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CEO defends $121K in federal coronavirus relief sent to closed hospital

Rennova CEO Seamus Lagan said the company believes the stimulus money was used in accordance with federal guidelines.

The owner of a closed Fentress County hospital that received more than $100,000 in federal coronavirus relief funds defended the money amid widespread criticism Thursday. 

In a statement to WBIR, Rennova Health CEO Seamus Lagan said he was unsure how the Department of Health and Human Services (HHS) calculated the $121,722 payment to the Jamestown Regional Medical Center, which has been closed since June 2019.

"We believe and endeavor to ensure the money has been used in accordance with the guidelines and terms of such relief," Lagan said. "We look forward to reopening this facility and while no plans are yet confirmed will consider reopening the ER as a first step if we can be certain we will get paid for the services we provide." 

Lagan said the facility still has some employees and that payment for services is "out of the control of the company." 

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The hospital closed June 13 after the Center for Medicare & Medicaid Services stopped insurance payments following reports showing the facility failed to comply with federal standards. 

The distribution of COVID-19 relief funds to the Jamestown hospital has been met with widespread criticism. Two congressmen and Sen. Marsha Blackburn (R-Tenn.) have written letters to HHS asking for investigations into how it could be eligible for funding. 

U.S. Rep. John Rose (R-Cookeville) has asked the federal department to get the money back. 

"Government is a big organization and unfortunately mistakes get made. We hope that this one can be rectified in short order and the taxpayers' money can be recouped," he said. 

An HHS spokesperson said the department will "force repayment" of funds issued to closed providers, but said it has not yet detailed how that repayment would work. 

Rose said he has been in contact in previous months with Rennova leadership about reopening the hospital, but said it is not clear the company will be able to do so. 

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"We’ve been disappointed thus far with their capacity to stand the hospital back up and reopen and frustrated by the failure to get that done through other avenues as well," he said. 

Florida-based Rennova also operates the hospitals in Oneida and Jellico, which have seen financial difficulty in recent months

A 10News investigation found the Jamestown facility owes the IRS $1.2 million in unpaid taxes. A review of tax liens shows the company owes a total of $4.4 million in back taxes. Lagan said the company has paid all 2020 taxes and "discussions are ongoing and constructive as repayment of any older outstanding taxes is facilitated by Rennova." 

In his 600-word statement, Lagan called a class-action lawsuit filed by former hospital employees "frivolous" and argued the coronavirus pandemic has highlighted the importance and financial struggles of healthcare providers in rural communities. 

"Rennova Health, Inc. has invested many millions of dollars in our healthcare operations in East Tennessee in the past 2-3 years," he said. "While the Jamestown hospital closure remains unfortunate and we continue to believe was avoidable, we are committed and look forward to reopening this facility with a new management team as soon as practical and permissible by the relevant agencies to permit payment for services to be received." 

Here is the full statement from Rennova CEO Seamus Lagan: 

We can confirm that Jamestown TN Medical Center, Inc. has received assistance from the Department of Health and Human Services Provider Relief Fund as indicated and publicly disclosed. While the hospital remains closed there are ongoing plans to reopen the hospital and there are employees retained as part of that plan. We are unsure on the metrics used to calculate the amount received but we believe and endeavour to ensure the money has been used in accordance with the guidelines and terms of such relief. We look forward to reopening this facility and while no plans are yet confirmed will consider reopening the ER as a first step if we can be certain we will get paid for the services we provide. That is something that is outside of the control of the Company.

The class action law suit by employees referred to is frivolous and filed in the belief that the Company somehow averted the WARN 60 days notice rules when the hospital closed in June 2019. This is absolutely not the case as there are clearly defined exceptions to the WARN 60 day notice rules that the Company was entitled to and did rely on. Had the Company been in a financial position to provide some extended payroll to employees at the time of closing it would have willingly done so. 

All 2020 taxes throughout the Rennova group are paid and current and discussions are ongoing and constructive as repayment of any older outstanding taxes is facilitated by Rennova.

We are not aware of any money owed to any nurse or employee that worked at any of our facilities and our payroll department is confident they have not made any errors in this matter, nor have they had any errors reported to them from anyone.

The ongoing pandemic has created a very difficult financial environment for rural hospitals with reduced revenues and increased costs. The need for healthcare services in rural communities is unquestionable and appreciation must be shown to those workers on the front line who accept the increased risk to their own well-being to come to work and receive and care for patients in the current environment. While unfortunate that it took such a serious event, the pandemic has highlighted the importance of, and financial pressures in the rural healthcare sector and will likely lead to a new appreciation and support to ensure these services remain and grow to meet the needs of an increasing ageing population in rural America. 

The decisive action by government in the current circumstances in providing assistance has ensured the retention of many services and continued employment of healthcare individuals that would undoubtedly not have survived the current disruption. Our priority at Rennova remains the safety of our employees, our patients and all visitors to our healthcare facilities. We were proactive in our approach to increased safety measures and policies and hope to exit this pandemic without tragedy for anyone working at or visiting our hospital facilities. 

Rennova Health, Inc. has invested many millions of dollars in our healthcare operations in East Tennessee in the past 2-3 years, reopening a bankrupt hospital in Oneida and taking ownership of a Hospital in Jellico after the previous owner had confirmed its intent to immediately close the facility. Our investments have created or saved approximately 300 direct or indirect jobs in these communities and while the Jamestown hospital closure remains unfortunate and we continue to believe was avoidable, we are committed and look forward to reopening this facility with a new management team as soon as practical and permissible by the relevant agencies to permit payment for services to be received. We remain confident that a small cluster of rural hospitals creates many synergies and efficiencies that will permit the longer term success of the operations.