After the closure of the Pauls Valley General Hospital in October 2018, rumors and false information have circulated about many aspects of the hospital’s closure, its possible reopening and the City’s financial condition. Here are the facts:

City and Hospital as Separate Entities

Q             Is the City of PV liable for the debts of the Pauls Valley hospital?

A             No. The hospital operation (which has now ceased) was owned by the Pauls Valley Hospital Authority (PVHA), which is a trust and a separate legal entity from the City of Pauls Valley.

Q             Who owns the hospital building and grounds?

A             The City owns the hospital building and grounds which were leased to the PVHA. After the Pauls Valley hospital ceased operations, the building was leased to Southern Plains Medical Center, Inc., which currently operates an urgent care center there, and is working toward opening a fully-licensed critical access hospital in the building currently owned by the City.

City and Nursing Homes/UPL program

Q             What is the UPL program?

A             Before the Pauls Valley hospital closed in October, 2018, City officials were searching for a way to save the Pauls Valley Hospital from financial failure and closure. The City sought to participate in a federal program known as the UPL (Upper Payment Limit) program. Under the UPL program, “non-state government” nursing homes (owned by cities or counties) could have been eligible for additional Medicaid payments if the city or county agreed to provide the state’s share of the additional payment and if quality goals were met. Through increased Medicaid payments, participating nursing homes and cities and counties could receive substantial federal money. City officials hoped that the income from this program would be sufficient to keep the Pauls Valley Hospital from closing.

Q             Does Pauls Valley own nursing homes?

A             Not in a substantive sense, but to prepare for participation in the federal UPL program with the City, each participating nursing home was required to transfer its license to the City of PV. However, the City did not “buy” any nursing homes, nor does it participate in the operation of any nursing home. All the operations of the nursing homes with licenses in the name of the City of PV are management pursuant to management contracts with experienced, professional nursing home managers or management companies.

Q             What happened to the UPL program?

A             A federal agency, Centers for Medicare & Medicaid Services (CMS), must approve the UPL program on a state-by-state basis. The Oklahoma Health Care Authority applied for Oklahoma’s participation in the UPL program but, despite efforts of City and state officials, Oklahoma’s application was denied.

Q             What happens now?

A             The City is in the process of transferring licenses back to the original license holders.

Q             Is the City being sued for deaths or injuries which occurred in the nursing homes?

A             Even though the City has no control over the operations of the nursing homes, some such lawsuits have been filed naming the City as one of the defendant in the suits. Those lawyers naming the City of Pauls Valley feel they need to name the license holder as a defendant. No lawsuit brought with respect to any nursing home whose license is owned by the City has the City as the sole defendant.

Q             Is the City at risk in these lawsuits?

A             The City is not at risk. Each nursing home is required to provide substantial liability insurance covering the City, and each nursing home is contractually obligated to indemnify (reimburse) the City for any losses not covered by insurance. To the extent of any potential liability assigned to the City, such liability would be limited by the Governmental Tort Claims Acts to $125,000. All the nursing homes for which the City holds the license have liability insurance which exceeds these limits. All such lawsuits are being defended by the nursing home’s insurance company at no cost to the City. If any judgment is entered in those cases, the judgment will be covered by the liability insurance.

City of Pauls Valley

Q             Is the City millions of dollars in debt?

A             No. The reasons are:

1. As mentioned above, the City is not liable for the debts of the Pauls Valley hospital.
2. By law, Oklahoma municipalities are required to have (and adhere to) annual budgets and are prohibited from “deficit spending” (spending more money than is on hand).
3. Long-term debt which benefits the City (such bond debt for the construction of Longmire Lake) are debts of the Pauls Valley Municipal Authority (another entity which is legally separate from the City) and is backed by sales taxes allocated for those purposes by a vote of the citizens of the City.

Q             Are there lots of lawsuits pending against the City?

A             There are no lawsuits against the City which pose any significant threat to the City.

                As described above, any lawsuits relating to nursing homes are covered by liability insurance.

                Cities of any size regularly receive tort claims for personal injury or property damage allegedly caused by city employees (for example, claims relating to City vehicles involved in wrecks, claims against policemen by persons who have been arrested, and claims for property damage caused by garbage trucks or sewage backups). The City’s liability insurance carrier pays attorneys to defend these cases and covers any judgment or settlement.

Currently, there are only two lawsuits against the City which are not covered by liability insurance. One is a small claim (under $7,000) that the City denies owing (the services provided were to be provided under warranty); that lawsuit is wholly unrelated to the Pauls Valley hospital.

The other is a claim filed by a former hospital employee who seeks $80,000 in wages and penalties from the City. This lawsuit purports to be filed “pro se” (without the plaintiff being represented by a lawyer). The City will file a motion to dismiss this lawsuit since there is no legal basis for holding the City liable for the debts of PVHA.

Q             What City employees were furloughed or laid off, and for how long?

A             City employees (both full time and part time workers) who worked at City facilities closed by the Covid-19 pandemic (such as the Don W. Reynolds Recreation Center and the City library) have been temporarily laid off. As the City begins to reopen these facilities, some or most of the employees will be brought back to work.

Police: One police officer resigned and took a position with another law-enforcement agency and that position has not yet been filled (this has reduced the number of officers from 10 to 9). Furthermore, a police clerk retired, and that position has not been filled. The police department is still patrolling the City and covering all calls.

Other employees: Generally, all other City employees have had their work schedule reduced by 8 hours per pay period (two weeks).

All employees who were laid off or are working a reduced schedule are continuing to receive full health benefits.

Q             Why did the City lay off or furlough City employees?

A             The Covid-19 pandemic has closed many businesses and hurt many others. Thus, sales tax revenues have declined statewide and nationwide. Of the City’s income, over 70% comes from sales taxes. Like many businesses, the City implemented furloughs and layoffs to keep payroll expenses in line with declining revenues and to avoid prohibited deficit spending.

Q             Have any City employees not been paid for their work?

A             No; all City employees have always been paid on the City’s regular pay dates for all work they have performed.

Q             What is the general financial condition of the City?

A             The City’s carry-over as of June 30, 2019 (cash left at the end of the 2018-2019 fiscal year, after all the City’s then-current debts were paid), was $941,571, according to audited financial statements (https://paulsvalley.com/wp-content/uploads/2020/05/2019-Audit.pdf) (“unassigned fund balance for the General Fund was $941,571” as shown on p. 8 of the audit report). This figure represents the general “fund balance that has not been assigned to other funds and has not been restricted, committed, or assigned to specific purposes within the general fund” (see p. 49 of the audit report).

Due to the Covid-19 pandemic and the resulting decreased sales tax revenues, the City’s carry-over as of June 30, 2020, is expected to decrease from the previous fiscal year. But even with the expected decrease in the carry-over, the City is still in a strong financial condition, and City officials expect it to remain strong with continued careful monitoring of expenditures.

Pauls Valley Hospital

Q             What has happened to the equipment at the Pauls Valley hospital?

A             Much of the leased equipment was returned to the lessors (owners) of the equipment. Other equipment remains at the Pauls Valley hospital and is subject to many liens of various creditors of the Pauls Valley Hospital.

Q             What is the status of the lawsuits pending against the Pauls Valley Hospital?

A             A few of the lawsuits resulted in judgments against PVHA only (not against the City). The City is not a defendant in those cases, the City cannot be held liable for the judgments, and the hospital and grounds owned by the City cannot be taken to pay these judgments. The remaining lawsuits are just sitting idle because the creditors realize that they cannot collect any judgment they might obtain against the PVHA.

Q             Were the hospital employees paid in full after the hospital closed?

A             The hospital employees were employees of PVHA, not employees of the City. After the hospital closed, most hospital employees had not received their final paychecks. Although it had no legal obligation to do so, but as an act of good faith and good will to the hospital employees, the Pauls Valley City Council voted to refinance an existing loan in order to have funds to pay the unpaid wages and payroll taxes and the bulk of the accrued benefits owed to the hospital employees.

                All but three of the hospital employees who lost their jobs due to the hospital’s closing were paid their final wages by the City. The three former employees who were not paid chose to file a lawsuit in December 2018 against PVHA seeking unpaid wages, benefits and other damages even though the City had already announced that it was going to pay the PVHA employees.

The three employees who filed the lawsuit could not be paid their final wages despite, the City’s intention to do so because, once the litigation was filed, the City could not pay them except in conjunction with a settlement of the lawsuit.

That lawsuit against PVHA is still pending, but like other lawsuits against PVHA, it is sitting idle. In fact, the attorney representing the three employees has withdrawn from the case. The City has offered (directly in a letter to the three employees) to settle the pending suit by paying those employees in the same manner as the other employees (except that,  because the three employees’ former attorney still has an attorney’s lien on any recovery, the City is also requiring either (a) that the attorney release his lien, or (b) that the checks include the attorney as a payee; however, the three employees have not responded to that offer).

Q             Is the Pauls Valley hospital going to reopen? If so, when?

A             Southern Plains Medical Center, Inc., is working to reopen the hospital. The Oklahoma State Department of Health has agreed to reissue the hospital license (which is required for reopening the hospital) if certain improvements (estimated at $500,000) are made to the hospital facility. Southern Plains has agreed to pay for the improvements but its lender required a mortgage on the hospital building and grounds (this does not make the City liable for the debt, but if Southern Plains were to default on the debt, the hospital and grounds could be sold to satisfy the debt). The improvements are expected to be completed in July, 2020; City officials and Southern Plains officials hope that the hospital can reopen shortly after that.

Q             Why did the City mortgage the hospital and grounds to secure Southern Plains’ debt?

A             The proceeds of the loan must be used to improve the hospital and grounds (which, as noted above, belong to the City). Thus, the City benefits from the improvements, and the City desperately needs an open hospital for the well-being of its citizens as well as other citizens of Garvin County. The hospital building and grounds are nearly valueless to the City sitting empty. By contrast, the benefits to the City of having a fully functioning hospital with an emergency room would be difficult to overstate.

The hospital building and grounds would easily cost millions of dollars to replace. Common sense and business sense dictated that the City must maintain insurance on the building, maintain the building, and secure the building. Southern Plains (the current lessee) does pay a portion of the insurance. Since the closing of the hospital, one City employee is assigned to protect the grounds, the building and everything inside the building.  (The hospital was already broken into in January, 2020 by a person caught on security cameras. However, the person apparently knew the location of the security cameras because the person hid his/her face when near a security camera. The person took specific items which further indicates that the person was likely a former hospital employee with specific knowledge of the location of items taken. A police report was filed but, due to lack of evidence no one has been charged. That investigation is ongoing.)

Q             What will happen to the hospital building and grounds?

A             City officials hope that Southern Plains is successful in opening a full hospital there, and that the building and grounds will be purchased by Southern Plains. Southern Plains intends to pursue financing through the United States Department of Agriculture which provides funds for rural hospitals. The agreed price of the hospital building and grounds is $5,000,000.00. Southern Plains will also repay its $500,000.00 loan for improvements required by the Oklahoma Department of Health as a condition to re-issuing the hospital’s license.

The following is a report from Southern Plains Medical Center, Inc:

AN UPDATE TO THE CITY ON WHAT’S GOING ON AT THE HOSPITAL

We have been working on repairs at the hospital since January, although there has been some time lost in March and April due to contractors being unavailable as a result of the “shelter in place” response to the coronavirus.

Work is back underway now, and over the next 2-3 months we intend to complete all of the repairs/corrections that were listed on the Plan of Corrections which was approved by the State Health Department in December of last year.  When the repairs are completed, the Health Department will resurvey the hospital for correction of all deficiencies, and reinstatement of the hospital license.  That will allow us to reopen the facility. 

Some of the major renovations that have been taking place are:

• Major Repairs to the boilers, chillers, and heat exchangers to restore heat and cooling to the building.
• Repairs, testing, and tagging of all the biomedical equipment at the hospital.
• Repairs to the Nurses Station on the 2^nd floor, and repairs and testing of the Nurse Call system.
• Conducting impedance ground testing of all electrical outlets in the facility.
• Line isolation monitors tested and commissioned as passed.
• Tagged and tested all equipment in the Boiler room to include all electrical panels and breakers.
• Testing and repairs to the Fire Alarm system to include checking and repairing all smoke control dampers and doors.
• Repairs to all of the 1 hour and 2 hr Penetrations in the floors and walls throughout the hospital.
• Repairing all cabinets, doors, and floor tiles in the patient rooms on the 2^nd
• Repairs and painting on the 1^st of the hospital to include the ER, Surgery, Trauma Rooms, Lab, and Radiology.
• Repairs and painting on the 2^nd floor patient rooms to include renovating 2 patient rooms to meet ADA handicap standards.

And, we have redrafted and updated all the Hospital and Medical Staff Bylaws governing hospital operations, along with all Committee structure and policy and procedures.

Some work that we still have to complete:

• Conducting and commissioning oxygen bulk supply and medical gas alarms.
• Repair of vacuum pump.
• Repairs and testing of all of the air handling units to include replacing coils and compressors where needed, and cleaning and replacing all filters.
• Replace power supply on ½ of Nurse Call system.
• Install dialer/or radio transmitter to Fire Alarm system.
• Replace carpet and tile floor coverings as needed throughout the hospital.
• Replace ceiling tiles and light fixtures throughout the facility as needed.
• Replace steam generator for sterilizer for Surgery.
• General repairs to the roof and exterior of the hospital building
• Resurfacing and restriping the parking lots.
• General clean up inside the hospital and storage of unnecessary furniture and fixtures.
• General cleanup of the exterior of the hospital to include cleanup of planting beds.
• Final check and repairs of all exterior lighting.

Our target date to have completed all of the required repairs is late June early July.  At that point we will contact the State Health Department to schedule a resurvey.