Kalispell Regional Healthcare Sets Aside $21.5 Million for Potential Settlement

Hospital disputes allegations in federal investigation by Office of Inspector General

By Myers Reece
The Montana Children's Medical Center under construction in Kalispell on June 15. Justin Franz | Flathead Beacon

Kalispell Regional Healthcare has set aside $21.5 million for a potential settlement in an ongoing federal investigation into physician compensation.

Hospital officials sent a memo to staff on June 15 informing them of the investigation by the Office of Inspector General of the U.S. Health and Human Services Department and the U.S. Department of Justice “for matters regarding compensation to certain physicians.”

“We do not agree with the allegations and deny any wrongdoing,” KRH said in a statement. “We have responded to the government’s requests for information and have cooperated fully with the investigation. We are hopeful for a quick resolution.”

In an interview on Monday, KRH Communications and Marketing Director Mellody Sharpton couldn’t provide details on the allegations and said there is no timeline for a potential settlement, if there is one.

“It’s still not resolved,” she said.

A spokesperson for the Office of Inspector General said the division can’t comment on ongoing investigations.

Before the memo was released, KRH General Counsel William Gibson had confirmed the investigation during a June 13 interview in which he accompanied President and CEO Pamela Robertson, who discussed the hospital’s recent financial challenges, stemming from the confluence of multiple large infrastructure projects and other growth-oriented investments, cuts to Medicaid reimbursement rates and changes in the state and federal health-care landscape.

The specter of a settlement adds to the financial uncertainty, leaving KRH with a substantial year-to-date deficit for fiscal year 2018. Though Sharpton couldn’t confirm the exact deficit total, the figure would include the $21.5 million set aside for the potential settlement.

KRH has three major projects under construction: the new Emergency Services Department, to be finished this summer; the Digestive Health Institute of Montana, slated to open this fall; and the 190,000-square-foot Montana Children’s Medical Center, expected to begin accepting patients next spring.

On May 31, Standard & Poor’s downgraded KRH’s long-term rating from A- to BBB based on fiscal year 2017 finances. The report cited revenue bonds issued by the Montana Facility Finance Authority (MFFA), which was slated to discuss the issuance of $95 million in tax-exempt bonds to KRMC at its June 19 meeting.

The MFFA’s agenda noted the bonds are “to provide funding for the new Montana Children’s Medical Center, refinance a bridge loan for the same, refund the Series 2014 & 2016 Facilities Revenue Notes and reimburse KRMC for monies spent on capital projects.”

The S&P rating “fully factors in our expectation of additional debt that management indicates is likely to be issued later this year.” The report noted the “outlook is stable.”

“The two-notch downgrade reflects our view of KRMC’s slightly below breakeven operating performance that further dilutes unrestricted reserves relative to both operations and debt,” S&P Global Ratings credit analyst Wendy Towber said. “The lowered rating further reflects our view of KRMC’s thinner liquidity position and significantly eroded maximum annual debt service coverage.”

In a statement, KRH stated it “is committed to promoting the health and well-being of the communities we serve, and our investment in talent, facilities and technology is a reflection of that commitment.”

“Montanans deserve to have a high level of health care in their own communities, reducing the travel burden on families seeking specialty care,” the hospital continued. “KRH has provided exceptional care for more than 100 years to the people we serve and is committed to carrying on this tradition and supporting this community as a strong, independent health care system.

“We look forward to continuing our focus on providing high-quality, compassionate health care and improving the health, comfort and lives of our neighbors, families and friends.”