What was supposed to be the final hearing on May 29 to potentially grant receivership of West Suburban Medical Center to a new owner has been pushed to Monday, June 1.
Cook County Judge Patrick Stanton heard closing arguments from each side of the bitter dispute between business-partners-turned-legal-foes at the heart of West Suburban Medical Center’s closure earlier this year. Stanton told the packed court room that he will issue a final ruling on whether the Oak Park safety-net hospital will go to a court-appointed receiver after deliberating over the weekend.
Rathnaker Reddy Patlola, the landlord for Resilience Healthcare, wants to transfer the hospital to an independent receiver which would oversee Insight Hospital and Medical Center as new management for West Suburban.
Patlola was present at Friday’s hearing, but Resilience Healthcare CEO Manoj Prasad, who manages the hospital, was not. The hearing came after the two had agreed to a third-party review of contested financial records, as Patlola had accused Prasad of “misappropriating” as much as $35 million in hospital funds, including a $10 million loan from the state of Illinois meant to save the Resilience-owned Weiss Memorial Hospital in Chicago shortly before that hospital’s closure last August.
The financial review did not net evidence of that alleged misappropriation, Judge Stanton said Friday.
Patlola’s lawyer, Scott Kaplan, asked Stanton to extend the financial review process so they could look further into the whereabouts of $2.2 million he said was transferred to a consulting firm run by Prasad’s daughter. Prasad’s counsel said that money had been “set aside” and not spent.
A furloughed hospital source told Wednesday Journal and Austin Weekly News that Prasad’s daughter did some marketing work for the hospital, keeping an office with a private bathroom but rarely working on-site.
At a May 8 hearing, the court heard testimony from former Resilience Healthcare CFO and Weiss Memorial CEO Irene Dumanis, who said Prasad would regularly have her transfer $25,000 to $30,000 to an entity called Westlaw Management Group, in part to “supplement his payroll” with funds that wouldn’t be noticed during his ongoing divorce proceedings.
Stanton pushed back on Kaplan’s request to extend the review of contested financial records in light of the lacking evidence for Patlola’s claims of tens of millions in diverted resources.
“Is this an emergency or not?” Stanton asked Kaplan about the emergency motion to appoint a receiver for the hospital. “Be careful how you characterize ‘fact.’”
Kaplan dropped the extension request to proceed with closing arguments.
Patlola’s counsel had not asked for a formal discovery order in the initial stages of the case.
In his closing argument, Kaplan stayed off the misappropriation allegations and grounded Patlola’s request for receivership in the claim that Prasad had defaulted on the leases for West Suburban Medical Center in Oak Park, its River Forest campus and Weiss Memorial by not paying rent or property taxes, allowing mechanic’s liens to be placed on the properties and allowing the hospitals to close. Prasad’s counsel maintained that the lease agreement governing the properties only required Resilience to pay Patlola $1 a year in rent, a claim Patlola’s camp has repeatedly denied.
Kaplan said the closure of West Suburban has led to laying off over 700 employees and has caused harm to the community it once served.
“What evidence do I have that a receiver will do the things Dr. Prasad can’t?” Stanton asked Kaplan. “Do you have a court-appointed receiver until the landlord is owed his rent?”
Kaplan said the management hasn’t reopened Weiss after over 9 months of its closure and has no concrete plans for reopening West Suburban.
Prasad’s lawyer said, “Does a receiver have the ability to keep a ship from sinking? From bringing back a sunk ship?”
West Suburban Medical Center closed its doors March 27, citing a year-long failure in the hospital’s electronic medical record billing system that resulted in as much as 90% of its work going unbilled. Since then, fallout from the closing has continued to play out in the county court system as Prasad and Patlola filed dueling lawsuits against one another, with each side presenting radically different views of the contracts, leases and strategies that governed the hospital in the years leading to its abrupt closure.