Health Care

Judge removes N. Kansas City company from running hospital, cites ‘irreparable harm’

A troubled North Kansas City-based hospital management company is down a Kansas facility as of Friday, and more of the remaining 13 across seven states may follow.

EmpowerHMS has been under scrutiny for months as employees of the rural hospitals it manages complained of late paychecks and lack of supplies and cities complained of unpaid rent and utility bills.

A spokesman for the chain has said the cash flow troubles are temporary.

But on Friday a district court judge granted the city of Hillsboro’s request to remove Empower as the operator of its hospital and install a temporary receiver until another operator can be found.

The court order stated “that immediate and irreparable harm is likely to result if a receiver is not appointed to operate and manage the hospital in order to ensure that it remains open and retains as much of its value as possible,” according to a news release from city administrator Larry Paine.

The court appointed Oklahoma-based Cohesive Healthcare and Management Consulting to take over the hospital temporarily.

Empower CEO Jorge Perez didn’t respond to an email sent Friday.

The court decision in Hillsboro, a town of about 3,000 people north of Wichita, comes just one week after Empower sent the city about $16,600 to pay off late utility bills after the city threatened to turn out the lights.

The city was joined in its receivership request by the Bank of Hays, which said an Empower-related company was in default on the $9.7 million loan it took out to acquire the hospital.

In a similar case, the city of Prague, Okla., filed suit Jan. 15 to seek the removal of Empower from its hospital and the appointment of a receiver, according to Prague city manager Jim Greff.

“The City Council decided to initiate the lawsuit after the current owners missed payroll and employees reported a concerning lack of supplies and equipment available to treat patients, and in light of the fact that the lease with the city for the hospital property has expired and no efforts had been made to extend it and get caught up on lease payments by the current owners,” Greff said in a prepared statement.

A hearing has been scheduled on a request to put another Empower hospital in Ripley, Tenn., in receivership as well, according to a recent Arkansas Democrat-Gazette story about the struggles of an Empower hospital in that state.

Empower still manages Kansas hospitals in Oswego and Horton and Missouri hospitals in Fulton and Sweet Springs.

Lisa Cox, a spokeswoman for the Missouri Department of Health and Senior Services, said state officials are keeping an eye on Empower after employees at its two Missouri hospitals voiced concerns about late pay and insurance cards getting declined.

“We are aware and monitoring their situations closely,” Cox said via email.

Empower’s headquarters is at 1700 Swift St., but most of its staff works in Miami.

The company bills itself as a savior of rural hospitals, which are facing financial headwinds nationwide. But Perez and other Empower leaders are under investigation in Missouri for a billing operation they allegedly ran through Putnam County Memorial Hospital in Unionville, which is no longer affiliated with them.

Rural critical-access hospitals get paid more for performing the same tests as free-standing labs. Missouri state Auditor Nicole Galloway said lab revenue rose astronomically at Putnam County after another Perez-affiliated company took over. Her office questioned whether the hospital possibly could have performed all the tests, or whether it was being used as a shell to funnel bills through.

Perez was also an executive in a company accused of running a similar scheme in Florida, at a hospital that went bankrupt. A pending lawsuit brought by a Mission Hills couple with an investment stake in 10 of the Empower hospitals alleges that he and others wanted to use those hospitals as lab billing shells as well.

Perez and the other defendants say the suit is baseless and have disputed Galloway’s findings.

But the controversy has taken a toll, with Blue Cross and Blue Shield of Oklahoma excluding several Empower hospitals from its network last year due to lab billing concerns.

The remaining EmpowerHMS hospitals are:

In Kansas: Horton Community Hospital and Oswego Community Hospital.

In Missouri: Fulton Medical Center and I-70 Community Hospital.

In Oklahoma: Prague Community Hospital, Fairfax Community Hospital, Haskell County Community Hospital, Drumright Regional Hospital, Latimer County General.

Elsewhere: Lauderdale Community Hospital (Tennessee), DeQueen Medical Center (Arkansas), Washington County Hospital (North Carolina), Regional General Hospital Williston (Florida).

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Kansas City Star health reporter Andy Marso was part of a Pulitzer Prize-finalist team at The Star and previously won state and regional awards at the Topeka Capital-Journal and Kansas Health Institute News Service. He has written two books, including one about his near-fatal bout with meningitis.