By John Howell Sr.

Physicians and Surgeons Hospital Group has sued Batesville Hospital Management, Inc. and Robert Corkern, M.D. in bankruptcy court for damages alleged to have occurred from non-payment for 35 hospital beds sold in February 2007, to create a long-term acute care (LTAC) unit at the facility.

Physicians and Surgeons Hospital Group is a non-profit corporation formed in 2005 to purchase the Tri-Lakes Medical Center from the City of Batesville and Panola County.

Batesville Hospital Management is a for-profit business incorporated in September, 2005 with Corkern as its president. Batesville Hospital Management was also hired to manage the hospital in November 2005.

A belief that Corkern himself purchased Tri-Lakes persisted in the Batesville community after Corkern and former Tri-Lakes CEO Ray Shoemaker formed Physicians and Surgeons Hospital Group to consummate a $27 million USDA-guaranteed loan to purchase the hospital.

Corkern also signed a personal guarantee for the loan, according to court records.

A board of trustees that included George Randolph, Dr. David Ball, Dr. Robert Gray, and Raymond Belk was selected to run the hospital, although Corkern oversaw its daily operation.

“With a not-for-profit, the board is the oversight mechanism for the hospital,” Michael Morgan of Healthcare Management Partners LLC (HMP) told The Panolian in December, 2007.

“Under bankruptcy, it’s the board and the bankruptcy court,” he added.

Healthcare Management Partners was hired by the board on the order of bankruptcy judge David Houston, who has presided over the bankruptcy.

Morgan, a HMP managing partner, was named chief restructuring officer at Tri-Lakes in November, 2007. He declined comment for this story, citing the lawsuit.

The LTAC unit is essentially a “hospital within a hospital,” Morgan said last summer when the hospital, under the management of HMP, began attempts to recover amounts that Tri-Lakes was expending for care of patients in the LTAC unit.

On February 13, 2007, hospital trustees agreed to sell the 35 beds and transferred the Mississippi Department of Health’s Certificates of Need (CON) authorizing the beds to Batesville Hospital Management  d/b/a Batesville Specialty Hospital, according to information contained in the lawsuit and also in a May 1, 2007, letter from the Mississippi Department of Health to Corkern.

Physicians and Surgeons Hospital Group also financed the $896,000 purchase at six percent annually for 15 years, according to a promissory note filed with the lawsuit.

Tri-Lakes filed for bankruptcy in August 2007, citing reductions in reimbursements from Medicaid as triggering a cash crisis at the facility.

The lawsuit, which represents one side of the legal dispute, alleges that Corkern has failed to make payments and owed $759,483 under the Certificate Of Need purchase agreement, $692,409 for dietary and ancillary services and $289,431 for monthly rent. The lawsuit seeks $1.7 million in economic damages and unspecified pecuniary, consequential and punitive damages as well as attorneys’ fees and expenses.

Dr. David Ball, a trustee for the non-profit Physicians and Surgeons Hospital Group, said that the hospital’s board sold the beds to Corkern to allow him to keep patients hospitalized who had exhausted the Medicare benefits available to pay for their stay in the hospital in acute care beds. As patients in LTAC beds, the hospital could continue receiving revenue and not be forced to write-off the expense of their care, Ball said.

Ball also said that the hospital’s contract with Batesville Hospital Management, Inc. as well as with other for-profit corporations owned by Corkern were vetted with the board of trustees’ attorney and accountant before they were signed.

Healthcare Management Partners cited payments to Corkern’s for-profit entities including Batesville Specialty Hospital, Emergent Health and Health Care Engineers as well as Batesville Hospital Management as “excess benefit transactions.”

The payments were cited in an amendment filed by HMP to Tri-Lakes’ 2006 Form 990, a document filed with the Internal Revenue Service by non-profit corporations in lieu of a tax return.

“Dr. Corkern, as owner and president of Batesville Hospital Management which held the management contract for TLMC, was in a position to exercise substantial influence over the affairs of TLMC and this qualifies him as a ‘disqualified person’ under the Internal Revenue Service Code,’” the amended Form 990 states.