Medicare has warned Carilion Roanoke Memorial Hospital it could lose significant funding unless it corrects problems identified during a state investigation of a mental patient's suicide in the hospital emergency room.

Lorraine Ryan, spokeswoman for the Centers for Medicare & Medicaid Services, said Wednesday that Carilion has been placed on a special status for hospitals that run afoul of agency regulations. Carilion was notified in a Sept. 11 letter that, as a result of the suicide, Medicare concluded that the hospital had failed in its duty to provide all patients a safe setting in which to receive care.

"Carilion is currently not in compliance," Ryan said. "They continue to receive Medicare payments, but there are steps that they are going to have to take to get back into compliance and avoid being terminated from the Medicare program."

Carilion said it had already addressed shortcomings in procedures by clearing rooms used by mental-health patients of medical equipment and other potentially harmful items. In addition, the hospital said it had begun making frequent, routine checks of such patients.

The changes occurred in the wake of a psychiatric patient hanging herself in a room where she was being held until a bed in a mental facility came open for her. Because there was no space available in any Roanoke Valley psychiatric facility, Carilion had put her in a special locked wing of the emergency department.

Eight hours after officials determined the woman needed hospitalization for mental-health issues, she used a cord to a medical device slung from a ceiling light to take her life.

Carilion Chief Executive Officer Dr. Edward Murphy could not be reached for comment.

Eric Earnhart, spokesman for Carilion, released Medicare's letter, a copy of a state investigative report into the suicide and a memo from hospital management to employees. The letter said hospital officials reported the suicide promptly, received a visit from an inspector and collaborated with the inspector on a plan of correction that has already been implemented.

As a follow-up, hospital officials told employees, an inspector or inspectors will return unannounced to confirm the hospital meets all conditions for participating in the Medicare and Medicaid programs.

"This is not unexpected and is appropriate," Nancy Agee, Carilion's chief operating officer, wrote to employees.

After the suicide July 25, the Virginia Department of Health began a hospital review Aug. 18. The inspector found "the facility failed to remove all safety hazards from the rooms in the Emergency Department Annex which were frequently used to retain psychiatric patients awaiting placement in psychiatric facilities," the inspection report said.

The patient was identified by a family member as Cheryl Keene. Carilion declined to identify the patient.

After the incident, the hospital assigned its personnel to check on psychiatric patients every 15 minutes and removed from each psychiatric holding room an otoscope and ophthalmic equipment that provided the cord used in the incident, the report said.

Inspectors are expected back within 12 weeks. "The facility will be required to respond with a plan of corrective action that will be subject to approval by CMS [by mid-November]. The hospital then has up to 90 days to complete the actions detailed in the plan to come back into compliance to avoid termination," Ryan said by e-mail.

In 2006, Medicare said such compliance reviews are rare, taking place against only 4 percent of the hospitals in the United States a year.

Lewis-Gale Medical Center in Salem faced such a review nearly three years ago.

A few hours after being informed by The Roanoke Times of the Medicare action, U.S. Rep. Bob Goodlatte, R-Roanoke County, said: "It's a serious matter, and it's important that Carilion come into compliance or show that they are in compliance so everyone in Roanoke who depends on the Medicare and Medicaid programs is able to continue to utilize their health care services. We are seeking additional information from CMS at this time."

Carilion has a lot at stake, because Medicare is an essential funding source, although Earnhart declined to say how much money is received by Roanoke Memorial from Medicare each year.

According to Carilion's financial reports, a third of the nearly $170 million in accounts receivable owed to the hospital system as of Sept. 30, 2007, was owed by Medicare. Carilion's total patient service revenue, across all health care operations, was nearly $1 billion last year.

But Ryan emphasized that most hospitals that fall out of compliance eventually fall in line before a funding loss.

The Sept. 11 letter lifted Carilion's "deemed status," Ryan said. Hospitals such as Roanoke Memorial that have earned accreditation from the Joint Commission on Accreditation of Healthcare Organizations are deemed, or assumed, to meet the conditions for participation in the Medicare and Medicaid programs. That remains true, unless a compliance issue is identified.

Staff writers Mason Adams and Laurence Hammack contributed to this report.