Cleveland Regional Medical Center outside Houston.

New Directions, a Louisville-based health care firm with a history of troubled takeovers, has given up control of a large Texas hospital it acquired in 2011.

The move came as Cleveland Regional Medical Center in Cleveland, Texas, pared back operations after months of budget crises, as well as an altercation between CRMC’s CEO and Peter Roth, the hospital’s chief nursing officer.

In interviews this week, Roth and other employees confirmed only the hospital’s emergency room is still operating.

Cleveland police are seeking CRMC CEO Charles “Chuck” Fulner, of Louisville, on charges he assaulted Roth, according to Roth and other staffers.

Calls to James Anderson, who replaced Fulner as CRMC CEO, were not returned.

Roth said Fulner told him and other staffers that he’s a partner in New Directions. The Cleveland Advocate website reported yesterday that Cleveland police are negotiating with Fulner’s attorney for Fulner to surrender. However, Roth told Insider Louisville he believes Fulner is in Louisville.

Last week, CRMC executives suspended admissions and surgeries “in an attempt to assure patient safety” due to a “critical shortage of staff and supplies,” according to a statement.

New Directions CEO Patrick W. Ayers declined to comment on issues related to Fulner and Roth. But Ayers emphasized CRMC is not closed while confirming that he and his partners have sold most – though not all – of their stake in the hospital to another investor group he declined to identify.

Sources in Texas tell Insider Louisville the new investor group is Liberty Health Centers, but those sources had no further details about the firm.

New Directions had owned 50 percent of the hospital and a separate investor group had owned 50 percent, with New Directions the operating partner, Ayers said. He confirmed the hospital had cash-flow problems during the past two months, and it was necessary to bring in new investors with additional capital.

New Directions now has a 5 percent stake and is no longer involved in hospital management, Ayres said.

“We needed to do some refinancing. So we gave up a (share) of ownership to do the refinancing,” he said.

Since 2010, Insider Louisville has documented New Directions’ history of taking over small hospitals in mostly rural areas, facilities that end up closing or struggling.

Employees in Cleveland, which is about 40 miles north of Houston, have been in contact with Insider Louisville for more than six months, saying conditions at at the 107-bed hospital were deteriorating quickly. Most asked not to be identified because they were concerned about losing their jobs, or about being blacklisted should the hospital be sold.

Concerns about instability were the main theme consistent theme through interviews and emails.

“The hospital was on the right track before New Directions took over,” wrote employee one in an email. “I loved my job … and I fully intended on retiring from there.” But the person resigned in 2012.

“I felt that I could not ethically do some of the things they were wanting,” the former CRMC employee worte.

These are the points multiple employees made during the last six months:

• Since April, 2012, New Directions has gradually halted payments to vendors including utilities, or went more than 120 days delinquent on payments. Roth said he believes the hospital owes vendors about $5 million.

• For months, directors and administrative staff have had to purchase everyday supplies out-of-pocket, including paper towels and office supplies. Copiers were removed from the hospital after management failed to pay leases.

• CRMC management hasn’t paid 2012 property taxes.

• CRMC management has failed to pay employee health insurance premium payments since mid-2012.

• CRMC management is is behind on contributions to employee 401K retirement plans.

• CRMC management has failed to pay state and local payroll taxes or state unemployment taxes.

Ayers said all those obligations have now been met with the new infusion of investor capital.

Ayers also noted that CRMC never missed a payroll.

New Directions attorney Charles Brooks said the new investor group is in place, “and by next week, they’re going to start (hospital) operations back up.”

New Directions is listed as having an office at 9900 Shelbyville Road between St. Matthews and Middletown. Insider Louisville requested an in-depth, in-person interview, but Ayers said he is no longer in Kentucky.

Insider Louisville reported back in 2011 that New Directions bought the Cleveland hospital from Nashville-based hospital giant HCA for about $900,000. Roth and other employees tell Insider Louisville that during the first months after the transaction, New Directions officials introduced former Kentucky Gov. Ernie Fletcher, who owns Alton Healthcare in Covington, Ky., as an investor.

Roth said Fletcher did not return to the medical center after 2011.

Brooks confirmed that Fletcher was part of New Direction’s partner investment group in CRMC. Fletcher did not return calls for comment about his current involvement, if any.

At the same time New Directions took over Cleveland Regional Medical Center,  New Directions was involved in a dispute over a small hospital in Murfreesboro, Ark., a shuttered hospital Patrick Ayers announced in 2010 that New Directions had acquired for $2 million.

However, city officials in Mufreesboro, a tiny community in a remote Pike County, Arkansas, told us New Directions never consummated the deal. Pike County Judge Executive Don Baker told Insider Louisville that New Directions actually agreed to a $300,000 purchase price for Pike County hospital, not $2 million.

The company put down $25,000, with the $275,000 balance due Dec. 1, 2012 not including $8,700 in interest. Baker told us he and local officials never did any real due diligence on New Directions or Patrick Ayers.

People in the area are desperate for someone to run the hospital and New Directions made a deal, Baker said. Baker added that Ayers has told him and other Murfreesboro officials the original Pike County hospital – which never reopened under New Directions – is too dilapidated to renovate. “So, they’re gonna’ build a new hospital,” Baker said. The price was $10 million.

The hospital remains closed.

Roth and others at Cleveland Regional Medical Center told Insider Louisville their research connects Patrick Ayers and his father and fellow New Directions partner, Timothy B. Ayers, to other failed hospital deals including Stewart Webster Hospital in Richland, Ga., which shut down last week.

Click to see full size.

Staffers at Stewart Webster confirmed that the Ayers had considered buying the small, critical care facility south of Macon. “Those gentlemen did consider (buying) us, but the deal never went though,” said a staffer. Federal documents including a 2010 National Provider Identifier Form lists (at right) shows Patrick Ayers as Stewart Webster CEO.

However, Brooks said he believes the documents were filed prematurely in the belief New Directions would complete the acquisition, a deal he said was never consummated.

Brooks conceded the Ayers are connected – but only indirectly – to investors who ultimately went to prison for tax fraud related to failed hospitals.

As we reported in 2010, the Ayers formed a company called Shiloh Health Services, a company whose focus was finding small, rural hospitals that were closed or under-performing.

An investor named Jim Cheek, Brooks said, liked both the concept and the name. He hired the Ayers to be consultants to new Shilohs Cheek formed in Nevada and other states. Shortly afterward, the Ayers dissolved the original Kentucky-based entity, then ended their relationship with Cheek, Brooks said.

Last year, Cheek and Herschel Breig, his partner in Shiloh, were sentence to five years and fined $5 million for failing to hand over payroll taxes other infractions at Highland Medical Center in Lubbock, Texas.

Fulner and Patrick Ayers connect back to Louisville through a hotdog stand, Zap’s Gourmet Hot Dogs, they owned at Fourth Street Live in 2006.

“Fulner was always telling us about how he and Patrick Ayers started out with a hotdog stand in Louisville,” said CRHC chief nursing officer Roth.

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Terry Boyd
Terry Boyd has seven years experience as a business/finance journalist, and eight years a military reporter with European Stars and Stripes. As a banking and finance reporter at Business First, Boyd dealt directly with the most influential executives and financiers in Louisville.

3 thoughts on “The saga continues: Louisville-based New Directions cuts stake in Texas hospital after cash crunch, altercation

  1. I worry how accurate this report is since the picture of the hospital isn’t even correct.
    Of the 6 “points” listed as concerns 4 are untrue. Maybe faxes should be checked before being published. Just a thought.

  2. I worry how accurate this report is since the picture of the hospital isn’t even correct.
    Of the 6 “points” listed as concerns 4 are untrue. Maybe facts should be checked before being published. Just a thought.

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