Buy a rural hospital for $100? Investors pick up struggling institutions for pennies

Rural communities with struggling hospitals often turn to outside investors willing to take over their health care centers. Some are willing to sell the hospitals for next to nothing to companies that promise to keep them running.

ERIN, Tenn. — Kyle Kopec gets a kick out of leading tours through the run-down hospitals his boss is buying, pointing out what he calls relics of poor management left by a revolving door of operators.

For instance, at a hospital in this town of 1,700 about a 90-minute drive northwest from Nashville, the X-ray machine is beyond repair.

“This system is so old, it’s been using a floppy disk,” said Kopec, 23, marveling at the bendy black square that hardly has enough memory to hold a single digital photo. “I’ve never actually seen a floppy disk in use. I’ve seen them in the Smithsonian.”

There’s a point to exposing these rural hospitals’ state of disrepair — the company Kopec works for, Braden Health, is buying buildings worth millions of dollars for next to nothing with a promise to keep running them as health centers serving their communities. Braden for its part, thinks it can run them more effectively than the previous owners and turn a profit.

The hospitals Braden Health is taking over sit in one of the worst spots in one of the worst states for rural hospital closures. Tennessee has experienced 16 closures since 2010 — second only to the far more populous state of Texas, which has had at least 21 closures.

The local governments that own these facilities are finding that remarkably few companies — with any level of experience — are interested in buying them. And those that are willing don’t want to pay much, if anything.

Braden Health’s Kyle Kopec holds up a sample of diagnostic images left behind at an abandoned hospital they’re taking over. They have to figure out what to do with old medical records stacked in boxes.

“When you’re on the ropes or even got your head under water, it’s really difficult to negotiate with any terms of strength,” said Michael Topchik, director of the Chartis Center for Rural Health, which tracks distressed rural hospitals closely. “And so you, oftentimes, are choosing whoever is willing to choose you.”

At this point, large health systems have already acquired or affiliated with the hospitals that have the fewest problems, Topchik said. The hospitals that are left are those that other potential buyers passed on. Turning a profit on a small rural hospital with mostly older or low-income patients can be challenging. Some operators who take over rural hospitals have gotten in trouble with insurers and even law enforcement for shady billing practices.

“You can make it profitable,” Topchik said. “But it takes an awful lot to get there.”

Dr. Beau Braden, who runs Braden Health, used his savings and some inherited wealth to get into the hospital-buying business in 2020. An emergency room doctor and addiction specialist, he previously tried to build a hospital in southwestern Florida, where he owns the large rural clinic in Ave Maria. After running into regulatory roadblocks, he saw more opportunity in reopening hospitals — which brought him to Tennessee.

“A lot of people aren’t willing to put in the time, effort, energy, and work for a small hospital with less than 25 beds. But it needs just as much time, energy, and effort as a hospital with 300 beds,” Braden said. “I just see there’s a huge need in rural hospitals and not a lot of people who can focus their time doing it.”

Braden Health’s corporate headquarters has 40 employees, according to Kopec, who is Braden’s second in command as the company’s chief compliance officer. He had limited work experience in hospitals before helping lead a hospital-buying spree at Braden Health.

Braden Health is a limited liability company and privately held, so it doesn’t have to publicly share much about its financial figures. But in filings for a certificate of need that outlines why a health care facility should be allowed to operate, Braden revealed $2 million in monthly revenue from the one hospital it ran in Lexington, Tennessee, and its balance sheet showed more than $7.5 million cash on hand.

Dr. Beau Braden (left) and Kyle Kopec talk to staffers gathered at the nurse’s station inside Houston County Community Hospital in Erin, Tennessee. Braden Health bought the facility for $20,000 ― a price that is mostly paying for the one piece of medical equipment deemed to have any value, a 2016 ambulance with 180,000 miles.

Since buying that Lexington hospital in 2020, Braden Health has signed deals for three other failing or failed hospitals and has looked at acquiring at least 10 others, mostly in Tennessee and North Carolina. Braden Health’s strategy is to build mini-networks to share staff and supplies.

At the hospital in Erin, much of the facility’s equipment is older than Kopec. And he said using outdated technology has caused Medicare to penalize the hospital with reduced payments.

The attic houses a ham radio system that seemingly never got much use, Kopec said on his way out to the roof. He wanted to show how the giant HVAC system can be controlled only from a rusty side panel accessible by a ladder. Down below, an emergency room has never been used. During a recent renovation that predated Braden Health’s ownership, its doors were built too narrow for a gurney, among other design flaws.

An old operating room is temporarily housing the ER while Braden Health starts work on new renovations. The Tennessee attorney general, who must approve any sale of a public hospital to private investors, signed off in July.

To prevent this hospital’s closure in 2013, Houston County bought it for $2.4 million and raised taxes locally to subsidize operations. “We had no business being in the hospital business,” Mayor James Bridges said. “The majority of county governments do not have the expertise and the education and knowledge that it takes to run health care facilities in 2022.”

Those with the most experience, like big corporate hospital chains based in Nashville, have been getting out of the small hospital business, too.

Communities have seen unqualified managers come and go. In Decatur County, where Braden Health is also taking over the local hospital, the previous CEO was indicted on theft charges that remain pending. And the Tennessee comptroller determined the hospital helped endanger the finances of the entire county.

“You’re looking to someone who supposedly knows what to do, who can supposedly solve the issue. And you trust them, then you’re disappointed,” said Lori Brasher, a member of Decatur County’s economic development board. “And not disappointed once, but disappointed multiple times.”

Brasher expressed much more confidence in Braden Health, which she said has concrete plans to reopen, though the timing has been delayed by an unresolved insurance claim from a burst water line that flooded a wing of the hospital.

Local residents still have trouble stomaching the sticker price: $100 for a property valued at $1.4 million by the local tax assessor. In addition to that low price, Braden Health won tax breaks for committing to invest $2 million into the building.

The Houston County hospital is valued at $4.1 million by the property assessor. But the final sale price was just $20,000 — and that wasn’t for the land or the building. Kopec said the amount was for a 2016 ambulance with 180,000 miles — deemed the only equipment with any remaining value.

An agreement with Braden Health to take over the shuttered hospital in Haywood County, Tennessee, valued at $4.6 million, was a similarly symbolic payment. All told, Braden Health is getting more than $10 million worth of real estate for less than the price of an appendectomy.

Kopec contends the value for each property is essentially negative given that the hospitals require so much investment to comply with health care standards and — according to the company’s purchase agreements — must be run as hospitals. If not, the hospitals revert to the counties.

Most of the funding for restoring these facilities comes directly from Braden, who thinks people overestimate the value of hospitals his company is taking over.

“If you look honestly at a lot of transactions that take place with rural hospitals and how many liabilities are tied up with them, there’s really not a lot of value there,” he said. Braden recently paid off a $2.3 million debt with Medicare for the Houston County hospital.

He said there’s no secret sauce, in his mind, except that small hospitals require just as much diligence as big medical centers — especially since their profit margins are so thin and patient volume so low. He wants to improve technology in ways that health plans reward hospitals, limit nurse staffing when business is slow, and watch medical supply inventories to cut waste.

It’s a tall order. Braden said he can understand any skepticism, even from the hospitals’ employees. They’ve heard turnaround promises before, and even they can be wary of the care they’d get at such run-down facilities.

Still, as Kopec bounced through the Erin hospital’s halls, he greeted nurses and clerical staff by name with a confidence that belies his age and experience. He tells anyone who will listen that rural hospitals require specialized knowledge.

“They’re not the most complicated things in the world,” Kopec said. “But if you don’t know exactly how to run them, you’re just going to run them straight into the ground.”

Financial toll of 340B discount restrictions magnifies for hospitals: 4 findings

Hospitals’ estimated annual financial losses due to 340B discount restrictions have doubled since December 2021, according to a report from the advocacy group 340B Health.

A growing number of drugmakers have imposed limits on 340B discounts to safety net hospitals for drugs dispensed at community-based pharmacies. Between December and March, six more drugmakers imposed restrictions. 

340B Health surveyed more than 500 hospitals from November to December 2021 and again in March to assess how these increasing restrictions are affecting patients and hospitals. 

Four findings:

1. The median annual financial effect on disproportionate share hospitals, rural referral centers and standalone community hospitals went from $1 million in December to $2.2 million in March. 

2. Among these hospitals, 10 percent of leaders said they expect annual losses of $21 million or more.

3. Leaders from rural critical access hospitals said they also expect the median annual financial effect of 340B discount restrictions to double from $220,000 to $448,000. 

4. Eighty percent of hospitals surveyed anticipated having to cut some patient care services if the restrictions become permanent.  

View the full report here.

Affiliation improves rural hospital sustainability

https://mailchi.mp/161df0ae5149/the-weekly-gist-december-10-2021?e=d1e747d2d8

In 2020, a record-breaking 19 rural hospitals closed their doors due to a combination of worsening economic conditions, changing payer mix, and declining patient volumes. But many more are looking to affiliate with larger health systems to remain open and maintain access to care in their communities. The graphic above illustrates how rural hospital affiliations (including acquisitions and other contractual partnerships) have increased over time, and the resulting effects of partnerships.

Affiliation rose nearly 20 percent from 2007 to 2016; today nearly half of rural hospitals are affiliated with a larger health system.

Economic stability is a primary benefit: the average rural hospital becomes profitable post-affiliation, boosting its operating margin roughly three percent in five years. But despite improved margins, many affiliated rural hospitals cut some services, often low-volume obstetrics programs, in the years following affiliation. 

Overall, the relationship likely improves quality: a recent JAMA study found that rural hospital mergers are linked to better patient mortality outcomes for certain conditions, like acute myocardial infarction. Still, the ongoing tide of rural hospital closures is concerning, leaving many rural consumers without adequate access to care. Late last month, the Department of Health and Human Services announced it would distribute another $7.5B in American Rescue Plan Act funds to rural providers. 

While this cash infusion may forestall some closures, longer-term economic pressures, combined with changing consumer demands, will likely push a growing number of rural hospitals to seek closer ties with larger health systems.

Senate bill would make telehealth reimbursement permanent for certain services

https://www.healthcarefinancenews.com/news/senate-bill-would-make-telehealth-reimbursement-permanent-certain-services

A bipartisan group of senators have introduced a bill to make telehealth reimbursement permanent for certain services such as those provided by physical therapists, audiologists, occupational therapists and speech language pathologists.

Sens. Steve Daines (R-Mont.), Tina Smith (D-Minn.), Jerry Moran (R-Kan.) and Jacky Rosen (D-Nev.) introduced the “Expanded Telehealth Access Act” on Thursday, according to The Hill.

If passed, the legislation would extend telehealth reimbursement policies that were temporarily added during the COVID-19 public health emergency.

WHY THIS MATTERS

The Centers for Medicare and Medicaid Services has long said that Congressional action is needed to make emergency telehealth measures permanent.

But on Tuesday, CMS released new actions that will allow Medicare to pay for mental health virtual visits furnished by Rural Health Clinics and Federally-Qualified Health Centers. This is through telecommunications technology such as audio-only telehealth calls.

Telehealth is particularly important for rural areas where patients may have to travel long distances for care.

The Senate bill has the support of the American Telehealth Association, the American Physical Therapy Association, the American Speech-Language-Hearing Association and the American Occupational Therapy Association, among others, according to the report.

The biggest issue in telehealth reimbursement remains. This is whether providers will be continued to be paid at in-person parity for a telehealth visit. 

THE LARGER TREND

The Senate Bill is a companion to a House bill introduced in March by Rep. Mikie Sherrill (D-NJ) called the Expanded Telehealth Access Act.

In May, Senator Daines, one of the sponsors of Thursday’s legislation, with Senator Catherine Cortez Masto (D-Nev.), proposed the “Telehealth Expansion Act of 2021” to permanently allow first-dollar coverage of virtual care under high-deductible health plans.

Health system consolidation as a “safety net”

https://mailchi.mp/26f8e4c5cc02/the-weekly-gist-july-16-2021?e=d1e747d2d8

Might health care consolidation be slowing and if so, why and what might it  mean? A perspective on where we are, how we got here and what is next. —  CASTLING PARTNERS

One of the underappreciated ways in which health systems create value in our healthcare economy, as was recently the topic of discussion with the CEO of an organization we work with, is their role as a “safety net”. We weren’t talking about safety-net providers in the traditional sense—those which serve low-income populations. Rather, we were talking about the ability of larger health systems to acquire and invest in smaller hospitals that might otherwise risk going out of business entirely due to economic pressures.

When economic shocks hit, as was recently the case with COVID, we often see firms close; think of all the restaurant and hospitality businesses forced to shut down over the past year. As the economy rebounds, new business spring up to take their places—that kind of “creative destruction” is commonplace in the larger economy. But when a hospital is forced to shut its doors, it’s a different story, one that could be potentially disastrous for the community. 

Often the most economically vulnerable hospitals are sole providers for their communities; without them, critical medical services could be much less accessible for patients. Enter multi-hospital health systems, which have often stepped in to acquire hospitals in jeopardy. 

By providing access to capital, technology, and management infrastructure, systems have probably kept hundreds of such smaller hospitals in business over the past several decades. Policy analysts are quick to criticize health systems for value destruction: leveraging scale to raise prices, and so forth.

Often valid criticism, but it would be myopic to overlook the fact that systems have also allowed many vulnerable communities to retain access to a viable local hospital. The pushback is often to posit that we simply have too many hospitals to begin with—but try telling that to patients and communities who have lost access to their local source of care.

House extends moratorium on 2% Medicare sequester cuts through 2021

https://www.healthcarefinancenews.com/news/house-extends-moratorium-2-medicare-sequester-cuts-through-2021

APR 14MORE ON REIMBURSEMENT

House extends moratorium on 2% Medicare sequester cuts through 2021

President Biden is expected to sign the bill into law.

Susan Morse, Managing Editor

(Photo courtesy joe daniel price/Getty Images)

In a vote of 384-38, the House on Tuesday passed a bill that eliminates the 2% cut to Medicare payments until the end of 2021. However, the bill proposes to offset the change by increasing the sequester cuts in 2030.

WHY THIS MATTERS

The cuts were triggered by a federal budget sequestration.

Hospitals, physicians and other providers protested the 2% cuts as coming at a time when they were struggling financially and clinically to handle the COVID-19 pandemic.

The bill also makes several technical changes to the rural health clinic provisions that were included in the Consolidated Appropriations Act. Specifically, the CAA required that the payment rate for RHCs, including provider-based RHCs certified after Dec. 31, 2019, to be capped at $100 per visit, starting from April 1, 2021. 

This rate will increase over time based on the Medicare Economic Index, but will remain well below typical provider-based RHC rates. The bill would correct the Dec. 31, 2019, date to Dec. 31, 2020, and include both Medicare-enrolled RHCs located in a hospital with less than 50 beds and RHCs that have submitted an application for Medicare enrollment as of this date, according to the AHA.

THE LARGER TREND

Last year, Congress paused the 2% Medicare cuts, but they were to resume on April 1.

The Centers for Medicare and Medicaid Services instructed Medicare administrative contractors to hold all claims with dates of service on or after April 1 for a short period until potential legislation was enacted.

In March, the House passed the bill to delay the cuts, and the Senate approved it later that month, but with an amendment to delay through December 31 and ensure that the cost of the delay is paid for. 

PROVIDER REACTION

Providers have reacted positively to the news.

American Hospital Association president and CEO Rick Pollack said, “Even though our country is making great progress by vaccinating millions of people a day, it is clear that this pandemic is far from over and that there is an urgent need to keep hospitals, health systems and our heroic caregivers strong.”

American Medical Association president Dr. Susan R. Bailey said, “The Senate and House, Democrats and Republicans, have overwhelmingly acknowledged that cutting Medicare payments during a pandemic is ill-conceived policy. Physician practices are already distressed, and arbitrary 2% across-the-board Medicare cuts would have been devastating.”

America’s Essential Hospitals SVP of policy and advocacy Beth Feldpush said, “Extending the moratorium through the end of this year provides much-needed relief for essential hospitals, which continue to face heavy financial pressure from their frontline response to COVID-19. The sequester would weaken the ability of our hospitals to care for the communities of color that have suffered disproportionately from the pandemic.”

Drugmakers sue HHS over 340B advisory opinion in feud over contract pharmacy access

Hospital associations sue HHS over 340B enforcement

Drug companies AstraZeneca, Eli Lilly and Sanofi filed separate lawsuits seeking to preserve their ability to restrict offering 340B-discounted drugs to contract pharmacies.

The lawsuits, filed Tuesday in different federal courts, seek to get rid of an advisory opinion filed by the Department of Health and Human Services’ (HHS’) general counsel that says drug companies must offer 340B drugs to contract pharmacies, which are third-party entities that dispense drugs on behalf of hospitals participating in the program.

The drug companies argue that the advisory opinion contracts the statute for the 340B program, which requires manufacturers to offer discounted products to safety net hospitals and other providers in exchange for participation in Medicare and Medicaid.

“The statute, on its face, does not require manufacturers to recognize any contract pharmacies, much less unlimited contract pharmacies,” the legal filing from AstraZeneca said.

AstraZeneca wants a federal court to declare the advisory opinion didn’t follow proper procedure and exceeded HHS’ statutory authority. The manufacturer also wants a court to declare that companies are not required to offer 340B discounts to contract pharmacies.

The lawsuits come less than a week after the American Hospital Association (AHA) and five other groups and three individual systems sent letters to the drug companies that have halted or restricted sales to contract pharmacies. They wanted the drugmakers to reinstate sending the discounted products to their pharmacies and reimburse facilities for any damages.

AHA and several groups sued HHS to get the agency to clamp down on the drug manufacturers’ moves.

AstraZeneca, Eli Lilly, Novartis, Novo Nordisk, Sanofi and United Therapeutics have taken a range of actions to clamp down on sales to contract pharmacies, which a majority of 340B-covered entities use.

The companies have argued that the discounts do not filter down to patients, but hospital and advocacy groups charge that the discounts are vital, especially as safety net providers operate on thin margins.

“Make no mistake: the boom in contract pharmacies has been fueled by the prospect of outsized profit margins on 340B discounted drugs,” AstraZeneca argued in its court filing.

A Wall Street Giant Tapped $1.5 Billion in Federal Aid for Its Hospitals

https://www.bloomberg.com/news/articles/2020-09-14/a-wall-street-giant-tapped-1-5-billion-in-federal-aid-for-its-hospitals

LifePoint’s Castleview Hospital in Price, Utah.

Private equity firm, flush with cash, sees ‘upside’ and more acquisitions.

Like hospital chains across the U.S., LifePoint Health tapped federal relief money to blunt the cost of the Covid-19 pandemic. It was a potent lifeline, a total of $1.5 billion.

But LifePoint is unusual in one respect, its owner: private equity firm Apollo Global Management, led by billionaire Leon Black.

LifePoint was certainly eligible for the money. But the extent of the federal assistance could contribute to concern in Washington over whether private equity-backed hospitals should have been. In July, the U.S. House passed a bill that would require health-care companies to disclose any private equity backing when seeking short-term loans from the federal Medicare program.

The reason for lawmakers’ concern: Private equity firms have ample access to cash. As recently as June, the Apollo fund that owns LifePoint had more than $2 billion to support its investments. Apollo, which manages $414 billion, recently told investors in an internal document that LifePoint was in such a strong market position that it was planning to make acquisitions of less fortunate hospitals.

The relief flowing to LifePoint illustrates a drawback of a government program designed to send out money quickly to every hospital, regardless of financial circumstances, according to Gerard Anderson, a health policy professor at Johns Hopkins University.

“This particular hospital system does not appear to need the money,” he said.

LifePoint and Apollo say they absolutely did. In their view, taxpayer money helped cover the soaring cost of treating Covid-19 patients and lost revenue because of the loss of fees from lucrative elective procedures. The assistance enabled the chain to retain all of its workers and provide essential service to its communities, they said.

“No health-care provider, including LifePoint, is immune to this, regardless of their ownership,” said LifePoint spokesperson Michelle Augusty.

Said an Apollo spokesperson: “Apollo is proud of LifePoint’s response to the Covid pandemic as they continue to provide vital care for both Covid and non-Covid patients.’’

LifePoint owns a far-flung collection of small-town hospitals, from Western Plains Medical Complex in Dodge City, Kansas, to Bourbon Community Hospital in Paris, Kentucky. For years, private equity has been pushing into every corner of American health care. Many medical professionals worry that these Wall Street-style investors will inevitably put profits before patients – something private equity denies.

LifePoint’s Willamette Valley Medical Center in McMinnville, Oregon.

In April, LifePoint Chief Executive Officer David Dill and other hospital officials met with President Donald Trump. Dill urged Trump to keep helping hospitals, noting that LifePoint’s medical centers tend to be in the middle of the country, “smaller communities, which I know are communities very important to you,’’ according to a transcript of the meeting.

Rural hospitals are a very important part of the infrastructure in this country and also treating the uninsured and the Medicaid population as well,’’ Dill said.

Trump pointed out that the hospitals didn’t appear to be in the “hot spots.” Dill acknowledged they were handling only “a couple hundred Covid patients.” (The company said it has now cared for almost 20,000.)

In April, the month the government started distributing assistance, LifePoint borrowed $680 million in the capital markets. It also had access to $900 million in cash and an $800 million credit line, according to Moody’s Investors Service

By Apollo’s own account, LifePoint was doing just fine when the pandemic struck. In fact, it was thriving – and looking to expand. As of March 31, shortly before LifePoint got taxpayer dollars, Apollo’s investors were on track to double their money, internal documents show. On paper, they were sitting on a gain of more than $800 million.

“Independent hospital systems have greater difficulty weathering prolonged periods of financial stress,’’ Apollo wrote to its investors in May. “A  consolidation strategy will provide meaningful upside for Apollo funds’ investment.’’

Apollo said the crisis represented an opportunity: “The coronavirus pandemic will serve as a catalyst for additional M&A opportunities given the attractive scale and overall position of the LifePoint platform.”

Apollo is one of three private equity firms whose hospitals, as a group, received a total of about $2.5 billion in bailout grants and loans, according to an analysis of the latest federal records. That’s a conservative figure because it doesn’t count the many smaller sums distributed to subsidiaries.
LifePoint’s UP Health System-Marquette in Michigan.
Steward Health Care, a hospital  chain financed by private equity firm Cerberus Capital Management, received $675 million in grants and loans. In May, Cerberus transferred ownership of Steward to a group of doctors in exchange for a note that can be converted into a 37.5% equity stake. Another hospital company, Prospect Medical Holdings, owned by private equity firm Leonard Green & Partners, took in $375 million.
Apollo’s LifePoint hospitals received the most: $941 million in subsidized loans and $535 million in outright grants. 
While Democratic lawmakers have said such firms could have instead tapped their own cash stockpiles, private equity industry representatives have said they have a duty to manage that money in the best interests of their investors, which include public pension plans.
A Wall Street Giant Tapped $1.5 Billion in Federal Aid for Its Hospitals -  Bloomberg

Apollo built its rural hospital empire through the acquisition of three regional hospital chains in 2015, 2016 and 2018.  Apollo Investment Fund VIII LP owns 76% of LifePoint, which is based in Brentwood, Tennessee.

Even though many individual rural hospitals are struggling, Apollo says it can operate them more efficiently by merging them together. LifePoint now owns 88 hospitals in 29 states. It had almost $9 billion of annual revenue last year.

Apollo says that on its watch, the chain has improved its infrastructure and technology, recruited care providers and built new centers.

And for rural hospitals, Apollo argues, bigger is better.

“We continue to believe that rural hospitals can benefit from being part of a larger well-run system that enables access to greater resources and infrastructure for improved patient care,” the Apollo spokesperson said.

 

 

Hospitals face closure as $100B in Medicare loans come due

https://www.beckershospitalreview.com/finance/hospitals-face-closure-as-100b-in-medicare-loans-come-due.html?utm_medium=email

HCA posts a billion-dollar profit, bolstered by CARES Act funds - MedCity  News

CMS accelerated payments to hospitals and other healthcare providers at the beginning of the COVID-19 pandemic to help temporarily relieve financial strain. It’s time to begin repaying the Medicare loans but that isn’t possible for some rural hospitals, according to NPR

CMS expanded the Accelerated and Advance Payment Program in late March to help offset financial damage caused by the COVID-19 pandemic. CMS announced April 26 that it was reevaluating pending and new applications for advance payments due to the availability of funds under the Coronavirus Aid, Relief and Economic Security Act. As of May, CMS had paid out $100 billion in advance payments, the bulk of which went to hospitals. 

Hospitals and other healthcare providers are required to start repaying the Medicare loans this month. Most hospitals will have one year from the date the first loan payment was made to repay the loans, according to Kaiser Family Foundation.

Ozarks Community Hospital, 25-bed critical access hospital in Gravette, Ark., is one of the hospitals that applied for and accepted the Medicare loans. The hospital also received grants made available under the CARES Act, which do not have to be repaid.

CEO Paul Taylor said Ozarks Community Hospital’s revenue is still constrained, and he doesn’t know how it will pay back its $8 million Medicare loan. Payments for new Medicare claims will be offset to repay the loans, but losing those payments could force the hospital to close, Mr. Taylor told NPR.

“If I get no relief and they take the money … we won’t still be open,” he said.

Ozarks Community Hospital is one of more than 850 critical access hospitals in rural areas that received Medicare loans, according to NPR. Given the shaky financial footing of many rural hospitals before the pandemic, the strain of having Medicare payments withheld could be enough to force others to shut down. 

Before the pandemic, more than 600 rural hospitals across the U.S. were vulnerable to closure, according to an estimate from iVantage Health Analytics, a firm that compiles a hospital strength index based on data about financial stability, patients and quality indicators.

If the financial pressures tied to the pandemic force any of those hospitals to shut down, they’ll join the list of 131 rural hospitals that have closed over the past decade, according to the Cecil G. Sheps Center for Health Services Research.

 

 

 

 

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

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.