Wednesday, October 07, 2015

TOP STORY >> Hospital overdue on taxes

Leader staffwriter

North Metro Medical Center owes the IRS more than $1.8 million and state of Arkansas almost $350,000 in unpaid withholding taxes. If a payment is not made to the state by Oct. 15 — according to an agreement ­— the hospital will be in default and the state could close its doors.

When state Rep. Joe Farrer (R-Austin) was the CEO, he made arrangements with the state on the tax issue. Farrer, who resigned last month, said he worked out a deal where the state waived about $175,000 in penalties and late fees and set the hospital up on a payment plan.

“But, if one payment is missed, the plan is over with,” Farrer said.

Also last week, another top official resigned. Scott Prothy, the vice president of acute care for Allegiance, gave his 30-day notice to pursue other options. His job had been to act as a liaison between the hospital leadership and Allegiance.

The hospital is owned by Rock Bordelon and Don Cameron, both of Shreveport, and a silent partner in Dallas. Bordelon and Cameron are also the top two officials in the company that manages the hospital.

Attorney Will Keadle with the state department of finance and administration said there were strict laws preventing him from discussing any individual or corporate tax situation, including the amount owed or specifics of a payment plan. But he did say that, when the DFA is involved, it is usually related to sales tax, withholding taxes or corporation taxes.

“All payment plans are very strict and being late a day could mean default, but each case is different,” he said.

Late payments and nonpayment seem to be an issue with Allegiance.

The company has been sued in Pulaski County courts about 50 times since it entered the central Arkansas market in 2007. Most of those suits had to do with not paying taxes it collected or not paying vendors.

A number of the suits against Allegiance were filed by the state’s Department of Workforce Services because the hospital management firm didn’t pay its workers compensation billings. Most of the time, the amount owed was less than $1,000, yet the state had to take Allegiance to court at least 30 times to get paid.

Many of the suits were against Allegiance and its operation of their specialty hospital in the old Southwest Regional Medical Center, off I-30 near the Saline County line.

The claims date back to 2007, and the most current was filed just four months ago.

On July 13, the Department of Workforce Services filed a suit over a “certificate of assessment,” which showed Allegiance owed $103,459. The amount was collected a little over a month later, on Aug. 26.

The DFA sued for $597.65 on March 12 and that court bill was paid by Allegiance on April 2.

Other suits filed against Allegiance this year include Dunk Fire and Security’s claim that
 Allegiance failed to pay almost $40,000 for construction work and alarm work the firm did in 2013 and 2014.

The case has been assigned to Judge Tim Fox with the Sixth Division Pulaski County Court.
Philips Healthcare also sued Allegiance for breach of contract for failure to completely pay off a service contract of about $350,000. According to the suit, Allegiance still owes Philips $160,000 at 18 percent interest accrued since August 2013.

The case has been assigned to Judge Wendell Griffin with the Fifth Division Pulaski County Court.


Allegiance’s legal troubles aren’t restricted to central Arkansas.

In August 2007, Allegiance took over the management of the Five Rivers Medical Center in Pocahontas (Randolph County).

Within a year, the city wanted to terminate Allegiance’s services because of an improper payment. Mayor Gary Crocker sent a letter to Allegiance in mid-June 2008, informing the company that it had breached the contract and telling Allegiance of the city’s decision.

The breach supposedly involved an improper and unauthorized payment from the medical center to Allegiance. All such payments were to be approved by the local hospital oversight committee and the city council.

“We gave them every chance,” said committee member Terry Dickinson.

Allegiance sued the city over the termination, and it is costing Pocahontas $300,000 to have Allegiance pushed out of the hospital.

It took almost five years for the two parties to reach an agreement in the lawsuit.

According to the terms of the settlement agreement, the city must make $10,000 payments monthly to Allegiance through April 5, 2016. The first payment was made on Nov. 5, 2013.

Eureka Springs Hospital commissioner Mary Jean Sells said in a 2013 meeting, “We had a solemn promise from Allegiance seven years ago to build a hospital. As of today, there has been no plan locked in.”

One of the reasons Eureka Springs hired Allegiance to run its hospital was the firm’s promise to build a new facility. Now residents are worried that the current hospital will fall into disarray before Allegiance follows through.

In an April 2013 meeting, Bordelon, the head of Allegiance, told the Eureka Springs commission that he was “ready to start now” and would be at the next meeting with more details, but the commission didn’t hear from Bordelon for more than a year after that, according to commission minutes.

It wasn’t until November 2014 that Allegiance produced an initial draft of an agreement between Allegiance and Eureka Springs for moving along the hospital project. That draft proposed erecting a new facility on a rocky bluff at the western edge of town.

But not much more has been done since.