A $90 million billing scheme reached a 10-hospital group, lawsuit says
A North Kansas City company that bills itself as a savior of struggling rural hospitals has been late in paying employees at several facilities this month, and is also behind on rent and other financial obligations.
Employees for at least four of its hospitals in Oklahoma have reported late paychecks recently, according to a TV station report. Employees at EmpowerHMS hospitals in Kansas and Arkansas and a nurse at one of its Missouri facilities said employees there were also paid a week late in December.
“This is people’s lives and livelihood,” said Amy Mahurin, who works in the emergency room at I-70 Community Hospital in Sweet Springs, Mo.
Officials at EmpowerHMS did not respond to phone messages left Tuesday.
Mike Murtha, the president of a nonprofit that has promoted EmpowerHMS’ hospital acquisitions, acknowledged Tuesday that the chain is having cash flow issues. But he said they are temporary and should be resolved when supplemental Medicare reimbursements kick in next month or in February.
He also said EmpowerHMS’ financial woes are no different than those facing rural hospitals across the country and the company has plowed millions of dollars into keeping the affected hospitals open since acquiring them.
“Late paychecks beats the alternative of no paychecks and no hospital,” said Murtha, whose group is called the National Alliance of Rural Hospitals. “These are hospitals that were in pretty rough shape when these folks came in.”
EmpowerHMS CEO Jorge Perez is chairman of the alliance’s board of directors.
Rural hospitals are struggling with uncompensated care for indigent people, especially in states like Kansas, Missouri and Oklahoma that declined to expand Medicaid under the Affordable Care Act, commonly called Obamacare.
Their Medicare reimbursements are increased based on how much uncompensated care they provided the year before, which Murtha said should give the EmpowerHMS facilities a boost once 2019 starts.
“Every (rural) hospital is in an end-of-the-year crunch,” Murtha said.
But some of the unpaid bills in Oklahoma go back several months.
The Prague, Okla., City Council scheduled an emergency meeting Tuesday after employees’ paychecks were late. City Manager Jim Greff said EmpowerHMS is about 12 months behind on rent on the building, which the city owns. The last rent check, which was paid in June, was for the month of November 2017.
EmpowerHMS is also one month behind on its utility bills, which Greff said are also handled by the city. The hospital employs about 60 people, he said.
“We would have to be the ones to say ‘Let’s pull the plug,’ and I don’t look for that to happen,” Greff said.
Greff said Perez, like Murtha, has assured him that finances will improve soon after the New Year.
“I have talked to Mr. Perez, actually even talked to him this morning,” Greff said Tuesday, “and I’m sure we will be talking quite a bit more here in the future.”
KOTV6 in Tulsa also reported that employees at hospitals in the Oklahoma towns of Drumright, Fairfax and Stigler were getting late paychecks.
A resident of Drumright set up a GoFundMe crowdfunding account to help the hospital employees, but it stopped taking donations after the employees received their checks.
Under Perez’ leadership, EmpowerHMS came to the Kansas City area in early 2017, when it acquired another hospital operator, Rural Community Hospitals of America. It has since taken over other rural hospitals on the brink of closure, including Fulton Medical Center in Missouri.
It now runs Fulton and I-70 Community Hospital in Missouri, and Oswego Community Hospital, Hillsboro Community Hospital and Horton Community Hospital in Kansas.
Perez is also part owner of Hospital Partners Inc., a management company accused of running a $90 million lab services billing scheme at Putnam County Memorial Hospital in a report issued last year by Missouri State Auditor Nicole Galloway.
The scheme involved billing for tests at the hospital, which is able to charge higher rates than free-standing labs, even for patients from other states who weren’t treated there. A lawsuit filed earlier this year alleged that Perez and others planned to run a similar scheme at 10 other hospitals, including four of the EmpowerHMS facilities in Missouri and Kansas.
Perez and Hospital Partners have said that the suit is without merit, and the “non-patient” clinical lab testing that Galloway’s office found objectionable is entirely legal and in fact an essential way to bring in more revenue to rural hospitals. Hospital Partners is suing Galloway, contesting her right to perform the audit.
But Galloway has questioned whether the labs were even actually performed at the Putnam County hospital and outgoing U.S. Sen. Claire McCaskill, a Missouri Democrat, has asked federal agencies to investigate what she called “potentially fraudulent practices” there.
Meanwhile, some insurers have begun to balk at paying the lab fees. In February, Blue Cross Blue Shield of Oklahoma dropped four of the EmpowerHMS facilities from its network, citing “questionable billing practices” to The Oklahoman.
Murtha said that played a role in the financial struggles of the company’s hospitals in that state. But he said the bigger factors are all seasonal to this time of year and universal to rural hospitals.
Rural hospitals have been closing at an increased rate nationwide in recent years, with the burden again falling disproportionately on communities in non-Medicaid expansion states.
Mercy Hospital in Independence, Kan., closed in 2015 and another in southeast Kansas in the same chain, Mercy Hospital of Fort Scott, is scheduled to close at the end of this year.
A spokeswoman for St. Luke’s Health System confirmed to The Star this week that the Kansas City-based nonprofit hospital chain had “initial discussions” with Mercy about purchasing the Fort Scott facility, but they didn’t progress beyond that.
One EmpowerHMS facility in Oklahoma, Latimer County General Hospital, closed in October, but Murtha said the company is working hard to make sure there aren’t more closures.
“Everybody is obviously upset and nervous but I think time and again these folks have done what they can to keep the doors open,” Murtha said. “It is going to take about four to six weeks.”