Hunter Health Clinic faces financial difficulties, layoffs
07/14/2013 6:20 AM
08/08/2014 10:18 AM
Hunter Health Clinic is coping with financial and legal troubles, including layoffs, cutbacks in employee benefits and a scaled-back facilities plan.
Longtime CEO Susette Schwartz, who had been on medical leave since the end of last year because of a family situation, left her post in late February, she said in a phone interview. When asked if she knew of Hunter’s financial difficulties, Schwartz said:
“Hunter accomplished a lot over the years and struggles through times like this just like any other nonprofit,” Schwartz said. “I’m sure they’ll make it through this, and if they need to cut back a little, I’m sure they’ll be able to bounce back.”
The clinic was founded in 1976 to serve Native Americans and expanded to serve people of all backgrounds in 1985, according to its website.
It received more than $690,000 in government grants in 2010, according to its most recent 990 IRS tax form. In 2011, there were more than 33,000 patients who visited the clinic, most of whom are underinsured or uninsured, according to its website.
Over the last several months, the clinic has laid off workers and cut pay across the board. It has been sued by Laboratory Corporation of America for allegedly not paying about $100,000, according to Sedgwick County District Court documents, and it has struggled to resolve issues with unpaid insurance premiums. It also canceled its employee retirement program.
Schwartz, a Topeka native, joined Hunter in 1993 and holds a law degree from Washburn University.
According to Hunter Health Clinic’s 2010 IRS 990 tax form, Schwartz was making a salary of $190,516 and received an additional $17,391 in other compensation.
Michelle Base, who had served as vice president for business operations and had worked in various other positions at the clinic for about eight years, took the reins of the clinic following Schwartz’s departure.
Former board chairman Rick Muma, an associate provost at WSU, stepped down in October. He was replaced by Jaya Escobar, assistant director of Upward Bound at WSU, who said she’s been on the clinic’s board for about five years.
The board meets at least once a month at the clinic, Escobar said, and is seeking more board members.
“We do need to continue to operate,” Escobar said, “and the difference between us operating and not operating is literally the health of the community because we serve a lot of people, and we serve a lot of people that won’t get help any other place.”
It’s unclear how long the clinic has faced financial difficulties.
“I believe things may have started a year or two years ago previously but they hadn’t been brought to the board’s attention, and so now that they have been, we’ve been trying to address those,” Escobar said in a May interview.
“Like anything, if you let it fester for a while it just kind of gets infected, and we’re trying to get the infection cleared so we can deal with the actual wound, if that makes sense.”
In February, the clinic had a net loss of $17,000, Base said, which is an improvement from the total $80,000 in net losses six months before.
“We’re definitely at a point now where we’ve depleted reserves and we need to start building,” she said.
Clinic officials did not return more recent phone calls and emails asking about the current financial situation at the clinic.
The clinic’s most recent IRS 990 tax form is from 2010, and no recent financial documents were provided by the clinic after several requests. Base said in May that the clinic is undergoing an audit and said she did not feel comfortable releasing any figures until after the audit.
During an interview in April, Base said she attributes some of the organization’s financial difficulties to the ending of several grants that helped fund positions. She did not specify federal, state or other sources of the grants.
“We really had to take a step back and assess where we were at financially and make some quick decisions,” Base said.
Some of those decisions included layoffs last fall and an across-the-board pay cut of 5 percent that went into effect in 2013, Base said. She wouldn’t provide the exact number of employees who were laid off.
“People say, ‘How did this happen all of a sudden?’ I guess I would say, I don’t know that it happened all of a sudden. It was just the way the winds blew. When you are cruising along getting insurance reimbursement and cash flow is coming in, you don’t necessarily notice that a grant ended,” Base said.
“At the end of the month it’s ‘Hey, this grant ended, the payer mix isn’t the way we budgeted and we need to make some changes.’ I think it sounded more dramatic just because, for the first time since I have been there, we were doing layoffs and we just hadn’t had to do that.”
The clinic, which typically had 69 percent to 75 percent of its patients uninsured, saw that range increase as high as 82 percent, Base said.
“It’s not a real good place to be economically. It’s a struggle,” she said.
With the upcoming implementation of the Affordable Care Act mandate that requires nearly everyone to have insurance, Base said she’s hopeful that will improve the payer mix.
“We want to be in a place where we’re prepared for that – for the influx of patients – so we need to strengthen a lot of community partnerships and shore up internal processes so that we’re fully prepared to meet that demand,” she said.
“Bottom line is there is a need for Hunter Health Clinic, GraceMed and the Center for Health and Wellness in this community and we all need each other. We need to work together to take care of the needs of the community and at the end of the day, we’re going to do everything necessary to make sure that Hunter Health Clinic is here, that we’re viable and that we’re providing quality services. And I feel very strongly that we are in that position now.”
Escobar, the board chairwoman, said she attributes some of the clinic’s financial troubles to inconsistent staffing, particularly in the position of chief financial officer. There were at least three CFOs in 2012 before Troy Biggs took the job in October, she said.
Base refused to disclose the names of former CFOs to The Eagle after a request.
All that turnover also meant that staff and the board were delayed in learning the scope of the clinic’s financial problems.
Base said in April that the clinic was considering applying for an $800,000 administrative grant from the Health Resources and Services Administration of the Department of Health and Human Services, which could be used to pay off the clinic’s outstanding accounts with vendors. Base would not give details on how much the clinic may owe to its vendors and did not respond to recent inquiries about the status of that application.
Base wouldn’t provide the exact number of layoffs and rehires since last fall when she was interviewed in May.
However, at that point, she said the clinic’s staff has gone from 110 full-time equivalent employees to 79 full-time equivalent employees since last September because of a combination of layoffs and resignations. She said several staff members have since been brought back, but she did not provide the number.
Additionally, the clinic discontinued its employee retirement plan, she said. The clinic maintained its health and dental benefits.
“It’s nothing unlike what other companies had done. … We just looked at the cost of the retirement plan and said given tough economic times, and the local economy the way it is, we want to preserve jobs – that’s most important – and maintain a high quality level of care,” Base said.
The moves affected retention, Base said, but she has been “blown away by the dedication (of) so many employees – just their desire to care for the community and see Hunter succeed.”
In a Jan. 4 email to employees about benefits, which was provided to The Eagle by an employee, chief financial officer Troy Biggs wrote:
“Some of you have received letters that your policy has been cancelled due to non-payment. This is particularly disturbing since your premiums had been collected through payroll deduction with the intent that your premiums would be remitted to AFLAC. The clinic did fall behind in it remittances to AFLAC to the point of nearly being cancelled (approx 6-8 weeks ago).
“Since that time we have brought the plan current. I verified this with the representative two weeks ago and again this afternoon. The letters you have received regarding your cancellation have been produced by the AFLAC system as a response to the earlier issues.”
The email also stated that the employee health and dental plans had reached the point of cancellation “after several months of non-payment,” but that the payments had been made current.
“I can’t really speak to previous practices,” Base said in April when asked about the benefits. “I can say that right now we’re 100 percent current.”
When asked where the money that had been collected from payroll deductions had gone, Base said she was speculating, but did offer this explanation:
“When the money is deducted from checks, the money doesn’t go from this to this. The money may not really even be there. This sounds really weird. There’s the check, you denote the deductions, but if the money was never there, it doesn’t go to a different pot or you don’t take that money and pay it towards something else,” she said.
“It’s not like you’d deduct my health insurance benefit and pay mileage to an employee. It wasn’t quite like that. Money would never be taken from one source and given to another. It doesn’t go into different pots of money … not when you have a negative bottom line of $80,000.”
She wouldn’t answer additional questions about the previous administration and previous financial practices.
Escobar said during the May interview that the board was not given a realistic picture of where the clinic was financially. She said the AFLAC issue was not immediately brought to the board’s attention.
“We were given information, it’s just maybe the information wasn’t clear and wasn’t – I don’t want to say that it was completely not there – but it was just, there was always some sort of something given to us, but as far as accuracy and the issue of multiple CFOs, there were times when things were behind, like monthly statements,” she said.
Clinic officials declined to provide names of previous CFOs.
As part of the reorganization, the clinic closed its Diabetes Care Center and moved those services to the clinic’s other locations earlier this year.
“We’re still providing those services, just not in an isolated setting,” Base said. “We’ve just been looking at finances and saying what can we do that’s a smart business move that doesn’t detract from the high-level quality services that we want to provide and what makes good economical sense. … It was the only site we didn’t own and had overhead costs attached to it.”
The clinic’s optometrist, an employee of the Indian Health Service, a federal agency, was relocated by the agency to Arizona in April. Base said in April that she wasn’t considering adding another optometrist.
She said the reduced workforce hasn’t affected the number of patients the clinic is able to see. On average, providers at the clinic see 20 to 24 patients a day, she said.
According to the clinic’s Facebook page, the clinic’s fees increased effective June 1. The previous minimum payment for an uninsured patient was $25. It increased to $35 for an established patient and $45 for a new patient, or one who has not been seen in at least the last three years.
The fees are based on the most recent poverty guidelines from Health and Human Services.
In May 2012, Hunter officials announced they would build a new clinic after receiving a $4.6 million federal grant. The award was part of $730 million for community health centers across the country, distributed under provisions of the Affordable Care Act.
The building was planned to replace a dilapidated facility at 2318 E. Central. Hunter has three other locations: Inter-Faith Ministries, 935 N. Market; the Wichita Child Guidance Center, 415 N. Poplar; and Brookside, 2750 S. Roosevelt, according to its website.
The original plan was to construct a $10 million building, but Base said in April that plans were being scaled back. She said there wasn’t a time line for when construction would begin, but it must be built by June 2015, according to grant guidelines.
“It’s still very much in the works,” Base said. “The original plan was to raise additional funds through a fundraising campaign for a larger building. We’re working now on a scaled-back building based on funds we actually have in hand. … Obviously there’s a need for a new building here.”
The building would be constructed behind the clinic’s current location on Central, demolishing the old building afterward for parking, Base said.
“I can only think having a new building will help,” she said. “We keep asking ‘Why are we losing the insured patients to the other health centers?’ Well, no doubt the building has something to do with it.”
On May 20, The Wichita Eagle, under the Kansas Open Records Act, requested access to any clinic-related emails in the Wichita State University accounts of former Hunter board chairman Muma and current chairwoman Escobar. The request was made before the interview with Escobar. Muma and Escobar are both WSU employees.
On May 22, the clinic sued WSU and The Eagle seeking to block release of the emails. The clinic obtained a temporary restraining order in Sedgwick County District Court, arguing that the emails, though connected to a public agency’s email system, are exempt from open records laws because they contain attorney-client communication or personnel and finance issues. The Eagle is contesting the clinic’s request for a permanent injunction, and WSU has said it will do as the court instructs. The case is set for trial July 29.
The Eagle requested from Base – prior to the issue of the temporary restraining order – Hunter’s board minutes since September, the total number of employees who had been laid off and those subsequently brought back on, a list of former CFOs, and any other recent financial documents.
Emails and messages following up on those requests have not been returned.