Correction: This story was updated September 27 to add new information about the debts incurred by the hospital under new and old management and to clarify that the Kentucky State Police has not confirmed the subject of the investigation at Westlake Regional Hospital.
COLUMBIA, KY (WAVE) - As a hospital faces bankruptcy, employees are losing jobs and a rural community is losing medical care. A WAVE 3 Troubleshooter Investigation uncovered a small town hospital has run up gigantic debt and now there are questions surrounding the role that management has played in the financial mess.
Troubleshooter Eric Flack went in search of the former CEO and found he's still managing hospitals and it looks like he's in a lot better financial shape than the medical center he left behind.
Westlake Regional Hospital in Adair County has an emergency and it's one no doctor can fix. It is a crisis for nurses and patients.
"They were within a week of having to close their doors," said Adair County Judge Executive Ann Melton.
Westlake is now so far in debt it's facing bankruptcy, or possibly closing all together.
"The hospital was broke, the funds were depleted and there was nothing to show for it," Melton said.
It was a stunner for Melton. She said financial reports from former CEO Rusty Tungate showed the hospital was making money. But when word got out that plans for an expansion had been scrapped after the hospital had already taken out a $3 million loan the county hired an outside consultant to check the books. Days later, Tungate and his management team walked out.
"Slipped their resignations under the administration door and left," Melton said. Mr. Tungate takes the position that he was effectively terminated by the Board after it prohibited the commingling of management staff with other hospitals.
The hospital remains in a financial mess. A copy of an audit obtained by the WAVE 3 Troubleshooter Department revealed Westlake had been losing money since 2004, but the board of directors didn't know because management overstated assets and understated losses. The hospital took out millions of dollars in loans to cover the shortfalls and over billed Medicaid by $2,700,000. Melton said the county had to loan the hospital millions just to keep the lights on.
"They couldn't pay the bills," Melton said.
While the audit does not conclude Tungate stole money or benefited personally, Westlake Regional Hospital was left drowning in a sea of debt few could have imagined.
"At one time the hospital had no debt," Melton said. Now, Melton said the hospital is facing more than $19,000,000 in debt.
Specifically, Melton says the hospital's debt reached $15,900,000 when Tungate Enterprises and Westlake Hospital ended their relationship in January 2011. And the debt has continued to grow under new management. Since January 2011, the hospital has accumulated more than $3 million in additional debt and possibly more.
While Westlake Regional Hospital may have money problems, Rusty Tungate apparently does not. He lives in a place he calls "Beulah Land." A 24-acre, million dollar estate in Taylor County.
Tungate wouldn't come out to speak with Troubleshooter Eric Flack when he went to get Tungate's side of the story. Instead he sent a statement calling his 30 year career at Westlake "a success," adding a second, forensic audit "completely vindicates our management at the hospital."
That forensic audit Tungate is talking about, also obtained by the Troubleshooter department, did not find evidence anyone stole money or committed fraud, but it stopped short of saying fraud did not exist.
In addition to these money troubles, Troubleshooter Eric Flack has now confirmed Kentucky State Police have launched a criminal investigation into Westlake although KSP would not say Rusty Tungate was a target. Indeed, Westlake has been under new management since January 2011. The investigation is being carried out by a special unit, which investigates both drug and financial matters. KSP is also looking at Jane Todd Crawford Hospital in Green County, where Tungate currently serves as CEO.
Neighbors said they saw KSP seize computers from Jane Todd's primary care facility which has now been shut down. A third hospital where Tunagte is CEO is not currently part of the investigation.
In response to the money problems at Westlake, Adair County has been forced to raise taxes on residents.
"It's a whole lot to dig out from under," Melton said.
Meanwhile the hospital is slashing expenses cutting pay and benefits to workers and laying off around 40 employees, including nurse Dorothy Stephens.
"I blame the hospital," Stephens said, "I blame the management."
She said she blames the former CEO that Stephens said, left Westlake Regional Hospital on life support.
KSP said thus far no charges have been filed in the Westlake case. In the meantime, Adair County is now trying to sell the hospital in an effort to keep it open, but the board can't find a buyer because of the $18 million in debt that comes with it.
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