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story.lead_photo.caption During Wednesday's Fulton Rotary Club meeting, Fulton Medical Center CEO Mike Reece said the hospital is in danger of closing if it cannot pay off $3 million owed to the IRS. He said he's optimistic FMC is "viable," if it can address its debts. Photo by Helen Wilbers / Fulton Sun.

Fulton Medical Center CEO Mike Reece fears the end may be nigh for the county's only hospital.

"We owe the IRS $3 million," he told the Fulton Rotary Club on Wednesday. "That's going to tank us if we can't pay it off."

That debt, which accumulated over the last two or so years, is due Dec. 31, Reece said.

The IRS debt is far from the only one facing FMC. Hospital leadership is also working to pay off $500,000 in settlements to contractors with whom they've cut ties, a $4.3 million mortgage and a $1.5 million line of credit, Reece said.

But to hear Reece tell it, the IRS debt is the biggest barrier to the hospital's survival — because it's scaring away lenders that could help the hospital stay afloat long enough to pay its other debts, and because it's the one he can do the least about.

"If FMC is important to the community, you're going to have to tell us how to get past this," Reece said.

This latest development comes at the end of a long line of near-disasters for Fulton Medical Center.

Background

In December 2014, FMC (then named Callaway Community Hospital) was purchased by NueHealth (also known as NueTerra Capital), a health management company based in Leawood, Kansas, and University of Missouri Health Care in Columbia.

NueHealth owned 65 percent of the venture while MU Health Care owned 35 percent, which — according to the terms of their operating agreement — they could sell back to Fulton Medical Center LLC.

On July 18, 2017, MU Health Care announced its intentions to disengage and sell back. NueHealth responded by announcing plans to close the hospital by Sept. 22, 2017. That's when Jorge Perez, of EmpowerHMS, stepped in, with an offer to buy that never went through. At its peak, the Miami-based management company managed 18 rural hospitals across eight states, with Perez as an owner or co-owner of 11.

In May 2018, the state auditor's office asked the Missouri Attorney General Office to open an investigation into Hospital Partners Inc., a firm which lists Perez as part owner. The auditor had found the company Perez co-owned Hospital Partners, had managed to generate $92 million from lab tests run through EmpowerHMS-managed Putnam County Memorial Hospital, allegedly using fraudulent means. Hospitals and insurers began filing lawsuits against Perez and his companies. As of March 2019, seven Perez-affiliated hospitals have shuttered.

On Sept. 30, Putnam County Memorial CEO David Byrns — also co-owner of Hospital Partners — pleaded guilty to criminal charges of conspiracy to commit health fraud.

The plan

By early 2019, EmpowerHMS had been removed from its management position at FMC, and in February, Reece was installed as CEO. NueHealth retained ownership.

In May, Reece announced he was seeking a USDA-backed loan to purchase FMC.

"We'll put the real estate into a Real Estate Investment Trust," Reece said at the time. "That will allow everyone in town to buy a share. Employees can own a piece. Doctors can own it."

But those plans have stalled.

"We've got that loan lined up, but they won't give it to us until the IRS debt is cleaned up," Reece said Tuesday.

He said he believes the IRS doesn't really want to see a hospital shut down, but NueHealth hasn't given him clearance to negotiate with the IRS.

"NueHealth doesn't want to own the hospital," he said. "They have an $8 million liability (in the hospital), but they seem okay with writing that off and moving on."

He predicted that within 90 days, NueTerra will have replaced him with a different CEO and sold the hospital to a different management company, or shut it down altogether.

NueTerra Chief Financial Officer Mark Jones did not respond to a request for comment Wednesday.

Reece pitched an alternative to the Rotary club.

"If we can get the funding to (pay) the IRS (debt), I think we can get leverage to take control of the hospital," Reece said.

How that will happen is still an open question. Reece acknowledged $3 million is "well beyond" what community fundraisers could handle. He suggested local business owners might be interested in investing.

"We're not just looking for a loan," he said. "They could own part of the hospital and be a board member."

Progress

Despite the seemingly grim financial situation, Reece said he's optimistic FMC is a viable community hospital.

FMC's director of marketing Andrea Bedrosian said the hospital just hired two new physicians on a part-time basis: Dr. Stanley Horner, who specializes in allergy and asthma care, and rheumatologist Dr. Daniel Yost. Customer satisfaction is up and the hospital is regularly introducing new services, Reece said. He hopes to add pediatrics and women's health care in the near future — all in the name of attracting local patients to FMC.

"We've got $50 million per year in potential revenue leaving Fulton and going to Columbia or Jefferson City," he said.

FMC is courting locals hard — on Oct. 19, it'll host a cornhole tournament to raise money for a free community holiday party in December.

"Reece has done a really good job on bringing new programs and new doctors in to the hospital," said Tamara Tateosian, executive director of the Callaway Chamber of Commerce. "It's important not only for us to problem-solve, but for the community to start supporting the hospital and going there if they have an emergency, or if they need to see a cardiac specialist or can't get into see their primary care physician."

She compared it to "shopping local" and pointed out the hospital employs many locals and is a boon to the county's economic development.

Reece said the hospital has been able to eliminate $200,000 per month in "wasteful spending" since he stepped in as CEO, mostly through eliminating contracts.

Additionally, he said FMC is actually turning a profit — to the tune of $100,000 per month — and is current on repaying all debts aside from the IRS one. He thinks the profit could be much higher, especially if FMC can get local physicians to start referring patients to the hospital.

"The future's bright. We've just got a $3 million hump to get over," Reece said.

NueTerra did not respond to a request for comment.

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