Category Archives: Management Company

What’s going on at Steward Health Care?

Posted on by • Posted in Audit, Audited Financial Statements, Auditor External, Bankruptcy, Debt Capacity, Debt Structure, Financial Stewardship, Financial Transparency, Financial Viability, Financially Distressed, For-Profit, Health System, Leverage, Management, Management Company, Monetize, Physician Leadership, Private Equity • Leave a comment
https://www.healthcaredive.com/news/steward-health-care-distress/706940/?utm_source=Sailthru&utm_medium=email&utm_campaign=Newsletter%20Weekly%20Roundup:%20Healthcare%20Dive:%20Daily%20Dive%2002-17-2024&utm_term=Healthcare%20Dive%20Weekender

The physician-led healthcare network formed to save hospitals from financial distress. Now, hospitals in its own portfolio need bailing out after years of alleged mismanagement.

Steward Health Care formed over a decade ago when a private equity firm and a CEO looking to disrupt a regional healthcare environment teamed up to save six Boston-based hospitals from the brink of financial collapse. Since that time, Steward has expanded from a handful of facilities to become the largest physician-led for-profit healthcare network in the country, operating 33 community hospitals in eight states, according to its own corporate site.

However, Steward has also found itself once again on the precipice of failure. 

The health system has been emanating signs of distress since late last year. Its landlord says Steward owes over $50 million in unpaid debts. A federal lawsuit alleges Steward defrauded the Medicare program. Steward has closed hospitals in Massachusetts and Texas, and publicly contracted restructuring advisors in January, fueling speculation about a potential bankruptcy filing.

Steward’s ongoing issues in Massachusetts have played out in regional media outlets in recent weeks. Massachusetts Gov. Maura Healey warned there would be no bailout for Steward in an interview on WBUR’s Radio Boston.  

Worries about financial problems prompted Boston-based Mass General Brigham to pull doctors from Steward-owned Holy Family Hospital late last month. Steward has also been accused of mismanaging other facilities.

The Massachusetts Department of Public Health said it is investigating concerns raised about Steward facilities and began conducting daily site inspections at some Steward sites to ensure patient safety beginning Jan. 31.

However, the tide may have begun to change. Steward executives said on Feb. 2 they had secured a deal to stabilize operations and keep Massachusetts hospitals open — for now. Steward will receive bridge financing under the deal and consider transferring ownership of one or more hospitals to other companies, a Steward spokesperson confirmed to Healthcare Dive on Feb. 7.

While politicians welcomed the news, some say Steward’s long term outlook in the state is uncertain. Other politicians sought answers for how a prominent system could seemingly implode overnight. 

“I am cautiously optimistic at this point that [Steward] will be able to remain open, because it’s really critical they do,” said Brockton City Councilor Phil Griffin. “But they owe a lot of people a lot of money, so we’ll see.” 

Built on financial engineering

Steward Health Care was created in October 2010, when private equity firm Cerberus Capital Management purchased failing Caritas Christi Health Care for $895 million. Steward CEO Ralph de la Torre, who stayed on from his post as president of CCHC, wanted to revolutionize healthcare in the region. His strategy was to woo patients away from larger health systems by recruiting their physicians and offering routine, inpatient care for a fraction of the price.

However, the business model wasn’t immediately a financial success. Steward didn’t turn a profit between 2011 and 2014, according to a 2015 monitoring report from the Massachusetts attorney general. Instead, Steward’s debt increased from $326 million in 2011 to $413 million at the end of the 2014 fiscal year, while total liabilities ballooned to $1.4 billion in the same period as Steward engaged in real estate sale and leaseback plays. 

Under the 2010 deal, Steward agreed to assume Caritas’ debt and carry out $400 million in capital expenditures over four years to upgrade the hospitals’ infrastructure. However, that capital expenditure could come in part from financial engineering, such as monetizing Steward’s own assets, according to Zirui Song, associate professor of health care policy and medicine at the Harvard Medical School who has studied private equity’s impact on healthcare since 2019.

Cerberus did not contribute equity into Steward after making its initial investment of $245.9 million, according to the December 2015 monitoring report. Meanwhile, according to reporting at the time, de la Torre wanted to expand Steward. Steward was on its own to raise funds.

To generate cash, Steward engaged in another leaseback play, selling its properties to Alabama-based real estate investment trust Medical Properties Trust for $1.25 billion in 2016. Steward used the funds to pay back its remaining obligations to Cerberus and expand beyond Massachusetts, acquiring 18 hospitals from IASIS Healthcare in 2017.

Such deals are typically short-sighted, Song explained. When hospitals sell their property, they voluntarily forfeit their most valuable assets and tend to be saddled with high rent payments.

Cerberus exited its Steward play in 2020, $800 million richer. Steward lost more than $800 million between 2017 and 2020.

A pattern of poor performance

Healthcare Dive spoke with four workers across Steward’s portfolio who said Steward’s emphasis on the bottom line negatively impacted the company’s operations for years. 

Terra Ciurro worked in the emergency department at Steward Health Care-owned Odessa Regional Medical Center in January 2022 as a travel nurse. She recalled researching Steward and being attracted to the fact the company was physician owned.

“I remember thinking, ‘That’s all I need to know. Surely, doctors will have their heart in the right place,’” Ciurro said. “But yeah — that’s not the experience I had at all.”

The emergency department was “shabby, rundown and ill-equipped,” and management didn’t fix broken equipment that could have been hazardous, she said. Nine weeks into her 13-week contract and three hours before Ciurro was scheduled to work, Ciurro said her staffing agency called to cut her contract unceremoniously short. Steward hadn’t paid its bills in six months, and the agency was pulling its nurses, she said she was told. 

In Massachusetts, Katie Murphy, president of the Massachusetts Nurses Association, which represents more than 3,000 registered nurses and healthcare professionals who work in eight Steward hospitals, said there were “signals” that Steward facilities had been on the brink of collapse for “well over a year.”  

Steward hospitals are often “significantly” short staffed and lack supplies from the basics, like dressings, to advanced operating room equipment, said Murphy. While most hospitals in the region got a handle on staffing and supply shortages in the aftermath of the COVID pandemic, at Steward hospitals shortages “continued to accelerate,” Murphy said.

A review of Steward’s finances by BDO USA, a tax and advisory firm contracted last summer by the health system itself to demonstrate it was solvent enough to construct a new hospital in Massachusetts, showed Steward had a liquidity problem. The health system had few reserves on hand last year to pay down its debts owed to vendors, possibly contributing to the shortages. The operator carried only 10.2 days of cash on hand in 2023. In comparison, most healthy nonprofit hospital systems carried 150 days of cash on hand or more in 2022, according to KFF.

One former finance employee, who worked for Steward beginning around 2018, said that the books were routinely left unbalanced during her tenure. Each month, she made a list of outstanding bills to determine who must be paid and who “we can get away with holding off” and paying later. 

Food, pharmaceuticals and staff were always paid, while all other vendors were placed on an “escalation list,” she said. Her team prioritized paying vendors that had placed Steward on a credit hold.

The worker permanently soured on Steward when she said operating room staff had to “make do” without a piece of a crash cart — which is used in the event of a heart attack, stroke or trauma. 

She stopped referring friends to Steward facilities, telling them “Don’t go — if you can go anywhere else, don’t go [to Steward], because there’s no telling if they’ll have the supplies needed to treat you.” 

Away from regulatory review

Massachusetts officials maintain that it hasn’t been easy to see what was happening inside Steward.

Steward is legally required to submit financial data to the MA Center for Health Information and Analysis (CHIA) and to the Massachusetts Registration of Provider Organizations Program (MA-RPO Program), according to a spokesperson from the Health Policy Commission, which analyzes the reported data. Under the latter requirement, Steward is supposed to provide “a comprehensive financial statement, including information on parent entities and corporate affiliates as applicable.” 

However, Steward fought the requirements. During Stuart Altman’s tenure as the chair of the Commission from 2012 to 2022, Altman told Healthcare Dive that the for-profit never submitted documents, despite CHIA levying fines against Steward for non-compliance. Steward even sued CHIA and HPC for relief against the reporting obligations.

Steward is currently appealing a superior court decision and order from June 2023 that required it to comply with the financial reporting requirements and produce audited financial reports that cover the full health system, Mickey O’Neill, communications director for the HPC told Healthcare Dive. As of Feb. 6, Steward’s non-compliance remained ongoing, O’Neill said.

Without direct insight into Steward’s finances, the state was operating at a disadvantage, said John McDonough, professor of the practice of public health at The Harvard T.H. Chan School of Public Health. He added that some regulators saw a crisis coming generally, “but the timing was hard to predict.” 

Altman gives his team even more of a pass for not spotting the Steward problem.

“There was no indication while I was there that Steward was in deep trouble,” Altman said. Although Steward was the only hospital system that failed to report financial data to the HPC, that alone had not raised red flags for him. “[CEO] Ralph [de la Torre] was just a very contrarian guy. He didn’t do a lot of things.”

Song and his co-author, Sneha Kannan, a clinical research fellow at Harvard Medical School, are hopeful that in the future, regulatory agencies can make better use of the data they collect annually to track changes in healthcare performance over time. They can potentially identify problem operators before they become crises. 

“State legislators, even national legislators, are not in the habit of comparing hospitals’ performances on [quality] measures to themselves over time — they compare to hospitals’ regional partners,” Kannan said. “Legislators, Medicare, [and] CMS has access to that information.” 

However, although there’s interest from regulators in scrutinizing healthcare quality more closely — particularly when private equity gets involved — a streamlined approach to analyzing such data is still a “ways off,” according to the pair. For now, all parties interviewed for this piece agreed that the best way to avoid being caught off guard by a failing system was to know how such implosions could occur. 

“If there’s a lesson from [Steward],” McDonough ventured, “it is that the entire state health system and state government need to be much more wary of all for-profits.”

The rising danger of private equity in healthcare

Posted on by • Posted in Adverse Events, Federal Trade Commission, Federal Trade Commission (FTC), Financialization of Health, Health Insurance Industry, Health System, Hospital, Hospital Industry, Joint Liability, Management Company, Market Consolidation, Market Power, Market Trends, Mergers & Acquisitions, Ownership Transparency, Private Equity, Regulation, Social Responsibility, Tax Loopholes • Leave a comment
The rising danger of private equity in healthcare

Private equity (PE) acquisitions in healthcare have exploded in the past decade. The number of private equity buyouts of physician practices increased six-fold from 2012-2021. At least 386 hospitals are now owned by private equity firms, comprising 30% of for-profit hospitals in the U.S. 

Emerging evidence shows that the influence of private equity in healthcare demands attention. Here’s what’s in the latest research.

What is private equity?

There are a few key characteristics that differentiate private equity firms from other for-profit companies. At a 2023 event hosted by the NIHCM Foundation, Assistant Professor of Health Care Management at The Wharton School at the University of Pennsylvania Dr. Atul Gupta explained these factors:

  1. Financial engineering. PE firms primarily use debt to finance acquisitions (that’s why they’re often known as “leveraged buyouts”). But unlike in other acquisitions, this debt is placed on the balance sheet of the the target company (ie. the physician practice or hospital). 
  2. Short-term goals. PE firms make the majority of their profits when they sell, and they look to exit within 5-8 years. That means they generally look for ways to cut costs quickly, like reducing staff or selling real estate. 
  3. Moral hazard. PE companies can make a big profit even if their target firm goes bankrupt. This is different from most investments where the success of the investor depends on how well the target company does.

The nature of private equity itself has serious implications for healthcare, in which the health of communities depends on the long-term sustainability and quality improvement of hospitals and physician practices. But are these concerns borne out in the real world?   

PE acquisition and adverse events

A recent study in JAMA from researchers at Harvard Medical School and the University of Chicago analyzed patient mortality and the prevalence of adverse events at hospitals acquired by private equity compared to non-acquired hospitals. The study used Medicare claims from more than 4 million hospitalizations from 2009-2019, comparing claims at 51 PE-acquired hospitals and 249 non-acquired hospitals to serve as controls.

In-hospital mortality decreased slightly at PE-acquired hospitals compared to controls, but not 30-day mortality. This may be because the patient mix at PE-acquired hospitals shifted more toward a lower-risk group, and transfers to other acute care hospitals increased. 

However, there were concerning results for patient safety. The rate of adverse events at PE-acquired hospitals compared to control hospitals increased by 25%, including a 27% increase in falls, 38% increase in central line-associated bloodstream infections (CLABSI), and double the rate of surgical site infections. The authors found the rates of CLABSI and surgical site infections at PE-acquired hospitals alarming because overall surgical volume and central line placements actually decreased. 

What could be behind these higher rates of adverse events after PE acquisition? In a Washington Post op-ed, Dr. Ashish Jha, dean of the School of Public Health at Brown University, writes that it’s down to two things: staffing levels and adherence to patient safety protocols. “Both cost money, and it is not a stretch to connect cuts in staffing and a reduced focus on patient safety with an increased risk of harm for patients,” he writes.   

Social responsibility impact

Private equity acquisitions may have a negative effect on patient safety, but what about social responsibility? In a recent report from PE Stakeholder on the impact of Apollo Global Management’s reach into healthcare, the authors use the Lown Institute Hospitals Index to understand hospitals owned by Apollo perform on social responsibility. Lifepoint Health, a health system owned by Apollo, was ranked 222 out of 296 systems on social responsibility nationwide. And in Virginia, North Carolina, and Arizona, some of the worst-ranked hospitals in the state for social responsibility are those owned by Lifepoint Health, the PE Stakeholder report shows.

Apollo Global Management is the second largest private equity firm in the United States, with $598 billion total assets under management, according to the report. The PE stakeholder report outlines concerning practices by Apollo, including putting high levels of debt that lowers hospitals’ credit ratings and increases their interest rates, cutting staff and essential healthcare services, and selling off real estate for a quick buck. If we care about hospital social responsibility we should clearly be concerned about private equity acquisitions. 

The bigger picture

Private equity buyouts did not come from out of nowhere, so what does this trend tell us about our healthcare system? PE acquisitions are in many ways a symptom of larger issues in healthcare, such as increasing administrative burden, tight margins, and lack of regulation on consolidation. For owners of private physician practices that face a lot of administrative work, deciding to sell to a PE firm to reduce this workload and focus on patient care (not to mention, getting a hefty payout) is a tempting proposal. 

In the Washington Post, Ashish Jha describes what made his colleague decide to sell his practice to a PE firm: “The price he was getting was very good, and he was happy to outsource the headache of running the business (managing billing, making sure there was adequate coverage for nights and weekends, etc.).”

“In many ways, private equity is both a response to and an accelerator of broader health system trends – one in which consolidation is happening quickly, care is being delivered by larger and larger entities, and corporate influence is growing.”Jane M. Zhu, MD, MPP, MSHP, Associate Professor of Medicine at Oregon Health & Science University, at NIHCM Foundation Event

PE buyouts are also indicative of a larger trend, what some researchers call the “financialization” of health. As Dr. Joseph Bruch at the University of Chicago and colleagues describe in the New England Journal of Medicine, financialization refers to the “transformation of public, private, and corporate health care entities into salable and tradable assets from which the financial sector may accumulate capital.”  

Financialization is a sort of merging of the financial and healthcare sectors; not only are financial actors like private equity buying up healthcare providers, but healthcare institutions are also acting like financial firms. For example, 22 health systems have investment arms, including nonprofit system Ascension, which has its own private equity operation worth $1 billion. The financialization of healthcare is also reflected in the boards of nonprofit hospitals. A 2023 study of US News top-ranked hospitals found that a plurality of their board members (44%) were from the financial sector. 

What we can do about it?

What can we do to mitigate harms caused by PE acquisitions? In Health Affairs Forefront, executive director of Community Catalyst Emily Stewart and executive director of the Private Equity Stakeholder Project Jim Baker provide some policy ideas to stop the “metastasizing disease” of private equity:

  • Joint Liability. Currently PE firms can put all of their debt on the balance sheet of the firm they acquire, letting them off the hook for this debt and making it harder for the acquired company to succeed. “Requiring private equity firms to share in the responsibility of the debt…would prevent them from making huge profits while they are saddling hospitals and nursing homes with debts that ultimately impact worker pay and cut off care to patients,” write Stewart and Baker.
  • Regulate mergers. Private equity acquisitions often go under the radar because the acquisitions are small enough to not be reported to authorities. But the U.S. Federal Trade Commission could be more aggressive in evaluating mergers and buyouts by PE, as they have done recently in Texas, where a PE firm has been buying up numerous anesthesia practices. 
  • Transparency of PE ownership. It can be hard to know when hospitals are bought by a PE firm. The Department of Health and Human Services could require disclosure of PE ownership for hospitals as they have done for nursing homes.
  • Remove tax loopholes. The carried interest loophole allows PE management fees to be taxed at as capital gains, which is a lower rate than corporate income. Closing this loophole would remove a big incentive that makes PE buyouts so attractive for firms.  

“It is clear that the problem is not the lack of solutions but rather the lack of political will to take on private equity,” write Steward and Baker.

We need not to not only stem the tide of PE acquisitions sweeping through healthcare, but address the financialization of healthcare more broadly, to put patients back at the center of our health system.

StoneBridge Healthcare, nonprofit offer $706M for Tower Health

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https://www.beckershospitalreview.com/finance/stonebridge-healthcare-nonprofit-offer-706m-for-tower-health.html?origin=CFOE&utm_source=CFOE&utm_medium=email&utm_content=newsletter&oly_enc_id=2893H2397267F7G

StoneBridge Healthcare, a hospital turnaround firm, is looking to enter a management contract with Delaware-based WoodBridge, a nonprofit organization, to acquire West Reading, Pa.-based Tower Health for $706 million, the Philadelphia Business Journal reported Dec.12.

WoodBridge, a sister organization to StoneBridge, was expected to share a nonbinding agreement in principle with Tower Health on Dec. 12, which includes the intent to purchase the system’s assets, the publication reported.

An initial cash payment of $550 million, including the assumption of finance leases with liabilities of $156 million, and a commitment of hiring nearly all the system’s 11,000 employees are featured in the proposed deal.

Tower Health operates Reading Hospital, Pottstown Hospital and Phoenixville Hospital. St. Christopher’s Hospital for Children in Philadelphia is also under the system in partnership with Drexel University. 

If all goes well, the plan would involve StoneBridge negotiating a management agreement with WoodBridge, Joshua Nemzoff, founder and CEO of StoneBridge, told the Journal. However, Mr. Nemzoff said WoodBridge is only interested in acquiring the Reading, Pottstown and Phoenixville hospitals.

This is not the first time that StoneBridge has attempted to acquire the system. Last November, the firm offered Tower Health $675 million, which was turned down. StoneBridge, in partnership with Allentown, Pa.-based Lehigh Valley Health Network, also made two conditional offers in 2021 to acquire the system’s assets for $600 million, which were also declined. 

Formed in 2020, StoneBridge’s mission is to purchase and turn around acute care hospitals that are in significant economic distress. The firm currently does not own or operate any hospitals. Like StoneBridge, WoodBridge also hasn’t completed hospital deals, and will have its own separate board of directors, the publication reported.

Becker’s has reached out to StoneBridge Healthcare and Tower Health for comments on the potential acquisition.

StoneBridge Healthcare Makes Bid to Acquire Care New England Health System

Posted on by • Posted in Financial Viability, Financially Distressed, Health System, Hospital, Hospital Industry, Leadership, Management Company, Management Consulting, Mergers & Acquisitions, Private Equity, Turnaround, Turnaround Plan • Leave a comment

https://www.prnewswire.com/news-releases/stonebridge-healthcare-makes-bid-to-acquire-care-new-england-health-system-301187518.html

StoneBridge Healthcare Makes Bid to Acquire Care New England Health System

Letter of Intent offered to acquire Rhode Island-based Care New England Health System

StoneBridge Healthcare, LLC (StoneBridge), an innovative company formed to buy, save and turn around distressed hospitals in the cities and suburbs of America, today announced it has presented a Letter of Intent (LOI) to purchase Rhode Island-based Care New England Health System. StoneBridge would make a significant investment in order to financially stabilize Care New England to allow the health system to continue its mission to transform the future of health care for the communities it serves.

“Care New England Health System has provided outstanding care to its patients for many years, and StoneBridge Healthcare is committed to the continuation of this high standard of care in Rhode Island,” said Joshua Nemzoff, Chief Executive Officer, StoneBridge Healthcare. “We believe that StoneBridge Healthcare is in a strong position to help Care New England to continue delivering cutting-edge care to the communities it serves for years to come.”

StoneBridge has offered a transaction value of $550 million with a purchase price of $250 million and a $300 million investment in capital improvements over six years to further transform the health system. The offer that StoneBridge has submitted includes a provision that will fully fund the employee’s pension plan at closing – a plan that is currently underfunded by more than $125 million. Care New England hospitals include the following: Butler Hospital, Kent Hospital, Women & Infants Hospital of Rhode Island, Care New England Medical Group, the VNA of Care New England, The Providence Center, and a certified accountable care organization (ACO) Integra.

“As the cost of care has risen and the COVID-19 pandemic has placed a tremendous strain on health systems across the nation, StoneBridge Healthcare is ready to assist Care New England during these challenging times to continue delivering an outstanding continuum of care to the region,” Nemzoff added. “StoneBridge Healthcare has the expertise and financial resources needed to help lead Care New England to a promising future.”

The LOI is not binding, and a Definitive Agreement would be finalized in a short period of time once comprehensive due diligence is performed. StoneBridge is a privately-owned company capitalized through a multi-layered composite finance group that includes nationally known debt and equity sources.

Earlier this year, StoneBridge submitted an offer to acquire the Erlanger Heath System in Tennessee for a transaction value of $475 million. StoneBridge is actively pursuing discussions related to this transaction, which is a system of similar size to Care New England and has also been devastated by the impact of the COVID-19 pandemic.

About StoneBridge Healthcare
StoneBridge Healthcare is an innovative company formed to buy, save and turn around deeply distressed hospitals in the cities and suburbs of America. StoneBridge is capitalized through a multi-layered composite finance group that includes nationally known debt and equity sources. The company features a nationally recognized team of experts in healthcare operations, finance, acquisitions and turnarounds.

Our decades of experience, our financial investment and our commitment to expand primary care into the urban areas we serve make our company the only one of its kind. StoneBridge Healthcare plans to purchase and turn around acute care hospitals that are in significant economic distress and could otherwise be forced to close. StoneBridge will identify and buy hospitals that can be saved, and then work urgently to make sure these hospitals survive and succeed.

StoneBridge is committed to responding to the healthcare needs of the urban markets it operates in through an initiative that is known as “The Mission Project.” Using the hospitals it acquires as a base of operations, StoneBridge will bring much-needed services into the community. StoneBridge will listen to and work with local groups to understand the gaps in community care – and then put money and time into offering clinics or other life-changing help. The solutions may look different in each market, but the commitment will be consistent. The hospitals can provide the doctors, nurses, pharmacies, kitchens and vehicles to bring care and support to people where they live. For more information please visit: stonebridgehealthcare.com.

DOJ charges execs, others with elaborate $1.4B billing scheme using rural hospitals

Posted on by • Posted in Board, Dept of Justice (DOJ), Fraud, Fraud and Abuse, Health System, Hospital, Hospital Industry, Indictment, Kickbacks, Laboratory, Laboratory Industry, Leadership, Management Company, Rev Cycle Management, Revenue Cycle, Rural Health, Rural Hospital, Substance Abuse, Vulnerable Populations, Workers Compensation • Leave a comment

https://www.healthcaredive.com/news/doj-charges-execs-others-with-elaborate-14b-billing-scheme-using-rural-h/580785/

Office of Attorney Recruitment & Management | Department of Justice

Dive Brief:

  • The U.S. Department of Justice is charging 10 defendants for an “elaborate” pass-through billing scheme that used small rural hospitals across three states as shells to submit fraudulent claims for laboratory testing to commercial insurers, jacking up reimbursement.
  • The defendants, including hospital executives, lab owners and recruiters, billed private payers roughly $1.4 billion from November 2015 to February 2018 for pricey lab testing, reaping $400 million.
  • The four rural hospitals used in the scheme are: Cambellton-Graceville Hospital, a 25-bed rural facility in Florida; Regional General Hospital of Williston, a 40-bed hospital in Florida; Chestatee Regional Hospital, a 49-bed facility in Georgia; and Putnam County Memorial Hospital, a 25-bed hospital in Missouri. Only Putnam emerged from the scheme relatively unscathed: Chestatee was sold to a health system that plans to replace it with a newer facility, Cambellton-Graceville closed in 2017 and RGH of Williston was sold for $100 to an accounting firm earlier this month.

Dive Insight:

The indictment, filed in the Middle District of Florida and unsealed Monday, alleges the 10 defendants, using management companies they owned, would take over rural hospitals often struggling financially. They would then bill commercial payers for millions of dollars for pricey urine analysis drug tests and blood tests through the rural hospitals, though the tests were normally conducted at outside labs, and launder the money to hide their trail and distribute proceeds.

The rural hospitals had negotiated rates with commercial insurers for higher reimbursement for tests than if they’d been run at an outside labs, so the facilities were used as a shell for fraudulent billing for often medically unnecessary tests, the indictment alleges.

The defendants, aged 34 to 60, would get urine and other samples by paying kickbacks to recruiters and healthcare providers, like sober homes and substance abuse treatment centers.

Screening urine tests, to determine the presence or absence of a substance in a patient’s system, is generally inexpensive and simple — it can be done at a substance abuse facility, a doctor’s office or a lab. But confirmatory tests, to identify concentration of a drug, are more precise and sensitive and have to be done at a sophisticated lab.

As such they’re more expensive and are typically reimbursed at higher rates than screening urine tests. None of the rural hospitals had the capacity to conduct confirmatory tests, or blood tests, on a large scale, but frequently billed in-network insurers, including CVS Health-owned Aetna, Florida Blue and Blue Cross Blue Shield of Georgia, for the service from 2015 to 2018, the indictment says.

Rural hospitals are facing unprecedented financial stress amid the pandemic, but have been fighting to keep their doors open for years against shrinking reimbursement and lowering patient volume. That can give bad actors an opportunity to come in and assume control.

One of the defendants, Jorge Perez, 60, owns a Miami-based hospital operator called Empower, which has seen many of its facilities fail after insurers refused to pay for suspect billing. Half of rural hospital bankruptcies last year were affiliated with Empower, which controlled 18 hospitals across eight states at the height of the operation. Over the past two years, 12 of the hospitals have declared bankruptcy. Eight have closed, leaving their rural communities without healthcare and a source of jobs.

“Schemes that exploit rural hospitals are particularly egregious as they can undermine access to care in underserved communities,” Thomas South, a deputy assistant inspector general in the Office of Personnel Management Office of Inspector General, said in a statement.

 

 

 

 

 

These Hospitals Pinned Their Hopes on Private Management Companies. Now They’re Deeper in Debt.

Posted on by • Posted in Board, Capital Structure, Health System, Hospital, Hospital Bankruptcy, Hospital Closure, Hospital Industry, Investment, Investments, Leadership, Management Company, Rural Health, Rural Hospital, Turnaround, Turnaround Plan • Leave a comment

https://www.propublica.org/article/these-hospitals-pinned-their-hopes-on-private-management-companies-now-theyre-deeper-in-debt?utm_source=ActiveCampaign&utm_medium=email&utm_content=Does+the+US+Spend+Too+Much+on+Police%3F&utm_campaign=TFT+Newsletter+06042020

At least 13 hospitals in Oklahoma have closed or experienced added financial distress under the management of private companies. Some companies charged hefty management fees, promising to infuse millions of dollars that never materialized.

Revenues soared at some rural hospitals after management companies introduced laboratory services programs, but those gains quickly vanished when insurers accused them of gaming reimbursement rates and halted payments. Some companies charged hefty management fees, promising to infuse millions of dollars but never investing. In other cases, companies simply didn’t have the hospital management experience they trumpeted.

Click on link above for examples of rural hospitals that pinned their hopes on private management companies that left them deeper in debt. They are based on interviews, public records and financial information from the Centers for Medicare and Medicaid Services and the American Hospital Directory.