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Vulnerable Rural Hospitals Face Tough Decisions On Questionable Billing Schemes

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Vulnerable Rural Hospitals Face Tough Decisions On Questionable Billing Schemes

Vulnerable Rural Hospitals Face Tough Decisions On Questionable Billing Schemes

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STEVE INSKEEP, HOST:

Next, we have a story of exactly what a rural hospital can do to stay afloat. It is hard for many of them. Two hospitals in Missouri recently signed deals with a private company that promised to turn them around, but how's it doing that? U.S. Senator Claire McCaskill has called for a federal investigation. Bram Sable-Smith reports from our member station KBIA.

BRAM SABLE-SMITH, BYLINE: City Hall in Fulton, Mo., was packed when Jorge Perez was introduced last September. He stood shyly at the podium as he received a standing ovation.

(APPLAUSE)

SABLE-SMITH: He had just saved the only hospital in the county. It was scheduled to shut its doors that week, which would have made Fulton the 80th rural community in the U.S. to lose its hospital in the last eight years.

JORGE PEREZ: We travel all over the country, and we see this same thing that we see here in Fulton, a town that's fighting to keep their hospital.

SABLE-SMITH: At a time when rural hospitals are struggling, Perez operates close to 20 of the facilities in states including Missouri, Kansas, Oklahoma and Florida. He says he thinks he can make them profitable. After the press conference, he said he wants to own 50 by the end of this year.

PEREZ: Part of our secret sauce is that, you know, we'll bring in new services that didn't exist before.

SABLE-SMITH: But one of those new services is raising serious questions at a different rural hospital, Putnam County Memorial in Unionville, Mo. In September 2016, one of Perez's Florida-based companies took over the hospital. Days later, a separate company incorporated in Florida and started billing for laboratory work through the tiny Missouri hospital, including for work that was not conducted there, according to an audit by Missouri auditor Nicole Galloway. The audit found that within six months, the hospital had billed for $92 million in lab work. By comparison, it generated less than $8 million in total revenue the year before. Galloway said in an interview after releasing the audit that the changes were red flags.

NICOLE GALLOWAY: It appears that Putnam County Memorial Hospital is being used as a shell company for questionable lab activity that's occurring across the country.

SABLE-SMITH: Last August, Galloway issued the audit questioning the lab billings. Eighty percent of the revenue went to private lab companies, some with business ties to Perez.

GALLOWAY: The majority, the significant majority of these billings, occurred for patients that have never been to Putnam County Memorial Hospital, have never even been to Missouri.

SABLE-SMITH: Galloway said in a press release announcing the audit that she turned her findings over to criminal authorities. U.S. Senator Claire McCaskill has called for a federal investigation into the billing arrangements, and the Missouri attorney general's office confirmed in a statement that it's actively investigating the matter, as well. Court records show one of Jorge Perez's close associates in the hospital arrangement who accompanied Perez to a sit-down interview last September has spent time in prison for fraud. The fraud was unrelated to the hospital arrangement. But in that interview, Perez defended the lab billing practice. He says he runs similar programs at some of his other hospitals, and there's even a book written about how to do it.

PEREZ: We had numerous attorneys review that, and the only other opportunity this hospital had to survive was for them to put a lab outreach program.

SABLE-SMITH: Indeed, these types of arrangements have popped up around the country in the past two years. Michigan health care attorney Brian Bauer says while they may be legal, there's a catch. He says insurance companies typically cut small, rural hospitals a deal, paying them at higher rates. But when they make those deals, he says, insurers are not anticipating this kind of high-volume lab program and its tens of millions of dollars in extra revenue.

BRIAN BAUER: The insurance companies usually object, taking the position. While this isn't the volume that we agreed to

SABLE-SMITH: In fact, several insurance companies are suing Perez and others in Missouri, seeking to recoup over $60 million. And earlier this year, Putnam's board of trustees ousted Perez's company from the hospital. Perez's company, in turn, is suing the trustees as well as Missouri state auditor, seeking to regain control of the hospital, a retraction of the audit and $2 million in damages. Whether Putnam County will be able to keep its hospital open without Perez and his billing program remains an open question. It's a reminder of the stakes for rural communities across America, where 700 more hospitals are at risk of closing. For NPR News, I'm Bram Sable-Smith in Missouri.

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INSKEEP: This story comes to us from a reporting partnership between NPR News, Side Effects Public Media and Kaiser Health News.

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