Massive fraud case involving Missouri hospital brings criminal charge to ex-CEO

A former top executive of a Missouri hospital has been charged in a massive billing fraud scheme that came to light in 2017 as a result of a state audit.

David Lane Byrns, the ex-chief executive of Putnam County Memorial Hospital, a 15-bed federally designated critical access hospital in Unionville, Missouri, was accused in federal court in Kansas City of one charge of conspiracy to commit health care fraud.

Byrns, according to an 11-page charging document filed on Friday, was part of a scheme to submit fraudulent claims for reimbursement on laboratory tests to insurance companies on behalf of the hospital in Unionville from patients who never visited the facility or had any connection to it.

According to the docket, Byrns’ case will be transferred from Kansas City to a federal court in Florida for plea and sentencing on the charge. Justin Johnston, a Kansas City attorney representing Byrns, was not available for comment Monday afternoon.

In 2017, Missouri Auditor Nicole Galloway released an audit alleging that Putnam County Memorial Hospital received $90 million in questionable insurance payments in less than a year. The Star began hearing from patients from out of state who said they had received bills from their insurance companies for lab tests done at the hospital in northern Missouri that they never visited.

Galloway at the time referred the matter to the Missouri Attorney General’s public corruption unit.

Byrns took control of Putnam County Memorial Hospital on Sept. 12, 2017, under a management contract with the hospital’s trustees through his company, Hospital Partners, which he ran with Jorge Perez of Florida.

The two presented themselves as businessmen who could reverse the fortunes of rural and financially strapped hospitals.

Court records show that Byrns quickly entered into agreements with a Florida contractor to provide claims processing in return for a 6.5% fee from revenue collected from insurance companies.

Another company in Florida that Byrns contracted with purported to operate a clinical lab at Putnam. The charging document filed against Byrns said the clinical lab company had access to a bank account where insurers would deposit reimbursements.

From October 2016 to February 2018, the document says, Byrns and others would submit false claims for reimbursement for blood and urine tests, resulting in $114 million in payments to Putnam County Memorial Hospital from private insurers and an affiliate of Missouri’s Medicaid program. Of that, the document says at least $63 million was transferred to the lab operator under contract with Putnam County Memorial Hospital.

“This all began with our audit of a small county-owned hospital. Our work helped expose a nationwide conspiracy that led to these federal criminal charges,” said Galloway, a Democrat who is running for Missouri governor in 2020, in a written statement. “Health care fraud impacts costs for all Missourians and underscores the importance of holding those responsible accountable. Over the past two years, my office has worked with law enforcement throughout the nation to ensure that those responsible for these crimes are punished.”

Friday’s filing says Byrns personally obtained $5.1 million from the conspiracy. The charge seeks to recover Byrns’ assets, including a money market account and a checking account with combined balances exceeding $2 million. It also seeks to take possession of four properties owned by Byrns, and his relatives, in Florida.

Public records in Florida list Byrns and Perez as officers in Hospital Partners as recently as April 2018.

Perez had also been chief executive of North Kansas City-based EmpowerHMS, a management company tied to several other rural hospitals in Kansas, Missouri and elsewhere that recently were experiencing cash flow issues to the point where payroll was not being met or facilities were closing.

Steve Vockrodt is an award-winning investigative journalist who has reported in Kansas City since 2005. Areas of reporting interest include business, politics, justice issues and breaking news investigations. Vockrodt grew up in Denver and studied journalism at the University of Kansas.