Officials address NHS oversight of Sallisaw hospital

Jun. 21—A forensic certified public accountant has raised concerns over the viability of Sequoyah Hospital in Sallisaw, over which Northeastern Health System has oversight with a management company.

Brian Woodliff is manager of Northeast Oklahoma Management Services Organization, system chief executive and strategy officer for NHS, and president of the Tahlequah Hospital Foundation.

An agreement was formed between the city of Tahlequah and NHS — then Tahlequah City Hospital — in 1974, establishing a trust indenture that created the Tahlequah Hospital Authority.

A "Management Services Agreement" was signed June 1, 2017, among THA, NHS and Sequoyah County-City of Sallisaw Hospital Authority. Under one of the "whereas" clauses of the agreement, it states that NHS is experienced in various phases of hospital management.

"Whereas, the Board has determined that NHS is an experienced healthcare provider and that it is in the public interest to obtain the managerial and operational expertise of NHS as manager of Hospital," states the agreement.

John Uzzo, a forensic CPA and self-proclaimed watchdog on operations of NHS, questioned the viability of Sequoyah Hospital after reading the audit for FY2022-'23. Note 11 of the audit Management Agreement lists the amount Sequoyah owes THA.

"As of March 31, 2023 and 2022, the hospital owes THA $8,901,023 and $6,006,785 for contracted salary and benefits, management fees and other professional services. As of March 31, 2023 and 2022, the hospital owes $87,288 and $140,324 for equipment leased from THA," states the audit.

Note 12: Going Concern and Management Plan, states Sequoyah Hospital experienced an increase in net deficit of $2,695,633 and $333,940 for the years ended March 31, 2023 and 2022.

"Management established a plan to mitigate the effects of the recurring losses. The hospital is looking into areas to reduce cost without impacting patient care," states the audit.

According to the audit, the Sallisaw hospital may delay payments to the management company as needed.

"The going concern within one year after the date of the financial statements remains. The financial statements do not include any adjustment that might be necessary if the hospital is unable to continue as a going concern within one year after the date of the financial statements," reads the audit in Note 12.

One of Uzzo's concerns centered on what he believes is a lack of due diligence and oversight by the NHS board of trustees and the operations of NOMSO.

"The trustees have not provided due diligence and oversight to the operations. Basically, the trustees have a consent agenda and accept and receive all financial reports, with no discussion and mostly likely no understanding," Uzzo said. "NHS is managing the Sallisaw Hospital and the trustees there mostly likely consent to everything Brian Woodliff provides."

Woodliff said the board consists of community members, and there is always a city councilor on the board. The board is currently chaired by Ward 3 City Councilor Stephen Highers.

"So [there is] the connection to the beneficiary and financial reports are sent to them so they are included," Woodliff said.

The city is the beneficiary, and if the hospital were sold, for example, money from the sale would go to the city in the form of a foundation or trust, Woodliff said.

"We don't receive any tax revenues and appropriations from the city," said Woodliff. "A public trust is designed to be at an arm's length from the city so the city doesn't carry the liability of the trust."

James Berry, CEO of NHS, said the debt with Sequoyah has not been forgiven.

"They have $8 million they owe us, but patients they've transferred, and the fees from the management agreement — maybe have made [that] up in over eight years," Berry said.

Berry said the audits were conducted post-COVID.

"In April 2020, they said stop doing everything because there was somebody in the world who had COVID," Berry said. "We shut our outpatient surgeries down. We still haven't recovered. The industry hasn't recovered."

Berry said rural hospitals in Oklahoma have suffered and are still in recovery mode.

"It has nothing to do with the management agreement; it has everything to do with COVID, the management of COVID," Berry said.

Medicare Advantage Plans, increased expenditures on wages due to COVID, all played into the financial downturns in the medical fields, Berry said.

"[The message was] 'Just stay home; it's safer'; so nobody was working, and I'm paying 40% more for somebody doing the dishes than in 2020, not to mention nursing costs," Berry said.

Berry said that in January 2023, NHS itself employed 37 agency nurses at $100-$125 an hour, but now, the hospital is down to just seven contracts.

"But in the interim, I had to increase the salaries of the nurses who stayed loyal to me so I could attract more at a marketable wage [and] I could get rid of the traveling nurses," Berry said. "Plus, I'd given all my nurses a raise when I didn't have the money to do it."

With regard to Uzzo's concerns about the payables on NHS' books for management services to Sequoyah, Woodliff said that in 2017, to avoid bankruptcy, NHS was selected from several interested hospital systems to provide support management services for the Sallisaw hospital.

"The purpose was to maintain local control and help sustain the institution and prepare it for the next generation," Woodliff said.

NHS classifies fees received from Sequoyah Hospital as "other income," because it is not revenue generated by patients, but rather via consulting.

Woodliff's response to Uzzo's opinion from the audit is, that's one person's interpretation.

"Rural hospitals are closing all over America, so should we go help them or not?" Woodliff said. "If the only thing the public would know is that Sequoyah is not a viable hospital and NHS is working with them and racking up a debt, it would seem like half of the story."

All the expenses of the operation of the Sallisaw hospital will be paid by Sequoyah, not by NHS, Woodliff said.

"NHS shall have no obligation to provide funds or otherwise pay... for other liabilities," Woodliff said, reading from the management agreement.

Woodliff said NOMSO is a health care business organization, 100% owned by NHS, that provides administrative consulting and other resources, so rural providers can be more successful in the health care environment.

"[Sequoyah Hospital] is committed to pay NHS fees, and has been since the contract inception, and is 90% current to date," Woodliff said.

What's next

A second article delving into the relationship of the city with THA will appear in the Tuesday, June 25 TDP.