Federal authorities announced Wednesday they are ending Medicare and Medicaid payments to a rural Tennessee hospital that has become so woefully broke that it cannot pay its employees, its vendors or even keep the lights on.

Portions of the hospital lost power last month because a $33,000 electricity bill had not been paid. Federal officials also allege the hospital has withheld taxes from employees' paychecks but then kept the money instead of paying it to the government.

Jamestown Regional Medical Center, an 85-bed facility that is the only hospital in Fentress County, will be terminated from government reimbursement programs on June 12, according to an announcement from the Centers of Medicaid and Medicare Services.

Reimbursement is a major funding source for any hospitals, so termination is likely a death knell for a hospital that was already in a desperate situation. Earlier this month, the Tennessean reported the hospital had reported net losses of more than $4.7 million over the past three years and identified the hospital as one of the 15 most struggling facilities in the state. In the weeks that followed, WBIR News in Knoxville reported that the hospital was low on supplies and no longer admitting ambulance patients.

Massive debt, taxes not paid

But a new federal investigation report, released Wednesday, show that finances were even worse behind the scenes.

According to the report, Jamestown Regional Medical Center owed more than $4 million to more than 200 vendors as of earlier this month. In addition to the unpaid electric bill, the hospital owed hundreds of thousands of dollars to emergency room doctors, a clinical services company and even its own billing vendor. The hospital was also making weekly payments to a blood bank to pay off a $15,000 debt.

At least one doctor recently quit the hospital because he felt the lack of staff, supplies and equipment were “unsafe,” the report states.

The investigation report also states that at least five employees told investigators they had discovered that income taxes or Social Security funds were withheld from their paychecks but never deposited with the government. One employee said her Social Security payments had not been made in three years.

Calls to the hospital administration were not immediately returned.

The trouble at this hospital are just the latest in a worsening crisis in Tennessee's rural hospitals. As health care has become more expensive and health insurance lags, many rural hospitals have been unable to pay their bills, creating health care deserts in poor, far-flung towns where residents are often the most vulnerable. Ten rural hospitals have closed in recent years and at least 15 more hospitals, mostly small and rural, have lost money three years in a row.

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Brett Kelman is the health care reporter for The Tennessean. He can be reached at 615-259-8287 or at brett.kelman@tennessean.com. Follow him on Twitter at @brettkelman.