They paid health premiums for months, but say their JoCo employer kept the cash
Employees of a Johnson County hospital company say they made health care premium payments for months only to find out that their employer pocketed the funds, leaving them uninsured.
Two nurses at Pinnacle Regional Hospital in Boonville, Missouri, filed a class action lawsuit against their employer Wednesday. That’s the same day the hospital announced it would abruptly close its doors within hours, citing a series of challenges with state regulators.
Surgical nurses Tiffany Carmichael and Michelle Rice say Overland Park-based Pinnacle Health Care Systems has been deducting insurance premium from their bi-monthly paychecks since July. But health insurer Anthem Blue Cross & Blue Shield has denied claims, saying both lacked valid insurance since July 1, according to the lawsuit.
Both declined interviews through their attorney, Blake Green. In a statement, he said he and his clients took “no joy” in filing suit.
“We filed this class action suit in an effort to protect the hospital’s employees and seek justice on their behalf,” his statement read in part.
While his office is in North Kansas City, Green was born in Boonville’s hospital and raised in the central Missouri town about 25 miles west of Columbia.
“We know how much the hospital has meant to members of the Boonville community and its loyal employees,” the statement read.
The lawyer did not want to comment further on the case, but said he’s had several Pinnacle employees sign up as clients since filing the lawsuit. One, he said, has incurred more than $100,000 in medical bills after seeking treatment and surgery for a major health issue, only to find out later she was uninsured.
The lawsuit over the health insurance issue is just one sign of the recent chaos at Pinnacle, which specializes in weight loss surgeries and spine and pain issues. Aside from its now-closed Boonville location, the company also has a hospital in Overland Park and operates Blue Valley Surgical Associates, which has several locations in Kansas and Missouri.
On Tuesday, Pinnacle’s Chief Financial Officer Dale Ferrell emailed employees informing them that the next day’s bi-monthly payroll would be delayed because of “extraordinarily low” cash flows over the holiday season.
But on Thursday, Pinnacle owner Douglas Palzer said in a different email to employees that the CFO, along with the chairman and administrative office manager were “no longer with the company.”
In that email, which sources provided to The Star, the owner said the company would seek to reorganize under Chapter 11 bankruptcy protections.
Palzer’s note also acknowledged the ongoing issue with employee health insurance coverage. He said that projected cash flows through the end of the month would help the company “pay off” Anthem Blue Cross & Blue Shield for “prior and current health insurance.” But he said employees would transition to a new Aetna Insurance plan on Feb. 1.
“Employee payroll, taxes and benefits will continue to be our first priority followed by payment to critical vendors,” Palzer wrote. “I hope that you will continue to support management to ensure that we continue to operate for the foreseeable future.”
A wider problem
In the lawsuit, the two nurses say they both signed up for coverage during the company’s open enrollment period in late 2018. At that time, Pinnacle provided full payment of premiums for employees, spouses and dependents.
But in May 2019, the company informed workers that they would no longer pay those premiums and the company held another open enrollment period, the lawsuit contends.
Officials with Anthem could not immediately be reached for comment.
Carmichael says Pinnacle deducted $83.30 in premium costs from each bi-monthly paycheck between July 1 and the end of 2019. That totaled $916.30. Rice says her employer deducted $224.91 per paycheck over that time, totaling $2,474.01.
But the lawsuit says claims for care have been denied. The two plaintiffs say the concerns have been raised with management and human resources without remedy.
Aside from the premiums deducted, the employees could potentially owe thousands in medical bills. The suit says one of the nurses was hospitalized in the fall of 2019 for an illness and later was told her claim would be denied because she had not had valid insurance since July 2019.
The lawsuit alleges the hospital acted “without justification, either in a malicious attempt to procure additional monies that it was not entitled to, or with reckless disregard for the damage and harm” those actions would have on workers.
Allowing the hospital to keep those funds “violates fundamental principles of justice, equity and good conscience,” the suit contends. In it, the attorney says he believes the class action could eventually consist of “dozens and perhaps hundreds” of individuals.
While only Boonville employees are named in the suit, the lack of health insurance coverage has plagued employees in Johnson County as well, said a registered nurse in Overland Park, who did not want to be named for fear of retaliation.
That nurse told The Star that employees have been paying into insurance since July but have had no claims covered over that time.
“We were paying into a policy that doesn’t even exist,” the nurse said. “What happened to the money for the premiums we paid?”
In an email to The Star, Pinnacle spokeswoman Lori Davies did not answer questions about employee’s health insurance. She referenced the executive shakeup and said employees should receive their paychecks by Friday or Saturday with only a “slight 2-day delay.”
Employees can file a wage claim with the Kansas Department of Labor for missed pay. Agency spokeswoman Julie Menghini said they can also file a claim for the improper payroll deduction of insurance premiums.
“We have had multiple inquiries, but as of this morning only one claim has been filed,” she said.
On Friday, the Missouri Department of Labor said it had received no complaints from Pinnacle employees.
A history of financial woes
In Overland Park, Pinnacle Regional Hospital employs about a dozen doctors at 12850 Metcalf Ave., according to its website. Formerly known as Blue Valley Hospital, that facility first publicly aired financial concerns in 2018.
That’s when the Centers for Medicare and Medicaid Services pulled the certification of the hospital, depriving it of Medicare reimbursements — a move the hospital said could cripple it financially. CMS made the decision after an inspection found the facility didn’t treat enough patients and wasn’t performing enough surgeries that require long stays to qualify for the higher Medicare reimbursements it had been receiving as an inpatient hospital.
The hospital sued the federal government in an attempt to keep Medicare funding, but a judge dismissed the lawsuit later in 2018.
According to federal inspectors, Blue Valley Hospital offered employee discounts on weight-loss surgery and asked workers to falsify records to try to pump up its inpatient numbers.
Pinnacle purchased the Cooper County Memorial Hospital in Boonville in October 2018. At the time, Pinnacle committed to continue providing all current health services.
But it has faced multiple regulatory problems.
A few days before the closure, Pinnacle announced that it would cease laboratory testing because of “regulatory issues.” Last week, the hospital was ordered to stop performing surgeries after a routine inspection found that the hospital’s sterilization room had problems with pressure, temperature and humidity.
In Thursday’s email to employees, Palzer said he has personally invested about $4 million into the hospital company in the last six months to make payroll and keep the doors open. He said he would continue to do whatever he could to stay open.
The owner said the company was unable to work with its bank “to retain sufficient funds to make payroll and payroll taxes.” But he said Medicare funds were in the mail, which would help cover payroll costs.
Palzer said bankruptcy reorganization would allow management to cover operating expenses with its cash flow, while negotiating with vendors and banks to decrease expenses in the future.
“Now is the time to increase surgical volume, increase and improve cash collections and concentrate on determining what service and facility changes may be needed,” the owner wrote.
This story was originally published January 17, 2020 at 5:00 AM.
