Attorney general reviews new FAHC disclosures

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(Host) State regulators have asked Fletcher Allen Health Care to scale back the size of its massive expansion project. The Burlington hospital is under state and federal investigation for allegedly concealing tens of millions of dollars in project costs.

VPR’s John Dillon reports.

(Dillon) Vermont’s largest hospital was already in trouble with the state this summer when Attorney General Bill Sorrell began his investigation. A top financial officer had testified that he was ordered to keep a $55 million parking garage off the books and out of sight of regulators. The hospital paid $320,000 to settle that case.

But Sorrell says he’s also looking at new allegations made public this week that the hospital had concealed millions of dollars more in project costs. Sorrell says he wants to know if the hospital lied to its bankers as well as to regulators.

(Sorrell) “We’ve been looking at issues of alleged or possible misrepresentation – not only to state regulators but to insurance companies, bonding companies other commercial lenders. [We’re] wanting to know what are the representations that were made to these entities and were the representations true?”

(Dillon) The latest revelations concern $26 million in additional costs for Fletcher Allen’s redevelopment project.

State regulations require hospitals to go through a cost-benefit review before they spend more than $1.5 million on construction. Fletcher Allen’s Renaissance Project in Burlington will now cost about $254 million. With the parking garage and the recent overruns, that’s about $80 million more than originally approved by the state.

The state says that hospital officials knew two years ago that it needed to get approval for much of the additional work. The hospital has floated bonds to pay for the project. And Sorrell says he got federal prosecutors involved because of the possibility of mail fraud.

(Sorrell) “We were the ones that contacted federal authorities because of the view that any number of these representations were made through the mail or to out-of-state entities, thereby bringing about the possibility that federal laws might be implicated.”

(Dillon) The state also wants Fletcher Allen to scale back its Renaissance Project. Banking and Insurance Commissioner Betsy Costle has told the hospital she’s concerned it’s taken on too much debt and may not have enough money to improve patient care.

Hospital spokeswoman Maria McClellan says Ed Colodny, the new hospital president, is reviewing Costle’s recommendations.

(McClellan) “Ed Colodny has outlined a number of things he will do to inform himself and get his arms around the scope, scale and cost of the project. And after he has all of that information he will make decisions working in concert with Commissioner Costle about what actions need to be pursued.”

(Dillon) Colodny has been on the job for just over a week and he’s already made changes. The new president has replaced the law firm that counseled the hospital through its state review. Colodny has reached out to regulators, hospital critics, and state lawmakers. He also decided to reveal the recent cost overruns to the news media.

The trustees hired Colodny to replace William Boettcher, the CEO who led the hospital through the state review. But other top managers remain at Fletcher Allen. Commissioner Costle said in a letter last month that she wasn’t sure she could believe what those officials told her. McClellan says Colodny is aware of Costle’s criticism:

(McClellan) “We take all of the concerns she outlined in the letter very, very seriously and one of the concerns she articulated is the credibility of senior management. But it’s premature at this time to make any decisions.”

(Dillon) Colodny has told Costle and other state officials that his top goal is to restore trust in the institution.

For Vermont Public Radio, I’m John Dillon in Montpelier.

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