Ritzville hospital board accuses former CEO of hiding finances as East Adams Rural Health faces closure

RITZVILLE – Nearly 200 residents packed into a small community meeting room Saturday in hopes of learning how they might save their small town hospital amid allegations of financial fraud from former administrators and lax board oversight.

Ritzville’s East Adams Rural Health Care could close as soon as the new year. According to a notice from the Washington State Security Employment Department, the hospital plans to lay off 108 employees beginning Jan. 7.

Administrators said closure was not set in stone but did not rule out that possibility. Interim CEO Todd Nida told the crowd he would do “absolutely everything possible” to prevent closure.

“We are in uncharted territory. We do not have a definitive answer. Our focus remains on maintaining services and financial stability while we assess all available options to keep us moving forward,” he said.

The hospital has lost $13.4 million in the past three years and has accumulated $10 million in debt that it cannot currently pay back.

Blame for the hospital’s sudden financial crisis was set squarely on former hospital CEO Corey Fedie and other former hospital administrators.

Current hospital leadership and hospital district board members accused Fedie and others of actively deceiving the board about hospital finances.

For years the board received financial reports from hospital administration showing a break-even or better balance sheet . In reality the hospital was losing money. The former administrators are also accused of delaying annual audits that would have revealed the hospital’s dire finances.

“I’ve shared with many of you over the last few years that the hospital is doing great. We’re in the black. We’re making money. That is what I believed,” said board member John Kragt. “We reviewed financials every single month. The financials showed good numbers. We believed those to be accurate.”

Fedie received annual bonuses tied to hospital’s performance, which had been based on what is now being described as fraudulent financial statements.

At the same time the board is being criticized for allowing the administration to delay audits.

“We asked for the audits every month. There was always a great excuse,” Kragt said, while expressing regret for being blind to the deception for years. One man angrily shouted at Kragt that he “should feel terrible” before storming out of the packed meeting hall.

The alleged financial fraud has been referred to state and federal law enforcement, and an investigation is ongoing.

Board member Eric Walker said he was shocked to learn of the deception.

“It’s very difficult to bring yourself to believe that professional people that you have been dealing with are doing things that appear to be seriously wrong,” Walker said.

The fraud was uncovered in June this year when Chief Financial Officer Viola Babcock joined the hospital. She uncovered the scheme “within days” of her tenure, said Kragt. The hospital underwent a number of emergency layoffs in July and Fedie was removed at the beginning of September.

“Will the people responsible be held accountable? The answer is yes,” Babcock said.

Community response

The packed meeting hall was tense as the crowd of nearly 200 listened to the reasons their hospital may close. Amid anger and shock, the residents of rural Adams County said they were willing to sacrifice to save the hospital.

“I do not want this hospital to close. I do not want people to lose their jobs. We have a responsibility to the people,” said Washtucna resident Elaine Hays.

Local Patty Cannon said the ER in Ritzville had saved her life by quickly transferring her to Holy Family Hospital in Spokane when she had a stroke.

“Everybody here I don’t believe can live or even want to live without that clinic and the hospital,” she said. “I just feel bad, and it makes me cry. I pray and I continue to pray.”

Hays said she will hold the elected board responsible for the crisis.

“What bothers me the most is that you are an elected official. It is your responsibility to make sure this does not happen. I can accept you letting it go for a year maybe but to not do an audit for three years is not correct,” she said. “The CEO, the administration is not the boss of the board. It is your responsibility.”

The stakes for the community are high. Without the hospital, the nearest emergency room would be 45 miles away in Moses Lake or 60 miles away in Spokane.

Walker said survival of the hospital was existential for Ritzville and the surrounding communities.

“When a hospital in a rural town closes, that’s a death sentence for that town. Within five to 10 years that rural town will be a ghost town,” he said.

Hospital lab manager Dan Crisp said Fedie had maintained a “culture of silence” that had prevented employees from bringing issues directly before the board. At the same time Crisp endorsed the current leadership – calling the interim CEO a “servant leader.”

“This requires grace. I think its time to forgive the sins of the past,” Crisp said.

What now?

Hospital leadership did not present its plan to save the hospital, but said it is in motion and will be voted on in the next week.

Part of that plan would be transforming East Adams into a “rural emergency hospital.” Babcock said such a designation would bring $235,000 a month in Medicare reimbursement. But such a plan would also require changes to the emergency department that could be difficult.

“If we go that route, you are not allowed to have long term observation patients or swing bed patients. The average patient stay at your facility has to be 24 hours or less,” she said.

A full plan will be presented at the board’s next meeting on Thursday.

This story has been corrected after the names of several board members were misspelled.