Government & Politics

Audit: Rural Missouri hospital at heart of $90 million billing scheme

Missouri Auditor Nicole Galloway began looking at Putnam County Memorial Hospital after a routine county audit raised questions about the hospital’s finances.
Missouri Auditor Nicole Galloway began looking at Putnam County Memorial Hospital after a routine county audit raised questions about the hospital’s finances.

A small Missouri hospital received $90 million in questionable insurance payments in less than a year, mostly for patients who hadn’t been treated there, according to an investigation by the Missouri auditor’s office.

Auditor Nicole Galloway’s office said Wednesday that it has passed the findings of its investigation on to federal and state law enforcement after uncovering the alleged billing scheme at Putnam County Memorial Hospital in Unionville, a town of about 1,800 in north-central Missouri.

“I can confirm our public corruption unit received the audit report and are reviewing it,” said Loree Anne Paradise, deputy chief of staff to Missouri Attorney General Josh Hawley.

Joe Bednar, a Spencer Fane attorney hired by Putnam County Memorial Hospital, said he will review the claims raised by the audit with the hospital board. He said he had been retained by the hospital recently.

“The client is confident they haven’t broken any laws,” Bednar told The Star. “They told me they (the allegations) were erroneous, they told me it was not true, they told me they were in compliance with the law.”

The hospital’s board hired David Byrns as CEO and his management company, Hospital Partners Inc., to take over day-to-day operations in September. Byrns hired a partner organization, Hospital Lab Partners, to provide lab services.

The board’s decision to hire Byrns was done without seeking competitive bids or offers from other hospital management companies. Auditors said board discussions related to the management contract were “informal in nature” and there was no critical evaluation of the proposal.

Byrns hung up twice when contacted by phone Wednesday and did not respond to multiple requests for comment. Bednar said to his knowledge Byrns was still working with the hospital.

Galloway’s audit found that the hospital passed on millions in insurance payments to the lab company, mostly for patients from across the country who had never received services at the hospital.

Annie Underwood, a 52-year-old caterer from Justin, Texas, said she received a bill from her insurance company 10 days ago saying she owed nearly $700 for blood work done at Putnam County Memorial Hospital, on top of the nearly $3,000 already paid by her insurer.

Underwood, who has never been to Missouri, thinks her insurer was improperly charged as part of the alleged billing scheme.

“I believe my insurance company is being gouged and severely over-billed,” she said. “Why would my doctor be sending my blood to Missouri? I’ve never been to that hospital, and I don’t believe any blood tests should cost that much money.”

The audit also found that the hospital paid out $10 million in lab management fees with little explanation of the charges.

Byrns, according to the audit, approved his own salary at the hospital — $200,000 a year — while his management company made $700,000.

Galloway’s audit gave Putnam County Memorial a “poor” performance rating, the worst possible designation.

“The decisions made by hospital management and the board are astounding in their irresponsibility and have the potential to negatively impact the hospital and the residents of Putnam County for years to come,” Galloway said.

Galloway began looking at the hospital after a routine audit by Putnam County raised questions about the hospital’s finances. During the audit, Galloway’s office received a call from a fraud examiner representing a Florida insurance company that denied about $700,000 worth of claims from Putnam County Memorial because the company suspected fraud.

Galloway’s office then heard from another insurance company that had identified $4.3 million in suspicious claims paid to the hospital.

In a written response to a draft version of the audit, the hospital rejected many of the claims. The audit described the hospital’s response as an attempt “to deflect the Board’s responsibility” and showed a lack of understanding by the board of its oversight responsibilities.

The audit also found that Byrns received reimbursement from the hospital for alcohol, cigarettes, car washes, golf outings and other questionable expenses worth at least $5,000.

James Stanger, who was once Byrns’ business partner in a Florida company called Frontier Hospitals, said Wednesday in a telephone interview that he no longer communicates with Byrns.

“Now he won’t take my calls,” Stanger said. “I live a few miles from him.”

Stanger described Frontier Hospitals as a venture that would buy or operate struggling hospitals in hopes of turning them around.

Federal court records show that Frontier Hospitals filed for bankruptcy in Florida in 2014.

Frontier Hospitals had a management contract for the South Cameron Memorial Hospital in Cameron, La., in 2013. Law enforcement authorities in Calcasieu Parish, La., investigated claims by the hospital’s bookkeeper about altered and forged checks written to Frontier Hospitals.

That investigation resulted in charges filed against Byrns in 2015 of felony theft, forgery and monetary instrument abuse. That case remains pending in Calcasieu Parish.

It’s not clear whether the Putnam County Memorial Hospital board of directors was aware of the Louisiana charges before hiring Byrns and his management company in 2016.

Galloway, in an interview with The Star, said the board hadn’t investigated Byrns’ background.

“The board did not do background checks; they went through almost no process before signing the management contract with Mr. Byrns and his management company,” Galloway said.

The board included in its contract with Byrns’ company an indemnity clause that would hold Hospital Partners harmless against liability arising from its work at the hospital.

That clause, which the audit described as unusual, could leave the hospital on the hook for any fraudulent conduct by Hospital Partners.

Bryan Lowry: 816-234-4077, @BryanLowry3

Steve Vockrodt: 816-234-4277, @st_vockrodt

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