First in a series.
When the nephew of one of the former owners of what was Medical Park Hospital here was arrested in August, 2012, for the theft of more than $157,000 in hospital equipment from Medical Park in Hope, much of which was subsequently found in a hospital in Clanton, Ala., owned and operated by the same group, residents of both communities were stunned.
While Alabama hospital officials insisted they had paid the Hope hospital's management company for the equipment, and both hospitals were managed by the same company, owned by the group which owned both hospitals, no record has been found of the transaction funds having been received by the Hope hospital.
The arrest of Scott Duane Cheek, on 28 counts of theft of property in connection with the disappearance from the Hope hospital of 28 surgical hospital beds, 12 overbed patient tables, and two drawer cabinets served to highlight the interconnection of questionable business practices which Springfield, Mo. based Carraway Medical Systems, LLC, principal owners James Cheek and Herschel Breig had carried out between hospitals operated by subsidiaries of Carraway in Hope and Alabama.
Those business practices left the Alabama hospital, Chilton Medical Center in Clanton, Ala., with between $4 million and $6 million in unpaid bills and tax liens during the period from March, 2011, to October, 2012, which resulted in the hospital being closed by the Alabama Department of Public Health and its license held in suspension since October, 2012.
And, in the period from the purchase of the Hope hospital in 2008 to April, 2012, during which then Medical Park Hospital was operated by companies controlled by Cheek, Breig, Teddy Cheek, and Dudley Bell, some $13 million in disputed claims remain in bankruptcy court filed by entities which the four men either owned jointly or were employed by, with at least $5 million in cash having been transferred from hospital bank accounts to those same entities within the first four months of 2012.
At the same time, federal payroll tax liens filed against the Hope hospital grew to some $9 million. And, some $417,000 in county and state real estate taxes had become delinquent, subjecting the Hope hospital campus to a threatened tax sale by the state.
When Chilton Medical Center and Medical Park Hospital became embroiled in the equipment theft controversy, James Cheek and Breig had already been indicted and pleaded guilty in federal court in Texas to one count of an eight-count indictment for tax evasion and embezzlement involving Highland Medical Center in Lubbock, Texas. Both men were sentenced to five years in prison in June, 2012, fined $10,000 each and ordered to pay a total of $5 million in restitution costs.
Yet, at the time, officials in Clanton refused to recognize what had been happening since Carraway took control of Chilton Medical Center in a lease-purchase deal with SunLink Health Systems, Inc., of Atlanta, Ga., in March, 2011.
Page 2 of 3 - Chilton Medical Center CEO Ted Chapin told the Clanton, Ala., Advertiser in published accounts in June, 2012, that, “We are not going to be distracted by this... I was hired to come in and turn this place around, and that's what I aim to do.”
Ron Turner, COO of SunLink, is quoted by the newspaper saying of the company's relationship with Carraway, “We are expecting them to perform under the lease agreement unless notified otherwise.”
That lease agreement in March, 2011, gave Carraway control of Clanton Hospital, LLC, which was the operating entity for the hospital, and leased the structure and equipment to Carraway through Central Alabama Medical Associates, LLC.
When Chilton Medical Center was closed by the state of Alabama in October, 2012, Carraway, through Clanton Hospital, LLC, owed Central Alabama Medical Associates, LLC, $79,129, and the hospital was $3.3 million behind in its bills.
Breig became “interim administrator” at Chilton Medical after he and Cheek bought Clanton Hospital, LLC, in March, 2011, and within the month Breig cut off a subsidy the hospital had traditionally supported for a community senior citizen program, saying the hospital could not afford it.
But, in August, 2011, Chilton Medical installed a state-of-the-art GE Senograph 200D digital mammography system. Later, that same month, Ted Chapin, of North Carolina, was named executive director at Chilton Medical, and he immediately laid out plans for a geriatric psychiatry unit, and told local media of the need to expand the emergency room.
In May, 2012, published accounts announced the Golden Care unit at Chilton Medical and its new director, but the unit never opened for patient care. By September, 2012, state records show that Chilton Medical owed some $75,000 to Golden Care LLC, which was registered to do business in Missouri by Herschel Breig in August, 2010, under an incorporation certificate issued in Wyoming in July, 2010, with principal offices in Tampa, Fla., and Carraway's mailing address in Springfield, Mo.
After James Cheek and Breig were incarcerated in June, 2012, Cheek's brother, Teddy Cheek, became president of Carraway, and operated an office across the street from Chilton Medical Center.
Then, in August, 2012, an employee complaint to the Alabama Department of Public Health precipitated the first of three subsequent on-site reviews of the hospital, with the final review coming in September of that year. ADPH issued a deficiencies report against Chilton Medical that same month, as public concern began to surface when it became known that the hospital was having difficulty meeting its payroll.
Chapin later announced that Chilton Medical was in need of an investor to generate capital, and that talks were ongoing with potential buyers. But, problems with payroll and the multitude of deficiencies cited in the report by ADPH ultimately forced community leaders to respond.
In October, 2012, Chapin informed the Chilton County Hospital Board that ADPH had given the hospital a Nov. 8 hearing date to determine whether to revoke its license to operate. He said the hospital would be required to show that it could provide “safe patient care” and remain “financially viable,” according to published accounts.
Page 3 of 3 - According to published accounts, SunLink opposed any deal to sell Chilton Medical, and community leaders were frustrated.
“If the hospital closes, they stand to lose the most,” the Clanton Adverister quotes hospital board member Sibley Reynolds saying. “At this point in time, they're willing to do that. We've run into a stone wall here because they own the property.”
Later that month, the ADPH closed Chilton Medical Center under a provisional order by Alabama State Health Officer Dr. Don Williamson because the hospital could not meet its payroll and could not ensure patient care.
“The notice of intention to revoke license was based upon deficiencies, including the hospital's inability to meet financial obligations, and failure to have an effective governing authority,” Brian Hale, ADPH deputy general counsel, said in the announcement.
Next: The ADPH deficiencies