of a hospital's finances, procedures and quality, he said.
"They were doing a lot of analysis and inspecting a lot of different things," Nemzoff said. "This is something you very rarely see."
The losses stress St. Joseph as it seeks to rebuild from its past struggles. The University of Maryland system borrowed $220 million to buy the hospital and make improvements to it. It is expected to take at least five years for St. Joseph to turn a profit again, analysts have said.
Hospital officials said care did not suffer during the time it lacked Medicare certification. The failed inspection cited issues including surgical assistants not properly supervised during cardiology procedures, pain medications not stored and disposed of properly, and a patient's
"We were committed to providing the community uninterrupted health care during this transition and have never wavered in that commitment," the hospital said in a statement in February, when it regained the certification.