Editor’s note: In Part I of this series, Metro Times relied on sworn testimony to report allegations that, after buying Greater Detroit Hospital with a partner in 1994, Dr. Soon K. Kim threatened to bankrupt the facility if he wasn’t able to gain full control of it. Depositions taken in litigation against Kim also alleged that, after he bought the Aurora mental hospital on Detroit’s west side, Kim began siphoning money from Greater Detroit into Aurora, propping up his new acquisition to the detriment of the first.
In a letter to Metro Times, an attorney representing Kim said Part I contained unspecified false statements and is libelous. He demanded that the entire article be retracted.
Metro Times declines to do so.
In Part II, some former members of Aurora’s board accuse Kim of using a network of companies under his control to reap millions of dollars from a nonprofit corporation he created. At the same time, allege his critics, patients at Aurora were subjected to substandard care while an undermanned hospital staff struggled to do its job.
Mel Ravitz sounded the alarm loud and long.
As a member of Aurora Healthcare’s board of directors, the former Detroit city councilman began issuing a series of increasingly urgent protests in January 1999. The nonprofit mental hospital needed to curtail its relationship with psychiatrist and businessman Soon K. Kim, Ravitz warned. Otherwise, its future would be in certain jeopardy.
None of his fellow board members paid heed.
Even now, with the hospital empty for more than a year, there are former board members who depict Ravitz as a curmudgeon and a crank.
“Mel Ravitz was the worst thing that ever happened to my board,” said William Stone, chairman of the Aurora board for nearly five years. “You can discount everything he has to say.”
What Ravitz has continued to say is this: So much money flowed from Aurora into Kim’s for-profit companies, the nonprofit hospital could not survive.
The flow of cash was considerable indeed. A Metro Times analysis of the hospital’s filings with the Internal Revenue Service and other documents found that for-profit companies affiliated with Kim were paid at least $23 million by Aurora over the span of four years.
A representative for Kim disputed that figure, saying it is “inflated.” Moreover, Kim said he bears no responsibility for Aurora’s demise. In general, he blames government agencies for policies that led to the hospital’s closure.
Stone, too, faults the government. He is critical of former Gov. John Engler’s well-documented neglect of Michigan’s mental health system. He is even more condemnatory of the Detroit-Wayne County Community Mental Health Agency, which Stone claims crippled Aurora by failing to pay the hospital $4 million it allegedly owed the facility.
Instead of being criticized by the likes of Ravitz, said Stone, Kim is due kudos for his attempts to keep Aurora open and serving the mentally ill.
“Dr. Kim deserves an award for what he did,” said Stone, who also disapproved of the way some critics depicted Kim in Part I of this series.
“In my opinion, all these people said things that aren’t true just to get back at him,” said Stone. “Something nice should be said about him. He’s not a bad guy.”
Somewhere between the polar opposites of Ravitz and Stone is another former Aurora board member, George Gaines Jr. Gaines agreed with Stone that the local mental health agency’s failure to pay its bills played a part in Aurora’s downfall.
But, admitted Gaines, he also realizes now that it was a mistake to have ignored Ravitz.
From its inception, Mel Ravitz harbored a keen interest in Aurora. It was toward the end of his tenure as director of the Detroit-Wayne County Community Mental Health Board, which he headed from 1974-1981, that the “germ” of an idea to build a nonprofit mental hospital in Detroit took root. The board began working with Michigan Health Care, a nonprofit corporation, to build the facility, and then helped fund its operation. Ravitz continued to keep a protective eye on the hospital as he took a seat on the Detroit City Council. Consisting of two buildings, with a total of 140 beds, the hospital established what Ravitz describes as an excellent reputation over the years.
Part of the facility was dedicated to serving children and teens. The hospital, located on the city’s near west side at 3737 Lawton, also provided care to adults, including mentally ill inmates transferred from the Wayne County Jail.
The vast majority of patients were poor and without insurance.
“It was,” said Ravitz, “a vital facility.”
About that there is little doubt. All concerned describe Aurora as a critical link in the mental health system serving Detroit and Wayne County.
Built in two phases during the 1980s, Aurora became a subsidiary of a larger nonprofit organization called Michigan Health Care (MHC).
During the late ’80s, MHC went on an expansion spree, accumulating debt exceeding $200 million. In 1997, with the parent company declaring bankruptcy, Aurora, along with the rest of MHC, went on the sales block. That’s when a for-profit limited liability corporation created by Kim stepped into the breach.
There is no denying Kim’s skills as a businessman. He arrived in the United States as an immigrant from South Korea in 1966. Since then, he and his wife, Bouh, who is also a psychiatrist, have amassed the sort of wealth most people only dream of. According to an unaudited financial statement obtained by Metro Times, Kim estimates his holdings to be worth $40 million. There’s a $1 million home in Bloomfield Hills and a $6.2 million farm in Salem Township. The couple also owns a $1.3 million home in the swank oceanside community of Dana Point, Calif. Various business interests are valued at $18 million. Chief among those businesses is Michigan Mental Healthcare Network. With a net value of $10 million, that company played a prominent role in events at Aurora.
Supporters of Kim, such as attorney Thomas Sweeney, hail him as a savior.
“There was a guy who wanted to buy it (Aurora) and turn it into a truck driving school,” notes Sweeney, whom Kim selected to be secretary of the Aurora board.
Sweeney works for the prestigious Clark Hill law firm and served as the registered agent for several of Kim’s businesses — including two that did business with Greater Detroit Hospital — beginning in 1994, according to records on file with the Michigan Department of Consumer and Industry Services. While Sweeney served as Aurora’s secretary, another Clark Hill lawyer served as Kim’s personal attorney in a lawsuit filed against him by the board of directors at Greater Detroit Hospital and the estate of a former business partner.
While it is true that Aurora was purchased out of bankruptcy — for $4.2 million by Michigan Mental Healthcare Network (MMHN), a limited liability for-profit corporation — the hospital itself was on relatively solid financial footing, according to several sources.
Ervin Johnson, a longtime employee who ran Aurora’s outpatient clinics before becoming its chief executive officer in 1999, said the sale in 1997 was greeted with optimism. Freed from the burden of helping to carry the parent company’s debt, it looked as though the facility “would be in pretty good shape,” he said.
“We were three-quarters full when sold,” recalled Johnson. “And we were a primary force for mental health care in Wayne County.”
Johnson said staff at Aurora prided themselves on treating “the chronic patients nobody else wanted. We never rejected anybody.”
Kim created the nonprofit Aurora Healthcare to oversee the facility, and, according to Ravitz, before an independent board of directors was installed, saw to it that the nonprofit entered into agreements with two of his for-profit companies.
Kim, who declined to be interviewed by Metro Times but did respond to written questions, first indicated the contracts were entered into by an “independent” board. When pressed, he subsequently conceded that the formal board ratified the contracts at a later date after business had already commenced.
Aurora began leasing the hospital and its equipment from MMHN for $200,000 per month, according to Laura Sanders, an attorney who works for Kim.
A company called Salem Services, in which Kim holds controlling interest, was also formed. In return for providing Aurora with a chief executive officer, chief financial officer, risk manager, and an administrative assistant, as well as other management services, Salem would be paid $100,000 per month plus an annual bonus based on Aurora’s revenues, according to Salem’s contract with Aurora.
That deal was particularly lucrative for Salem, asserted Ravitz, who said salaries for the four executives totaled no more than $500,000 a year combined, yet Aurora paid Salem as much as $1.5 million a year, according to the nonprofit’s filings with the IRS.
In mid-1998, two subsidiaries of the management company, Salem Hospital Pharmaceutical and Salem Transportation, also began providing service to Aurora, according to Salem’s Web site.
Another company affiliated with Kim, Marbella Management, leased at least two and possibly three outpatient clinics to the hospital. In addition to its hospital lease, Aurora was paying as much as $580,000 per year to rent other facilities, according to IRS filings. The documents do not specify how much of that sum was paid to Marbella.
Kim defended the overall arrangement.
“The companies you mention provided much needed services to Aurora at market price or lower,” he wrote.
“Most of the entities were created to assist Aurora at a time when, because of its financial history and credit problems, Aurora was having a hard time finding service providers. If the Salem-related entities did not agree to take the risks they did by entering into the contracts with Aurora, Aurora would not have been able to conduct its daily business activity.”
Board chairman Stone also defended the practice of putting much of Aurora’s business into companies associated with Kim; Stone said they provided vital services that might not have been available otherwise.
“He was providing us with services, and he’s entitled to be paid for services rendered,” said Stone.
Mel Ravitz wasn’t among the original board members recruited after Aurora was created in April 1997. He came on board in ’98, after he left the City Council, where he had gained a reputation as a reformer.
He had been recommended by Barbara Clark, a longtime employee of Michigan Health Care who had been hired by Kim to be Aurora’s CEO. Clark and Ravitz were friends, having worked together during the 1970s when Ravitz chaired the Detroit-Wayne County Mental Health Board and Clark worked for the agency.
“Barbara is a dedicated social worker, a person dedicated to providing quality mental health programs,” said Ravitz. “I have enormous regard for her and her integrity.”
Ravitz said that upon joining the board he believed Kim was motivated to “maintain Aurora’s high quality of care. But I slowly became disabused of that notion as I learned more and more about him and how his operation worked.”
His concern spiked in 1999 as the nonprofit board discussed buying the hospital from MMHN.
He worried about financial ties between Kim and some board members. As the owner of a Southfield insurance agency, board chairman Stone provided insurance coverage to Aurora as well as two other hospitals in which Kim had an ownership role: Greater Detroit Hospital, located on the border between Detroit and Hamtramck, and the Arborview mental facility in Warren.
Stone said he checked with the state to ensure there would be no conflict of interest problems before he joined the Aurora board, and that the nonprofit’s bylaws allowed him to do business with Aurora as long as contracts he received were competitively bid, an obligation Stone said was fulfilled. Stone said he received about half of Aurora’s insurance business; the nonprofit paid $130,000 to $200,000 per year for coverage, according to its IRS disclosures.
“I’ll sue anybody who says I had a conflict of interest,” Stone told Metro Times.
Another board member, Steve Plotnik, was Kim’s longtime personal accountant. Attorney Sweeney, who did legal work for several companies affiliated with Kim, served as board secretary. Salem employee Carol Peart served as both Aurora’s CFO and board treasurer.
Letters Ravitz wrote to his fellow board members starting in January 1999 reveal his trepidation about the sale process.
“How we proceed to buy out Dr. Kim is a matter of concern to the entire community; its citizens are our patients,” he wrote.
The letters reflect Ravitz’s view that the board was moving too quickly, and that his efforts to obtain separate advisers were consistently stymied.
Ravitz also complained that the Aurora board was essentially given only two options: Allow Kim to sell the hospital to the for-profit Universal Health Systems, or go into debt and buy the facility itself. Ravitz insisted that the board needed more time to explore other options.
“I have no desire to stand in the way of helping Dr. Kim receive a reasonable offer for his real estate, but it must be done appropriately and openly with every alternative professionally and objectively researched, then evaluated carefully by the entire board in the interest of the community we serve,” he wrote in a March letter.
Then in April: “For its own ethical and fiduciary protection, the Aurora Board should postpone its decision and authorize adequate expenditures to engage appropriate professional consultants and extend the review period at least an additional sixty days for a complete investigation of suitable alternatives.”
In April 1999, the board voted to buy the hospital from Kim. The appraised value of the facility was $17 million to $19 million. Ravitz thought the price outrageous. After all, MMHN had purchased Aurora less than three years before for $4.2 million.
Kim wrote to Metro Times that the more than four-fold increase was justified because under Salem’s management “the operation had turned itself around so that the business value of Aurora had improved and became more valuable.”
According to Aurora’s IRS filings, the nonprofit’s revenues increased about 25 percent between 1997 and 2001, jumping from $19.4 million to $25.5 million.
Ravitz suggested that a 20 percent return on Kim’s investment would be a fair price for the nonprofit to pay MMHN; it would provide Kim an $800,000 profit on his $4 million investment.
By that point, Aurora’s $200,000 monthly lease payments to MMHN had already eclipsed the initial investment. Not to mention the $100,000 monthly management fee that Aurora was paying to Kim’s company, Salem.
Instead of taking on high-interest debt, Ravitz argued, a low-interest loan could be obtained from the Michigan State Health and Hospital Association.
Ravitz advised the board to borrow $6 million from the association. Then, instead of taking on the higher interest rates associated with issuing bonds, Kim could be paid off, needed improvements to the aging buildings could be made, and Aurora would remain an independent, community-based nonprofit.
“I do not suggest anything sinister on anybody’s part,” Ravitz wrote. “Nor do I have a problem with an investor making a profit off his investment, but that profit should not saddle the agency with a crushing debt it may be unable to pay.”
Shortly thereafter, Ravitz said, Stone asked him if he would “be more comfortable” resigning from the board since he was so often at odds with his fellow board members.
“Mel Ravitz was a disturbing person on the board,” said Stone. “He was always against everything that was happening. He was an agitator who thought he knew everything, but he wound up making a lot of bad decisions. He was the worst thing that ever happened to the board.” Stone verified that he suggested Ravitz might want to leave the board.
Ravitz didn’t budge.
“I am not uncomfortable being a minority board member,” he wrote to Stone. “I have been in that role before. Indeed, the purpose of all my letters has been to try to present what I believe are the cold facts to the other members in the hope they would eventually see matters as I do.
“As I told you, my ties to Aurora go back to its inception. … it serves people who were my constituents for almost three decades. My sole interest is in seeing that Aurora Healthcare is able to continue to serve its patients and at the highest quality level possible. Unfortunately, that is not the case now. We have physical improvement needs. We have unusually high staff turnover. We are not paying our staff salary and benefits that will enable them to stay and develop loyalty to the agency.”
Board member George Gaines Jr. said, “I think the rest of the board didn’t go along with Ravitz because at the time, things were still going good. Cash flow was good, the number of patients was good.”
In retrospect, he said, Ravitz was prophetic.
“Mel’s warnings were a harbinger,” said Gaines.
Around that same time, Aurora’s CEO, Clark, began raising red flags of her own.
Citing a confidentiality agreement, Clark refused to discuss any matters related to Aurora or Salem Services with Metro Times.
However, her position was laid out in a presentation to the board on May 26, 1999. A copy of that document has been obtained by Metro Times. A big part of the problem was staff pay. As Clark put it, “Aurora has not made market adjustments to pay scales since the change in ownership.”
Consequently, the hospital had 17 nursing vacancies. That shortage, combined with what she described as “patient incidents,” had aroused the interest of health care regulators.
Clark was caught in a tough spot. She drew her salary from Kim’s for-profit company, Salem, but as president of Aurora’s board owed it an ethical obligation.
“Since I have a fiduciary responsibility to the board,” she said, “it is important to inform you that Aurora must seek a balance between the current administrative overhead costs, rent, management services, other contracts and investment in the staff and facilities.”
She urged the board to follow Ravitz’s recommendation and create a committee to review financial reports, audits, the contracting process and expenditures. Doing so, she said, was “customary for board oversight.”
She also warned:
“Because Aurora is a non-profit service to indigent patients and families, most of Aurora’s income over expenses needs to go back into programs and facilities in order to provide a quality service and be competitive. We have successfully operated in this manner in the past and believe we can be successful in the future.”
“If Aurora’s financial obligations either through outside debt or current overhead are too high, Aurora will not be viable over time. This is evidenced by our current situation after two years.”
Within five weeks of making that report, Clark was fired. Kim would only say that she was let go because of “performance issues.”
She filed a wrongful dismissal action against Salem, but because that complaint was settled in mediation and not in court, there is no public record of what transpired. Clark was awarded a settlement, according to her attorney, but she cannot discuss the case because of a confidentiality agreement.
(The firing of Clark mirrors an action at Greater Detroit Hospital, where CEO Linda Carroll was fired after balking at what she described as Kim’s attempts to funnel money from Greater Detroit into Aurora. Carroll has a wrongful termination lawsuit pending against Kim and his companies. The board of the nonprofit Greater Detroit also sued Kim over the firing of Carroll and other issues. Kim said that like Clark, Carroll was fired due to poor performance.)
Upon learning of Clark’s dismissal, Ravitz resigned from the Aurora board.
In a July 8, 1999, letter to the board, he wrote, “Ms. Clark’s dismissal by Salem Management without even … bringing the matter to the Aurora Board, emphasizes the basic structural deficiency of allowing another entity to control the personnel leadership of Aurora Healthcare.
“The Aurora Board should convene promptly to consult an independent attorney about severing its relationship with Salem Management. ... It is a major conflict for Aurora to be controlled by an agency that has interests other than assuring the continuity of leadership that has brought it to its current respected, certified state.
“Ms. Clark’s dismissal underscores the need for Aurora’s Board to run its own operation and decide its own future and not depend on any management company.”
The board did not follow Ravitz’s recommendations.
Six months later, in December 1999, the Detroit Hospital Finance Authority, a special “pass-through” agency convened only twice in the past decade, facilitated the financing of the hospital purchase by issuing $11.8 million in bonds. Fortunately for the City of Detroit, taxpayers were not left on the hook in event of default. The company purchasing the bonds, Finova Public Finance, took that risk. To protect its investment the hospital was offered up as collateral. Aurora’s interest rate on the loan was one point above the prime interest rate.
MMHN would receive $8.4 million. Most of the remainder was slated for improvements and repairs needed at the hospital.
In addition, the deal provided a second mortgage note of $8.8 million to MMHN, bringing the total sales price to $17.2 million and saddling the nonprofit with a debt of more than $20 million.
Kim justified the profit made on the sale, saying the price was based on two independent appraisals and that the decision to purchase was made by a duly appointed independent board.
Ravitz had a different point of view: “There is no way that hospital could survive with a debt load like that.”
For Ravitz, the issue of money is crucial because of its effect on a different sort of bottom line: the care provided to the patients turning to Aurora for help.
People like Ted Jones.
“Like … prison”
Ted Jones (not his real name) began experiencing emotional problems while in the fourth grade.
Like most of the patients who ended up in Aurora, he’s an African-American from a low-income family. His mother is single, supporting Ted and four siblings with income from a disability check.
By the time Ted entered Aurora in the spring of 2001 at the age of 13, he’d been diagnosed with everything from depression to schizophrenia to attention deficit disorder. He’d been in and out of several mental hospitals, few of which garner much praise from Ted or his mother. But Aurora, they say, was the worst.
“It was like being in prison,” Ted recalled.
Patients who didn’t follow instructions would be “shot up with medications” and “made to stay in their room all day,” he claimed.
The practice is called using “chemical restraints.”
His mother said that at first she didn’t believe the things Ted told her about life inside Aurora.
“I thought they was just stories,” she said. “But then I started watching, paying close attention to see what was going on.”
At one point, said Ted, a confrontation with a staff member ended with Ted “getting hit up on the side of my head with a telephone.”
His mother filed a police report, and the staff person, she said, was fired.
Ted was in the facility for four months. When he was released, his mother said, “he was worse than when he went in.”
Skeptics might rightly doubt the veracity of a teenage mental patient who was hospitalized because he suffered hallucinations.
But the problem at Aurora wasn’t with just one patient, or even a few.
An inspection conducted by the federal Center for Medicare & Medicaid Services in January 2001 resulted in a report that cited multiple violations in three categories — nursing services, patient rights and quality assurance.
The fears expressed by Ravitz and Clark two years earlier were coming true, and people like Ted were suffering the consequences.
The problems were significant, according to Bob Daly, a manager in the Center for Medicare & Medicaid Services’ Chicago office, which oversaw the inspection.
“Staff was not properly carrying out its function, not providing adequate care, not monitoring patient behavior,” Daly said.
As for the lack of quality assurance, Daly explained, “Every hospital must have a system in place to review incidents, review procedures, improve operation, correct deficiencies, not wait for a survey to come along and point out problems.”
Daly said that when inspectors returned for a follow-up in August to see if the initial problems had been corrected, the situation at Aurora had deteriorated further.
“It’s not untypical to find problems at hospitals,” said Daly. “What is unusual is for there to be major issues and not have the problems fixed. … But at Aurora, you had a situation where they were repeatedly failing to fix deficiencies. In fact, they had even more problems in August than they did in January. Then a state survey in October still found problems.”
The August report is eye-opening. Federal inspectors found a facility in disrepair and a staff that frequently failed to assure that patients were safe and receiving proper treatment. There were not enough nurses. On weekends, only one psychiatrist was on hand to provide treatment for up to 140 patients, according to the report. At other times, psychiatrists were prescribing medications but not delivering the psychotherapy that should have accompanied the drugs. Chemical restraints were being improperly used. Patients were staying in their rooms instead of participating in treatment programs. Patients were being released without knowing where they would go. Injuries among patients, whether inflicted by fellow patients or by staff, were on the rise.
Aurora’s once sterling reputation was obliterated.
Ervin Johnson, who worked at Aurora since the mid-’80s and served as its CEO for more than two years immediately prior to its closing, is still mystified by the regulators’ zeal.
“It was like they were looking for reasons to close the program,” he said.
Johnson noted that the state did not increase reimbursement rates for five years, and that Aurora was consistently paid less than other area hospitals for the same types of service.
“We were the cheapest game in town, and they were out there investigating us like it was a duck shoot,” Johnson said. “We were working day and night to put in place a corrective plan, and that plan was accepted (by government regulators). I never thought that facility would close, with all the humanity that was being served there.
“But once the county machine decides you are going to go, you’re going to go.”
Like Johnson, Aurora board members interviewed by Metro Times contend that the extent of patient care problems was blown out of proportion.
“We were taking patients that nobody else wanted to take,” said board member Gaines, a longtime health-care professional. “But the problems we had were run of the mill.”
Susan McParland, a lawyer who heads the Michigan Association for Children with Emotional Disorders, has ambiguous feelings about Aurora’s closure.
On one hand, she said, its absence creates a real hardship for Detroit’s mentally ill and their families. Especially hard hit are children.
“There aren’t beds for them in Detroit or Wayne County, period,” she said. Consequently, they must find their way to facilities in Ferndale, Auburn Hills and New Baltimore to receive in-patient treatment.
The flip side is that, the way it was being operated, Aurora was not fulfilling its obligation to provide proper treatment.
“In my opinion, they were in gross violation of the rules,” she said. “The children I know of who were in there were not receiving adequate services.”
Ted Jones expressed no ambiguity when asked what he thought about Aurora’s closure.
“It was the kind of place,” he said, “that no one should have to be in.”
Aurora’s management and board members had a problem with more than health care inspectors swarming through the place like, as former CEO Johnson puts it, “they were on a drug raid.”
According to board chairman Stone, the Detroit-Wayne County Community Mental Health Agency — which processed all government payments going to Aurora, accounting for about 98 percent of its budget — had been shortchanging the hospital for years.
“Every time they sent us a payment, they’d only be giving us 50, 60, 70 percent of what was actually owed,” he said.
Some board members say they were caught unaware by the extent of the hospital’s financial problems.
Said board member Bernard Moray: “We knew that the fiscal situation wasn’t great, but had no idea there wasn’t enough money to operate the facility.”
“Obviously, we were not receiving all the information we should have been receiving, or we would not have been surprised the way we were at the end,” added board member Edna Bell. “We knew there were problems with funding, but we were being told those problems were being worked out.”
The Detroit-Wayne County Community Mental Health Agency maintains it owes no money to Aurora. That dispute will be settled in a courtroom.
But some board members say they eventually concluded problems with the agency weren’t the only factor creating financial havoc at Aurora.
“There’s no doubt about the fact that monies for improving the hospital and keeping staff up to the required ratios were frustrated by all the capital going to Dr. Kim,” said board member Gaines, himself the former CEO of a mental health agency in Detroit. “The board was aware of that. You can’t have that amount of money going to an entity and still have a well-run hospital.”
“I think he was greedy,” concluded Gaines of Kim, adding, “but that’s business.”
Some contend that the local mental health agency used the patient care problems at Aurora as a pretext to justify withdrawing its contracts and avoid payment of its alleged $4 million bill.
That is certainly the position held by board chairman Stone, who said he is extremely “bitter” over the mental health board’s actions.
Gaines said there might be some truth to Stone’s theory, but he also believes there was another factor motivating the mental health board that approved payments to Aurora.
“I think they became completely aware of Dr. Kim’s lucrative arrangement with the hospital, and they didn’t like it,” said Gaines. “They won’t admit to that, but I think that’s what happened.”
Board member Agustin Arbulu made a similar observation.
“The management style of Salem was that they developed excuses and reasons for the problems we were experiencing with patient care,” he said. “… I think the board lost trust in them.”
Mohammed Okdie, chair of the Detroit-Wayne County Community Mental Health Board, said the agency didn’t need any ulterior motive to withdraw its contracts. The problems with patient care were so significant that no other reason was required to justify the action. But he admitted that, even though it was never a matter of formal discussion among board members, distrust of Aurora’s management loomed like a shadow.
“It was there, in the back of your mind, that dirty dealings were going on,” said Okdie.
The board withdrew its contracts with the hospital in December 2001.
As the situation at Aurora spiraled downward, members of its board finally concluded the hospital could no longer afford its relationship with Dr. Kim. The contract with Salem Services was terminated late in 2001, according to Stone.
Salem managers concealed problems with health care regulators when they first arose, according to Stone.
Board members weren’t the only ones being kept in the dark. According to a September 2001 letter to Aurora and Dr. Kim, the bond holder Finova said it was “very troubled” that it had not been informed of the problems Aurora was having with Medicare regulators. The hospital and Salem had also failed to provide required financial information, Finova said.
The plan was for Aurora to hire its own managers, which was exactly what Ravitz had urged more than two years earlier.
But by the time the board finally decided to sever its ties with Salem, there was nothing left to manage. An estimated 90 percent of Aurora’s patients were acquired through contracts with the local mental health agency; without those, Aurora could not survive.
At that point, the only options available to the board, said Stone, were to go bankrupt or reorganize. But to reorganize, he explained, the county would have to pay the money Aurora claimed was owed.
“I met with the county again in January (2002) and they refused to give us the money,” said Stone. “And without that money, there was nothing we could do.”
Rather than file for bankruptcy, the board disbanded. One member, lawyer and businessman Arbulu, stayed on, assuming the position of CEO. A new board has been created. Since then, he’s commanded a skeleton crew overseeing an empty facility. Money has come from payments on delinquent accounts. It’s with his direction that the lawsuit seeking reimbursement of the $4 million from the county was filed.
For his trouble, Arbulu has collected a salary of $12,500 a month, according to Eric Frankie, an attorney representing Aurora workers who claimed they were laid off without notice, as is required by law. The workers also claim they are owed vacation pay.
In an attempt to create a fresh start, Arbulu said, the nonprofit was renamed Horizon Healthcare.
In October 2002, Finova, the institution that financed the purchase of Aurora from Kim, foreclosed. It is attempting to sell the facility to recover its investment. A source familiar with negotiations says a deal could be near.
In January 2002, Carol Peart was indicted in federal court on an embezzlement charge connected with her employment previous to working for Salem and Aurora. It is alleged that while she was head of accounting for Mercy Health Services Inc., Peart participated in a scheme to embezzle several million dollars.
Mel Ravitz takes no satisfaction in having predicted Aurora’s demise.
“I would rather have been effective in stopping what I saw happening,” said Ravitz. “Closing that hospital was an enormous loss to the people of Detroit and Wayne County.”
Meanwhile, another Kim enterprise, the Greater Detroit Hospital, which Kim purchased with a partner in 1994, closed its doors in early 2000. It too remains shuttered.
Kim still has his counseling centers in Detroit. There also are at least two mental hospitals affiliated with Kim in Southern California that were purchased in 2000. And, in the fall of 2001, Illinois approved Salem’s purchase of what is now called Aurora Chicago Lakeshore Hospital. The purchase was entirely financed by a $4 million loan from Kim to Salem Service Company of California, a company solely owned by Kim, according to records obtained from Illinois regulators.
“Given the state of the economy and the health care services industry, business elsewhere is fine,” Kim wrote to Metro Times. “In any case, my affairs in other states are unrelated to the closure of the Greater Detroit and Aurora hospitals.”
And does he feel that he bears any responsibility for the closing of those two hospitals?
“No,” Kim replied.
Read the first installment of this controversial cover story.Curt Guyette is the Metro Times news editor. E-mail [email protected]