Bankrupt St. Louis Hospital Fires Top Doctor, Cuts Costs Amid COVID-19 Outbreak

A small hospital in St. Louis that serves a densely populated, low-income neighborhood fired its CEO and faces cutbacks and a potential shutdown just as the city is being hit with an outbreak of the novel coronavirus. Doctors and nurses say lives are at risk.

St. Alexius Hospital has struggled financially for years and is currently involved in Chapter 11 bankruptcy proceedings, which are being overseen by a court-appointed trustee from out of state. The bankruptcy trustee, an accountant and CPA, fired the CEO, who is a doctor, earlier this week in the name of eliminating management redundancies. City leaders and hospital staffers alike fear the trustee could liquidate the hospital amid the COVID-19 pandemic, which threatens to overwhelm the city.

The trustee maintains that she believes the hospital can be solvent and remain operational, and that she is committed to supporting hospital staff. But while doctors answer to their patients, the trustee is obligated to take account of the interests of creditors and stakeholders. An important objective, she says, is to "maximize value."

According to interviews with St. Alexius’ former CEO, current doctors and staff, the trustee, St. Louis alderman Cara Spencer, and St. Louis mayor Lydia Krewson, as well as hospital documents and emails obtained by VICE, what’s happening at St. Alexius comes down to two groups of people trying to do their jobs in the middle of a national health crisis: The bankruptcy trustee and her team trying to maximize value, and doctors and public servants trying to care for patients and save lives.

The St. Alexius Hospital situation lays bare yet another peril of America’s private healthcare system: On the community level, as on the individual level, healthcare is for those who can pay for it. According to Bloomberg, more than 30 U.S. hospitals entered bankruptcy in 2019, thanks in large part to the byzantine structure of the United States healthcare system, stranding vulnerable people with nowhere to go. And now, facing one of the biggest public health threats of our time, cities across the country are scrambling to build makeshift care centers to deal with swelling coronavirus caseloads.

“It's terrifying to think that in this critical time, we'd be serving shareholders rather than a community,” said Spencer.

The idea of constricting, rather than expanding, a city’s health care capabilities is practically unthinkable; in St. Louis as elsewhere, though, it’s just the system working as designed.

And so the bankruptcy proceeded as bankruptcies do. On February 26, a court-appointed trustee, Carol Fox of the firm GlassRatner, was entered into the court docket to take control of St. Alexius, which was bought out of bankruptcy by Americore last year. She and her team set about figuring out how to cut costs, make money, and maximize value—business as usual.

For the hospital’s now-former CEO Dr. Sonny Saggar, who was promoted from emergency room director to hospital CEO on February 18, nothing was business as usual.

He was new on the job, the hospital was in bankruptcy, and awareness of the threat of the novel coronavirus was growing. The first COVID case in St. Louis county was reported March 8. On March 14, Saggar said, he initiated a “daily COVID task force call with all the hospital managers,” and began planning how St. Alexius Hospital could coordinate with other area hospitals as well as keep regular patient care from being interrupted. Then, on the morning of March 24, Fox fired him.

“I like Carol Fox, I think she's a very sensible person. She does her job well, and her job, as directed by the federal judge, is to look after the creditors,” Saggar told VICE.

“The creditors should come second to the patients.”

In a letter to hospital employees obtained by VICE, Fox said that Saggar’s termination, which was first reported by the St. Louis Post Dispatch, was merely a way to “streamline the message and direction of the Hospital.” Saggar says he was fired because he butted heads with Fox over cuts to patient care and his plans to address the COVID-19 pandemic.

“Even though I grew up in a socialized healthcare system—I grew up in London—I still do value profit. I do understand capitalism,” Saggar said. “I just think that there are times in one's life when money should not be the number one priority.”

In an email to VICE, Fox wrote, “The chief focus at the moment is to bill for the services St. Alexius performs and to get paid for the services St. Alexius bills. Based on our extensive review of the books and records this has not occurred for over a year if not more.”

In an email to the trustees on Friday, March 20—by which time there were at least 10 cases of COVID-19 in St. Louis County—Saggar wrote:

A few minutes later, Fox responded:

Saggar responded:

Fox said:

When Monday rolled around, Saggar said he told his staff to continue hyperbaric treatments as usual. “I said, ‘Look, you guys have all got videos on your smartphones. If anyone tries to stop this, video it,’” Saggar said. The treatment was allowed to continue, but Fox fired Saggar the following day.

“Improving the Hospital’s revenue cycle will likely serve as the largest boost in liquidity,” Fox wrote in an email to VICE. “Other steps include review and right-sizing the Hospital’s legacy contracts (both clinical and non-clinical) to utilization that is currently ongoing. Case in point is the recent renegotiation of the hyperbaric contract.”

A surgeon at St. Alexius, Dr. Faris Al-Gebory, said the trustees have made other cuts to patient care.

“They shut down the wound care clinic, they shut down the operative room because they don't have money to buy supplies for the OR, they shut down the clinic, which is the fourth-floor clinic,” he told VICE in a phone call. “This is not someone who really stepped in to save this hospital. This is someone whose aim is to dissolve it.”

“Dr. Al-Gebory is an employee of Western Healthcare, a sub-contractor to St. Alexius Hospital,” Fox told VICE. “He has no visibility into the long-term plans of the Hospital. Elective surgeries were suspended in accordance with CMS guidelines in light of the COVID-19 crisis.”

Al-Gebory has worked at St. Alexius for nearly five years.

“It's my fear that they will be in the process of liquidating while we’re going through a global pandemic,” she said. “We're already going to be squeezing our existing hospital resources through the crisis.

St. Alexius Hospital is located in one of the poorest and, according to Spencer, most densely populated areas in the region. Census Bureau data puts median household income in the majority-Black zip code in which it’s located at $32,851, less than two-thirds the state average.

“This is a very, very vulnerable community here,” she said. “And we need to ensure that we can have access to healthcare.”

Before he was fired, Saggar proposed several ideas that would help St. Alexius handle the COVID outbreak. One involved turning an unused building into shelter for the area’s homeless population. Not only would this help stop the spread of infection, he said, it could bring in money from the city and potentially be a permanent solution for the region’s homelessness crisis. Another idea was to partner with other, larger area hospitals to better coordinate treatment for COVID-19 and other patients. VICE obtained a memo outlining the plan, which read in part:

The status of the plan is now unclear, though Fox told VICE she did plan to coordinate with other area hospitals. Would she be using Saggar’s plan? “We are eager and committed to serve the community during these uncertain times. Our partnership is with Mercy and BJC. We will formulate a plan with them.”

“While an important objective of the Chapter 11 Trustee is to maximize value for the estate (i.e. creditors), I believe the best way to achieve that is to maintain the operating status of the hospital and in connection with that the continuum of care that local residents have come to expect from St Alexius. This extends to ensuring the ongoing support of doctors, nurses and staff, which is critical in these challenging times,” Fox wrote in an email to VICE.

But Al-Gebory said there have been discrepancies between what the trustees said they wanted for the hospital and what they did. He said the hospital does not have the supplies or manpower it needs.

“This is not a time [to talk] about money. This is a time we need more health providers. We need more nurses. We need people to help us in this crisis. We need hospitals,” Al-Gebory said, adding that politicians need to step in and help. “[They] need to postpone the bankruptcy situation.”

Mayor Lyda Krewson said the city wants to keep the hospital open.

“We've made the case that this facility is an important facility for the people of St. Louis and particularly the people in that area in St. Louis, and so we'd like for them to keep things open,” she said. “We are working within the confines of the bankruptcy trustee in order to try to keep this facility open. Perhaps have some other hospital buy it. I think there are a lot of options here.”

Krewson said that she has been in communication with the trustee about how best to utilize the hospital’s large campus.

“We are talking about the possibility of perhaps using a small part of one of their buildings […] for homeless services,” she said. “We hope that we'll learn more about that in the next few days as we go down that path with the bankruptcy trustee.”

With St. Louis trending a few weeks behind New York City and with a city-wide stay-at-home order on its fourth day, she said the infection of the virus is projected to peak in mid- to late April.

But the people who work in the hospital feel the urgency now.

After Saggar was fired, 22 doctors, nurses, and other staff at St. Alexius Hospital sent a letter to Fox asking her to reconsider.

“We will not work under dangerous conditions. Once again, please bring Dr. Saggar back as our ER Director if not as our CEO,” the letter read. “Many lives will depend on this decision.”

Fox said Saggar will not be reinstated as CEO, but that GlassRatner is “seriously considering reinstating him as Director of the [emergency department] if he is willing to accept that position.”

Asked if St. Alexius would receive any of the $130 billion the federal government allocated to help hospitals deal with the COVID-19 outbreak, Fox said that the trustee would “certainly” seek out and apply for “all stimulus packages.” She would not say whether they planned to cut staff. “If that happens, the staff will be the first to know,” she said.

For his part, Saggar is ready to get back to work, wherever he can be useful.

“Right now I'm benched during a global pandemic, and I feel kind of helpless sitting on the bench,” he said. “It doesn't have to be at that hospital. It could be anywhere.”

Correction, 1:27 PM ET: This story has been changed to more accurately describe the trustee's role.

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