Mayo Clinic, other hospitals concerned UCare won’t fully repay $500m debt
MINNEAPOLIS (FOX 9) - UCare owes nearly a half billion dollars to the four largest hospital systems in Minnesota and hasn’t made payments in months.
UCare stopped making payments in December
What we know:
UCare owes nearly $500 million combined to Mayo Clinic, Allina Healthcare, Fairview and Hennepin Healthcare, according to a court transcript filed earlier this month.
Attorney Andrew Brantingham, who represented Mayo Clinic during the court hearing last month, said the group of hospitals constitutes "a very significant proportion of the entire healthcare infrastructure" in the state of Minnesota.
"You have nonprofit entities and a public entity in front of you who are the entities who care for Minnesotans on a daily basis and are continuing to do so, and the financial support for this operation is profoundly important," Brantingham said.
The hospitals claim the managed care organization stopped making debt payments for medical care provided to its members after it was taken over by the Minnesota Department of Health (MDH) in December.
"We're talking about millions of dollars every week that is not going to pay for services that are being provided," David Asp, an attorney representing Fairview Health Services, said during a recent court hearing.
The hospitals want to have a say in how UCare pays back its creditors as the state dissolves the nonprofit and shifts its healthcare plans to Medica.
Hennepin Healthcare's financial crisis accelerating due to UCare debt
Local perspective:
"Hennepin Healthcare continues to provide care for all the patients under those UCare contracts that we have and is not getting paid," Patti Jurkovich, Assistant Hennepin County Attorney said, according to the court transcript.
Hennepin Healthcare is owed $115 million —more than double the budget gap it is currently trying to fill by cutting jobs and services.
The Level 1 Trauma Center may need a financial backstop from UCare so it can "continue operations," according to Jurkovich.
MDH accused of shielding UCare's assets
What they're saying:
Stephen Schwab, Allina’s attorney, argued the hospital should have a say in the dissolution process to "ensure that the failure of UCare does not turn into a domino effect of failures" across the state’s healthcare system.
Allina also accused MDH of improperly moving UCare’s assets to Medica without court approval to shield it from creditors.
"It does not appear that (MDH) is abiding by the law," Schwab said.
UCare may not have enough cash to cover debts
The other side:
Assistant Attorney General Jennifer Moreau, who is representing the state in the legal proceedings, denied that allegation, saying only contracts were transferred in December to ensure coverage carried over at the start of the new year.
"No liquid assets were transferred to Medica as part of this closing," Moreau said.
But Moreau also acknowledged concerns that UCare may not have enough liquid assets left to fully repay the hospitals.
"We understand there's a concern that there could be insufficient funds to pay everybody in full, and that's why we're in this delinquency proceeding."
What UCare owes
By the numbers:
MDH filed a rehabilitation plan last week that, if approved by the court, would set aside an initial $200 million for healthcare providers — less than half of what is owed.
UCare owes the following debts:
- $180 million (Mayo Clinic)
- $115 million (Hennepin Healthcare)
- $100 million (Fairview)
- $70 million (Allina)
MDH plan for dissolving UCare
Dig deeper:
Under the proposed plan from MDH, UCare would only make further distributions as "cash becomes available."
It would first pay for necessary expenses as the nonprofit winds down operations. That would include future administrative costs, attorney’s fees and any federal tax obligations, such as employment taxes.
A spokesperson for MDH said it had nothing to add when asked for comment on its plan to dissolve UCare.
"We don't dispute that UCare’s financial condition has caused considerable disruption and concern," Moreau, the Assistant Attorney General, told the court.
Hospitals say "time is our enemy"
What's next:
But she also argued the major hospital systems are not allowed to intervene in the ongoing legal proceedings.
"They don't have the legal right to bring an action or a claim," Moreau said. "Creditors like Fairview and Allina will have the opportunity to review the proposed plan, and they could file an objection if they believe it to be necessary."
The hospitals argue time could run out for the state’s fragile healthcare system before UCare runs out of money.
"We don't understand why the receiver isn't paying any claims of these providers, at least in part, until they determine that they can't do that anymore, said Schwab, Allina’s attorney.
The issue is especially urgent for Hennepin Healthcare.
"Time is our enemy," Jurkovich said. " Finances are of the essence for Hennepin Healthcare right now."
The Source: This story uses information from the FOX 9 investigative team.