St. Margaret’s says ‘without an immediate infusion of cash’ it cannot pursue Rural Emergency Hospital status

Admitting they should have contacted lawmakers sooner, hospital officials ask for state, federal funds to continue services

An aerial view of St. Margarets Hospital on Monday, Jan. 23, 2023 in Peru.

Hours after Illinois Valley lawmakers urged St. Margaret’s to develop a plan for expectant mothers following the recent Peru hospital closure, St. Margaret’s officials issued a five-page statement Monday evening saying they will need “an immediate infusion of state support” in order to continue operations and services.

The letter issued by St. Margaret’s President and CEO Tim Muntz and Board Chairperson Terry Judd was provided to state Sen. Sue Rezin, R-Morris, and state Rep. Lance Yednock, D-Ottawa.

St. Margaret’s has said it intends to convert the Peru hospital, which closed Jan. 28, to a Rural Emergency Hospital, a new designation that allows the hospital to collect more funding, but officials said in the letter they “may not have the finances to convert SMH-Peru to an REH without financial assistance from state or federal monies.”

“Without an immediate infusion of cash, we cannot pursue an REH in Peru,” St. Margaret’s officials said in the letter.

In the letter, St. Margaret’s officials said they would like to bring back obstetrics services, but called it a challenging service to provide because of the economics of reimbursements and other factors that have resulted in other Illinois hospitals to discontinue the services.

St. Margaret’s officials also said they need to shore up the financial situation with their Spring Valley hospital, which remains open as a full service hospital and emergency room. Officials said they have a backlog of bills for both facilities.

“The amount needed to accomplish both opening the REH and temporarily reopening OB in SMH-Peru, and continuing operation in SMH-SV is significant,” St. Margaret’s officials said in the letter. “The reason OB would be temporarily at SMH-Peru is that it would need to move to SMH-SV if SMH-Peru is designated an REH.”

Officials acknowledged that they are exploring options, including acquisition by a larger health system.

“We would like to engage state policy makers in a pilot or demonstration program, which keeps OB available in our area and in similar areas across the state who have faced this dilemma or will face it in the near future,” St. Margaret’s officials said in the letter, adding that the financial crisis facing St. Margaret’s in Spring Valley and Peru is not unique to the region. “Just a few days ago, the Illinois General Assembly and governor recognized the crisis in healthcare finance by approving $460 million in emergency relief funds for hospitals statewide. As two general acute care hospitals, SMH will receive a combined $1.2 million approximately, once approved by CMS, expected in April. This is greatly appreciated, but more is needed immediately.”

Officials outlined within the letter the background of St. Margaret’s acquiring IVCH in 2021, a process that started in 2018. St. Margaret’s assumed responsibility for underfunded pensions, to the tune of several millions, in the acquisition.

Despite a shared $8 million in COVID relief funds within its Sisters of Mary of the Presentation, revenue was lost from suspending elective surgeries and a drop in outpatient and inpatient activity.

Staff shortages also became problematic for the Peru hospital, officials said. Staff wages were increased, but could not compete with wages offered by agencies of larger, competing health systems. Retention bonuses and sign-on bonuses were offered, but did not prove successful.

“For instance, on the day SMH-Peru temporarily suspended inpatient services, there were 300 unfilled job openings across the SMH organization,” St. Margaret’s officials said in the letter. “As a result, SMH has been forced to pay contracted labor agencies almost $16 million of unbudgeted monies in the last 12 months.”

Officials also pointed to how a cyberattack in February of 2021 halted billing for a period of time.

In the letter, St. Margaret’s said significant capital investments were needed in Peru’s facility, and, because of that, the original plan to make Peru an acute care hospital and Spring Valley an outpatient center was nixed, and services with the exception of OB and ICU had moved to Spring Valley’s facility. St. Margaret’s also said the Peru hospital had difficulty in attracting and retaining hospitalists to provide care.

St. Margaret’s consolidated its obstetrics into one unit in Peru, but officials said they still lost money.

“For every dollar of delivery, SMH receives ten centers, resulting in a $3.5 million loss annually,” St. Margaret’s officials said in the letter. “It is SMH’s wish to support OB services in the Illinois Valley, if adequate funding is made available from state or federal government sources.”

St. Margaret’s said its hopes relied on gaining the Rural Emergency Hospital status at the beginning of the year. Necessary legislation passed in both chambers and Gov. JB Pritzker signed the bill into law, but the necessary rule making was not ready from the Illinois Department of Public Health.

St. Margaret’s officials said in the letter that the last straw was in December, when St. Margaret’s was notified by its Peru ER physician provider that it had not received payment for August, September and October, totaling $698,000. St. Margaret’s said it paid these balances by Dec. 30 as agreed, but received a letter Jan. 13 terminating ER physician services in 15 days. Officials said they couldn’t find an alternative to cover the emergency room.

The end result was an announcement Jan. 19 to close the Peru hospital on Jan. 28, officials said.

“We realize our error now in not reaching out to our legislators sooner to inform them of this crisis,” St. Margaret’s officials said in the letter.

Lawmakers have been critical of St. Margaret’s for not notifying them until after the closure announcement. Earlier Monday, Yednock said that if St. Margaret’s had alerted them sooner to the possibility of a suspension of closure, “maybe we have could have helped stave this off.”