By Mark Taylor, Post-Tribune correspondent
Pinnacle Hospital might either close or be sold within weeks, according to some of the for-profit hospital's physician owners.
Shareholders in Pinnacle Hospital in Merrillville said Neuterra Healthcare, a Kansas health-care firm that operates ambulatory surgery centers and hospitals, is scheduled to meet today with board members to discuss a sale.
An earlier Neuterra bid was rejected. Local hospital systems, including Community Healthcare System of Munster and the Mishawaka-based Sisters of St. Francis Health Services, also were approached to buy the hospital, but ultimately backed off, according to several shareholders.
CEO resigns
In another development, the recently appointed CEO, Lilly Veljovic, resigned abruptly Thursday.
In a confidential memo distributed at a Sept. 14 members meeting, Haroon Naz, a South Bend area health-care entrepreneur, whose company some physicians believe now manages Pinnacle, explained to about 25 shareholders that what they had been told for months was wrong.
"Financials were overstated by approximately $400,000 monthly," the two-page, unsigned letter said.
Instead of earning profits of $60,000 to $100,000 per month, Pinnacle was hemorrhaging money and would book a loss of approximately $3.5 million. "This was just brought to light a week ago!" the letter said.
It went on to say creditors and suppliers will be paid on a cash-on-delivery basis soon, that accounts payables are $2 million behind and "essential bills such as NIPSCO, RN Agency, Anesthesia are all behind severely. Payroll is struggling to be met when payroll is due."
Debt warning
Total shareholder debts, according to the hospital's accounting firm, "could be around $38 million to $40 million," the letter warned.
In bold capital letters it said Pinnacle Hospital is a "few weeks away from a very bad situation which could change the lifestyles of the owners for a very long time if we don't change the way we are currently administering PH (Pinnacle Hospital)."
One physician shareholder said the doctors attending the meeting were stunned.
"People asked questions, but received no answers," he said of the 90-minute meeting held in Pinnacle's lobby. "They told us the important thing is not to dwell on the past, but how to rectify the situation now. 'Right now we need cash,' they told us."
Naz reviewed a short-term plan that described how the hospital could still succeed and pull out of debt: by increasing physician referrals of medical and surgical patients.
Cutting expenses, staffing and purchasing were among other suggestions.
Former Pinnacle CEO Don Burman said he left the hospital in good financial shape after he was terminated in November.
"We passed every audit under my watch," he said. "Now I'm out of the loop."
Pinnacle has suffered its share of controversy. Two years ago the Indiana Medical Licensing Board took action against Pinnacle founder, former board chairman and the hospital's largest shareholder, orthopedic surgeon Dr. Kirnjot Singh, after an incident of alleged sexual abuse.
The board placed his license on probation with practice restrictions. Burman and some physician shareholders and board members tried to oust Singh from Pinnacle, alleging he had violated the hospital's operating agreement and was out of compliance, and Singh countersued. Singh eventually won the protracted legal battle and Burman was fired.
Singh resumed control of the hospital and hired Veljovic as CEO and a Wheaton, Ill., consulting firm, Idilus, to offer financial advice to the hospital.
A different story
The board continued to tell physician owners that the hospital was turning a profit.
But the recent financial disclosures to members tell a different story. Mike Collucci, CEO and owner of Idilus, called the financial discrepancies routine adjustments of patient bills that should have been booked as uncollectable debts.
"We were trying to help them financially restructure and get the doctors to play together in the sandbox. We found some errors in the calculations and restated the financial statements," said Collucci, who was optimistic that the hospital could be saved.
Merrillville family practitioner Dr. William Pierce, a Pinnacle investor, said he cannot verify the accuracy of the numbers presented at that Sept. 14 meeting.
"I don't know what the reality is," said Pierce, who has sued Singh, alleging he is not in compliance with the hospital's operating agreement. "Dr. Singh has been in charge of everything for the last year. If the numbers are accurate, now all the misfortunes must fall upon him."
Pierce said he has been highly supportive of the hospital and will continue to be.
"We offer a different plan of care and our surveys show high patient satisfaction. I hope it can survive. I think having a big brother in the hospital industry would be helpful," Pierce said.
Late Thursday, Haroon Naz told the Post-Tribune that Lynne Metz was Pinnacle's new administrator.
Restructuring ahead?
In a fax sent out to shareholders, Naz announced that Veljovic resigned as CEO. Naz told doctors Pinnacle is restructuring its leadership and urged shareholders not to talk with the media.
But in a phone call at deadline, Naz said he doesn't know much about what's going on at Pinnacle and denied his company was managing the hospital.
"I have no official position there," he said. "I'm not a contractor or a consultant."
Phone calls to Singh, fellow owner and board member Dr. Ramesh Kanuru and Pinnacle medical staff director Dr. Brent Jacobus were not returned. Former CEO Veljovic did not return repeated phone calls seeking comment.