Health Care

Last traces of North KC company disappearing as another Kansas hospital closes

The EmpowerHMS office in North Kansas City.
The EmpowerHMS office in North Kansas City.

Two years ago Florida resident Jorge A. Perez breezed into the Midwest promising to save struggling rural hospitals.

He headquartered a hospital management company, EmpowerHMS, in North Kansas City that at one point was running 14 facilities in seven states, including five in Kansas and Missouri.

Now that Midwest mini-empire is crumbling amid a lab billing controversy centered on Perez. One of the last vestiges of it disappeared at 5 p.m. Tuesday with the closure of Horton Community Hospital, a 15-bed facility north of Topeka.

Perez didn’t respond to an email seeking comment. Nor did officials with iHealthcare, the company Perez gave control of the hospitals to earlier this year, in a deal that stipulated he would stay involved in their management.

Horton hospital employees hadn’t been paid for almost a month, and, as at other Empower hospitals, there were reports of supply shortages and unpaid utility bills.

Jorge Perez.jpg
Jorge Perez spoke at a presentation in 2017 in Fulton, Mo., after a change in ownership of Fulton Medical Center. Jenny Gray Fulton Sun

Earlier Tuesday, Barbara McClain, the administrative assistant to Horton hospital CEO Ty Compton, said Compton was meeting with officials from the Kansas Department of Health and Environment who were inspecting the hospital in response to a complaint.

She didn’t think state officials were there to close the hospital but said, “it’s no secret we’re having a lot of issues; a lot of problems.”

A few hours later, the hospital closed. KDHE spokesman Gerald Kratochvil said it was not the agency’s decision.

“The administrators of the hospital closed on their own,” Kratochvil said. “Because of the closure, KDHE is in the process of revoking their license.”

Horton was the last of the nearby Empower dominoes to fall, after at least five months of persistent cash flow problems throughout the chain:

Oswego Community Hospital in southeast Kansas closed in February.

Hillsboro Community Hospital north of Wichita was placed in receivership in January, under the temporary management of an Oklahoma company, after the Bank of Hays started foreclosure proceedings on an unpaid $10 million mortgage.

I-70 Community Hospital, about an hour east of Kansas City, voluntarily suspended its license in February after the Missouri Department of Health and Senior Services visited about a complaint.

The Fulton Medical Center near Columbia is under new management as well.

In other states, local media have reported similar woes for Empower hospitals.

Almost all rural hospitals already faced headwinds, especially in states like Kansas and Missouri that have declined to expand Medicaid under the Affordable Care Act.

But the Empower hospitals also shouldered additional problems because of accusations that Perez intended to use his facilities as shells to funnel lab bills through, profiting from the increased reimbursements that rural hospital labs get to help keep the facilities open.

A scathing report to that effect by Missouri State Auditor Nicole Galloway was forwarded to the Missouri Attorney General for investigation in 2017. A federal lawsuit with similar allegations filed by a Mission Hills couple who were shareholders in a group of the Empower hospitals followed.

Some insurance companies began removing the hospitals from their networks, and by November reports of late paychecks and other cash flow problems started to emerge.

Over the last few months, Empower’s presence in North Kansas City has been minimal — most of its employees, including Perez, were based in Miami.

Documents filed with the federal Securities and Exchange Commission show that on Jan. 7, Perez entered into an agreement with iHealthcare, also based in Miami. He gave iHealthcare 10-year management contracts for Empower’s hospitals in exchange for millions of dollars in “success fees.”

It’s unclear how much of the success fees Perez will ultimately collect. The SEC documents say that they’re pro-rated if any of the facilities close or are put in receivership before the 10 years are up.

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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.