Hospital impacted by Shopko bankruptcy
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A recent announcement of bankruptcy filings and the closing of Shopko, Inc. could impact Ringgold County Hospital due to a 340B Pharmacy program partnership.
This topic led discussion at the Ringgold County Hospital Board of Trustees meeting held February 18, 2019.
Gordon Winkler, hospital administrator, explained how the partnership with Shopko through the 340 B Pharmacy program leaves the hospital holding outstanding invoices. Utilizing the 340 B Pharmacy program in the partnership with Shopko, the hospital had just begun to see revenue through the program that has been in effect less than one year.
Winkler stated Shopko filed bankruptcy on January 16, 2019 in Nebraska. Mount Ayr’s Shopko pharmacy was not on the original list of pharmacies to be auctioned. After the first auction did not generate enough income, Shopko, Inc. was required to auction additional pharmacies which then included the Mount Ayr site. This leaves RCH holding five unpaid invoices for approximately $317,000.
Most of the hospital invoices would be considered pre-petition claims as they were incurred more than 20 days prior to the January 16, 2019 filing. Pre-petition claims could be less likely to be paid than post petition claims. In response to the bankruptcy and sale of Shopko’s Mount Ayr pharmacy, due to the outstanding invoices, Ringgold County Hospital sought legal counsel from Davis Brown Law Firm. After several attempts to contact Shopko, Inc. by phone, Mark Walz, a bankruptcy attorney affiliated with Davis Brown sent a letter suspending RCH’s performance within the 340B program. Shopko replied to the letter and denied the validity of RCH’s suspension; however, Walz responded that the move was appropriate as long as the invoices remain unpaid.
No further response has been received by Ringgold County Hospital.
In addition, Walz intends to request that RCH not be considered an unsecured creditor in order to increase RCH’s ability to collect payment. Walz’s legal argument is that Ringgold County Hospital, as a virtual provider of drugs, constitutes a secured creditor because the drugs have already been dispensed and paid for to Shopko, Inc. Walz indicated he has also contacted a Nebraska attorney. It was noted, in a question about the state of filing, Nebraska is said to have more favorable bankruptcy laws for the petitioner. An appeal has been filed by some claimants, asking that Shopko’s bankruptcy filings be moved back to Wisconsin.
Good news, with regard to the discontinuation of the 340B program due to Shopko’s closing, is the announcement that Hy-Vee, winning bidder on Shopko’s Mount Ayr pharmacy, has expressed interest in participating in the 340B program with Ringgold County Hospital. Application is required on a site by site basis for the program which will require RCH to make a re-application.
The next application period is April 1-15, 2019 for implementation effective July 1, 2019.
Due to the sale and closing of Shopko Pharmacy and the timeframe for reapplication, Winkler concluded in his report there would be no further revenues recognized from the 340B program for the rest of the fiscal year.
Winkler also reported on the new walk-in clinic. The new clinic that is available Monday-Friday, 8:00 am to 5:00 pm, has been well received.
The clinic is staffed by a dedicated provider on a rotational basis utilizing current Mount Ayr Medical Clinic and Ringgold County Hospital Emergency department staff.
Summing up news at the hospital, Winkler announced Peggy Drake has taken over as the full time ambulance director after the retirement of Joe Dukes. Dukes retired December 1, 2018 after 28 years of service. Alysha England will serve as nursing ED lead, with both reporting to Molly Kayser, patient care manager. More EMS providers have been hired with several looking to advance their provider credentials to Paramedic level. Angela Kerchner, Emergency Department director is also encouraging all ED physicians to obtain their pediatric advanced life support credentials/training.
Missy Walter presented the financial overview for the months of December 2018 and January 2019 due to no meeting being held in January.
Both months were mostly as expected, however the hospital has not seen as many patients as normal during what is typically flu season. December was under budget in all areas for the month by approximately $25,000 with patient admissions up from 10 to 20. Physical Therapy and Occupational Therapy revenue exceeded budget and $69,000 of bad debt was written off. The month ended with net patient revenue short of budget by $70,000, expenses over by $152,000 due to labor costs being higher with more than anticipated health insurance claims. Bottom line figure for the month was $231,116.
January financials showed gross patient revenues short by $407,000 with patient days down from 64 to 47 recorded in December. Net patient revenues were over $256,000 due to contractual adjustments and expenses came in at a break even number. Labor did exceed budget by $146,000, with vacations and providers switching out from contracts related to staffing changes in the Emergency Department. Bottom line for the month of January was a negative $77,485.