Marianas Healthcare Corporation Chief Operating Officer Resigns

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Idaho billing company services terminated

By Tammy Doty

SAIPAN, CNMI (Marianas Variety, June 4, 2012) – Last Thursday and Friday saw big changes once again at the Commonwealth Healthcare Corp. James Phillips, CHC’s chief operating officer, was handed on Thursday his termination letter, effective immediately.

The letter, signed by CHC chief executive officer Juan N. Babauta, thanked Phillips for his valuable service, then stated that because his employment contract was never signed by the governor or attorney general by its six-month expiration date of May 18, the action to end the employment tenure was necessary.

Two days earlier, CHC board of advisors chairman Jack Torres showed Variety an email to Phillips and CHC chief financial and administrative officer Alvaro Santos, in which he claimed they had not responded to requests for financial information, and if not able to do that, they "both should resign."

No replacement was named by CHC leadership.

End to ICS

Friday was the zero-hour for CHC to "cease and desist" its billings/collections engagement with Idaho-based International Consulting Services.

CHC’s information technology department on Thursday afternoon shut down ICS’ access to the corporation’s database.

In an email yesterday, ICS’ legal counsel confirmed the disengagement.

"As you are aware, the AG’s 45-day order is over, all information has been transferred back to CHC, the computer link to the hospital has been turned off and business with CHC has concluded. Please refer all future correspondence to Alvaro Santos, CFO of CHC," stated the email.

All CHC patient information stands secure as documents were never transferred to Idaho but were scanned on Saipan and uploaded into the IT system to which ICS had access to carry-out the billing and collections work.

The only outstanding item remaining is a final accounting of what was billed, received and remitted by ICS to CHC.

CHC’s chief financial and administrative officer Alvaro Santos confirmed to Variety on Friday that ICS’ full and final accounting is expected in the very near future.

ICS fallout

In parallel, at least three enquiries are underway both here and in Idaho regarding the brief and controversial connection CHC-ICS engagement.

CHC board members confirmed that both the attorney general and office of the public auditor offices dispatched investigators to interview corporation personnel at least twice in the last week.

Furthermore, the CHC board of advisors tasked board members Anthony Aguon and Anthony Raho with examining a local ICS bank account recently brought to the board’s attention.

According to CHC board chairman Jack Torres, the bank account report was scheduled to be provided to the entire board today and discussed at tomorrow’s board meeting.

The issue however, seems to have been ignited by one of CHC’s biggest challenges; miscommunication among staff.

Bank account deposits

An email dated May 10 from ICS’s Dan Cochran to Santos and copied to chief executive officer, Juan N. Babauta and chief operating officer, James Phillips, titled "Todays Deposits!" identified the issue and sought to rectify the error.

Cochran wrote: "Yesterday I sent you [Santos] the Reconciliation Report for the first week of May. I just went on line, and HOLY COW, the deposits today are huge! We shouldn’t wait until the end of the week to reconcile. Please send me the procedure on the transfer of funds to the CHC account."

According to CHC information and corroborated by Cochran’s email both Santos and Cochran went to the bank together to open a joint trust account for the collections money but they did not possess all the documents required by the bank.

Instead, Santos opened a new CHC only account and was supposed to have provided the account number to CHC business office staff but for unknown reasons the information was never passed along.

As a result, CHC business office staff deposited collections money into the ICS account by mistake as explained in Cochran’s email.

"When we were at the bank together, you were initiating a new account for CHC to receive the collections from our billing process. When will you be transitioning to this account?" asked Cochran to Santos in the email.

CHC business office staff had previously been provided deposit slips for the ICS bank account and used them to deposit around $150,000.

On the issues of who provided the ICS bank account deposit slips to CHC business office staff and instructed them to deposit collections money into the account is a subject of disagreement.

CHC sources claimed Phillips provided the ICS bank account deposit slips to CHC business office employees but anonymous sources that were in a CHC board meeting executive session last month claimed both business office employees told the board that it was Cochran that had provided the deposit slips.

Regardless of who provided the deposit slips and instructions the money was returned to CHC.

Santos confirmed to Variety on Friday that ICS transferred the $151,000 to CHC via check and that he expects in the near future ICS’ final reconciliation for all work performed.

CHC seemed to acknowledge the financial misstep in a memorandum issued by Babauta to Santos, Phillips, Karen Buettner, hospital administrator, Chris Pangelinan, business office manager and all cashiers.

"In order to prevent confusion or miscommunication in the future, any changes made with respect to bank account deposits must be accompanied by a written directive from Chief Executive Officer with the concurrence of the Chief Financial Officer," stated the memo.

Torres and Rios told Variety last week that processes are being put into place to avoid further financial mistakes such as what happened with the bank deposits of collections and the recent issue of the unaccounted for, then ‘found’ $966,000 worth of Medicare checks.

Apparently, CHC could not initially locate the Medicare check deposits because business office staff did not label the entries as U.S. treasury checks in the financial system and instead typed in "CMS and/or Medicare."

When CHC financial staff searched the database for "U.S. treasury" checks no entries popped-up but eventually the correct search terms were used and the Medicare funds were located just as the department of finance had advised.

Idaho contacts AG

Meanwhile, 6,000-miles away in Idaho questions surrounding the CHC-ICS relationship continued to gather steam during the prior two-weeks.

Since Variety broke the unlawful CHC-ICS contract on April 8, Idaho media began their own investigative series on ICS co-founders Louis Kraml and Dan Cochran who are Bingham Memorial Hospital’s CEO and COO respectively in Blackfoot, ID.

Bingham county commissioners tasked a local business consultant, Lee Hammett of PDS Group, to look into claims that Kraml and Cochran co-mingled revenues and expenses between ICS and the hospital (a non-profit registered as a 501c3 organization).

In an email dated May 31 to attorney general Edward T. Buckingham and copied to Variety and other Idaho media, Hammett explained the circumstances.

Hammett described allegations from Idaho sources that "equipment may have been obtained from BMH, Inc. and sent to your hospital in Saipan. It is alleged that this equipment was perhaps taken from the property [BMH] and somehow sent to Saipan, and the proceeds directed to someone or some entity not necessarily connected to BMH," stated the email message.

Hammett then ends with a request for assistance.

"Mr. Buckingham, if you have any information that might connect any such equipment sales or deliveries to either BMH or ICS, we would be extremely interested in your findings."

On Friday the AG responded.

"Please note: An Idaho firm identified as ‘International Consulting Services’ had a relationship with the Commonwealth Healthcare Corp. However, this relationship was determined to be inconsistent with legal requirements. Accordingly, on April 17, 2012 a Notice to Cease and Desist was issued," stated Buckingham’s reply.

However, the AG declined to discuss what if any investigations are underway in the NMI.

"In terms of investigative activities that may be undertaken by the CNMI Office of the Attorney General, it is not appropriate for me to confirm or deny the existence of any such investigative activities. I would suggest that Idaho law enforcement may contact me if they believe it is appropriate," stated the AG’s response.

In addition to Hammett’s informal investigation for county commissioners, another criminal investigation was launched by Blackfoot police.

Police chief Dave Moore confirmed the department’s investigation into possible violations of Idaho code by individuals at BMH.

The exact allegations under investigation were not confirmed but current and former BMH employees have gone on record about two separate incidents.

One current BMH employee, Brandi Seal, stated she was ordered by hospital administrators in 2010 to run ahead of hospital accreditation auditors and gather up all expired drugs and "get rid of it."

Seal claimed she carried four garbage bags full of expired drugs to her car in the hospital parking lot.

Her story was corroborated by a co-worker and her former manager who also went on record with Idaho’s Local8 news.

The second allegation leveled against BMH involved a former management employee who funneled BMH equipment purchases through his own private company.

One Idaho citizen who requested anonymity and has been emailing Variety since the CHC-ICS story broke on their side summed up the strange circumstances and expressed a shared hope.

"I never heard of Saipan before the story was on the news here…I hope things work out for your hospital and ours."

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