Ledes from the Land of Enchantment

Gallup hospital says it is ‘indigent’ ahead of court order to find more than $100M  • Source New Mexico

A New Mexico District Court judge has ordered a struggling rural hospital staring down one of the state’s biggest-ever medical malpractice judgments to put up a bond of more than $100 million before it can file an appeal.

A lawyer for Rehoboth McKinley Medical Center in Gallup told a judge Thursday in Santa Fe that the hospital has nowhere near that kind of money. In fact, as of early February, the hospital had a negative net worth of more than $25 million, attorney Larry J. Montaño told the court. 

In January, jurors awarded a Gallup man and his family more than $68 million, including $50 million in punitive damages. The 2019 lawsuit stemmed from a botched hernia surgery that left the patient, who cares for young children, with life-long complications. 

The patient’s lawyers attribute much of the size of the jury’s award to what the lawyers said was a cover-up by doctors and attempts by the defendants’ lawyers to slow-walk the civil case.

As Gallup hospital tries to mend financial wounds, it faces a $68 million judgment

The judgment occurs as the hospital, one of two serving much of northwestern New Mexico, struggles to stay afloat after years of financial difficulties and allegations of mismanagement. 

State lawmakers gave the hospital $12 million to cover “shortfalls” this legislative session, and the city of Gallup and McKinley County have given it about $5 million to make payroll. But the hospital still has outstanding debts to vendors, the interim CEO has said. 

The hospital intends to appeal the verdict, but before it can do so, it is required to offer up more than $100 million in bond for the expected length of the appeal in court. An appeal could take three years or longer. 

‘Akin to an indigent defendant’

The hospital will have to put up a bond worth the $68 million for the judgment, plus about $6 million in pre-judgment interest and tens of millions in post-judgment interest that will accrue over the next three years. The judgment is likely the second-biggest for medical malpractice in New Mexico history, according to Vargas. 

The hospital will be on the hook for the entire amount of the bond if it does not succeed in its appeal, said Ray Vargas II, one of the patient’s lawyers. 

The exact figure will be calculated based on an updated judgment expected soon from Judge Maria Sanchez-Gagne. It could easily exceed $130 million, lawyers said. 

Once the judge issues a final judgment, the hospital will have 60 days to come up with the money, Vargas said. 

Montaño did not respond to emailed questions from Source New Mexico after the hearing about what the hospital will do next or what its appeal will entail. 

Labor pains: Delivery rooms closed at a Gallup hospital as employees resign

But he did describe in filings and in court Thursday a precarious financial situation at the hospital, part of the hospital’s effort to convince the judge to set bond at less than $21 million or offer it a reprieve from the judgment.

The filings contained affidavits from two recent chief financial officers at the hospital, as well as from Curi Insurance, the hospital’s insurance provider. 

The insurance company will cover, at most, $34 million of the verdict, Montaño said, which is the limit of the policy. The insurance pool covering Rehoboth also covers 16 other rural hospitals, including six that have their own pending medical malpractice claims, a Curi official wrote. 

The hospital has negative net worth of $25.7 million, and it leases, not owns, the hospital’s building from McKinley County. That leaves it few options to come up with the rest of the bond required and threatens the hospital.

Even without the additional requirements of the bond, Montaño wrote, the judgment could still mean an existential threat for the hospital. 

“Were plaintiffs allowed to execute on the judgment,” he wrote, “Rehoboth might need to seek bankruptcy protection, lay-off employees or cease operations.”

And the amount of the bond could cause irreparable harm to the hospital’s constitutional rights to appeal the judgment.

“Due to its precarious financial position, Rehoboth is akin to an indigent defendant who should not be prevented from appealing an adverse judgment because it lacks the financial resources to post bond,” Montaño said. 

Gallup hospital staff didn’t report death of patient during call system breakdown, report says

The hospital gets 56,000 patient visits a year, he wrote. Apart from Gallup Indian Medical Center, Rehoboth is the only medical provider for the town of 20,000 people and others within a 60-mile radius.

Case looms over Council meeting

The judgment loomed over a meeting of the Gallup City Council on Wednesday night.The hospital’s interim CEO, Bill Patten, asked for and unanimously received approval from councilors for an additional $2 million for payroll.

After months of changes, Patten predicted the hospital could soon be in a position to pay off its debts and then its employees. 

Still, he acknowledged that the judgment could mean his efforts could all be for nothing, and that the hospital was on a tightrope. 

“I’m confident in the strategies that the legal team has presented to me that there are options there that give us more than even money that we’re going to be able to survive this,” he said. “And so all that all the work that I’m doing is with the assumption that the lawsuit isn’t going to tip us over.”

And Patten expressed hope that the patient and his legal team don’t want to push the hospital into closing.

“I don’t believe that either the plaintiff or the plaintiff’s attorneys want to be responsible for closing us,” he said. “And in essence, if the judgment as initially handed out … is not changed, that’s what would happen.”

Comments are closed.