CEDARVILLE, Calif. — Beau Gertz confronted a crowd of nervous locals at this city’s senior middle, hoping to promote them on his imaginative and prescient for his or her long-beloved — however now bankrupt — hospital.
In worn blue denims and an untucked shirt, the bearded entrepreneur from Denver pledged at this city corridor assembly in March to revive the Surprise Valley Community Hospital — a spot many within the viewers counted on to set their damaged bones, sew up cattle-tagging cuts and have a tendency to growing old family members.
Gertz stated that in the event that they vote June 5 to let him purchase their tiny public hospital, he’ll retain such important companies. Better nonetheless, he stated, he’d prefer to open a “wellness center” to draw well-heeled outsiders — one that will provide telehealth, habit remedy, bodily remedy, genetic testing, intravenous vitamin infusions, even therapeutic massage. Cedarville’s failing hospital, now at the very least $four million in debt, wouldn’t simply bounce again however thrive, he stated.
Gertz, 34, a former weightlifter who runs clinical-lab and nutraceutical firms, unveiled his plan to pay for it: He’d use the 26-bed hospital to invoice insurers for lab exams no matter the place sufferers lived. Through telemedicine know-how, medical doctors working for Surprise Valley may order exams for individuals who’d by no means set foot there.
To among the 100 or so folks on the assembly that night time, Gertz’s plan supplied hope. To others, it sounded suspiciously acquainted: Just months earlier than, one other out-of-towner had proposed an analogous deal — solely to vanish.
Outsiders “come in and promise the moon,” stated Jeanne Goldman, 72, a retired businesswoman. “The [hospital’s] board is just so desperate with all the debt, and they pray this angel’s going to come along and fix it. If this was a shoe store in Surprise Valley, I could care less, but it’s a hospital.”
Goldman says the hospital’s board is simply so determined with all of the debt that they “pray this angel’s going to come along and fix it.” (Heidi de Marco/KHN)
About 100 folks attended the city corridor assembly hosted by Beau Gertz. (Heidi de Marco/KHN)
(Heidi de Marco/KHN)
Looking For Salvation
The woes of Surprise Valley Community Hospital mirror an more and more brutal surroundings for America’s rural hospitals, that are disappearing by the handfuls amid declining populations, financial troubles, company consolidation and, generally, self-inflicted wounds.
Nationwide, 83 of 2,375 rural hospitals have closed since 2010, in line with the North Carolina Rural Health Research Program. These often-remote hospitals — some with 10, 15, 25 beds — have been focused by administration firms or potential consumers who promise a lot however typically ship short time lining their very own pockets, in line with allegations in courtroom circumstances, a Missouri state audit and media stories.
Enticed by such outsiders, some struggling rural hospitals across the nation have embraced lab billing for faraway sufferers as a rescue plan. That’s as a result of Medicare and industrial insurers are inclined to pay extra for exams to maintain endangered rural hospitals in contrast with city hospitals and particularly outpatient labs. In basic, this sort of distant billing is controversial and legally murky, and it not too long ago has resulted in allegations of fraud in a number of states, in line with authorities paperwork and media stories.
Surprise Valley’s hospital has 22 expert nursing beds, one acute mattress and three “swing” beds that can be utilized as wants come up. (Heidi de Marco/KHN)
(Heidi de Marco/KHN)
Rural hospital boards, nevertheless, have a tendency to not have experience within the well being care enterprise. The president of Surprise Valley Community’s board, as an example, is a rancher. Another board member owns a neighborhood motel; a 3rd, a building firm. That lack of expertise “leaves them vulnerable in many cases,” stated Terry Hill of the nonprofit National Rural Health Resource Center, based mostly in Duluth, Minn.
Seeking to tell apart himself from different would-be rescuers who bumped into authorized bother, Gertz described his proposal to residents as completely authorized — a official use of telemedicine, basically distant remedy through digital communication equivalent to video. “If you do it correctly,” he stated in an interview with Kaiser Health News, “there is a nice profit margin. There [are] extra visits you can get from telemedicine but … it has to be billed correctly and it can’t be abused.”
Email Sign-Up
Subscribe to KHN’s free Morning Briefing.
Gertz runs a number of firms — based throughout the final 4 years —together with two labs, SeroDynamics and Cadira Labs, in addition to a wellness firm known as CadiraMD.
He pledged in court documents to purchase the bankrupt hospital for $four million and canopy its money owed, saying he had lined up a $four billion New York firm as a monetary backer. Kaiser Health News was unable to find the corporate beneath the title Gertz cited, Next Genesis Development Group. He didn’t reply to emails in search of clarification on the difficulty.
Gertz, who acknowledged that he had by no means earlier than run a hospital, was requested on the identical gathering whether or not he had disclosed his “financials” to the hospital board. “As a private entity, I don’t have to show my financials and I have not provided my financials to the board,” he replied.
It was not clear whether or not board members had ever requested. Surprise Valley Health Care District board President John Erquiaga declined to remark.
Cedarville, a hamlet of about 514 residents, is in one in all California’s poorest counties, with a median earnings of roughly $30,000. The closest hospital with an emergency room is about 25 miles away over a mountain go. (Heidi de Marco/KHN)
(Heidi de Marco/KHN)
A Sad Decline
Surrounded by the Warner and Modoc mountains and forests in California’s northeastern nook, Surprise Valley is dwelling to 4 small communities. The largest is Cedarville, inhabitants 514, ultimately rely.
The valley, coated in sagebrush and greasewood, is a part of Modoc County, one in all California’s poorest, with a median income of about $30,000. The closest hospital with an emergency room is roughly 25 miles away, over a mountain go.
One of a whole bunch of rural hospitals constructed with assist from the 1946 federal Hill-Burton Act, the Surprise Valley hospital opened in 1952 to serve a thriving ranching group. But it has struggled since, closing in 1981, reopening as a well being clinic in 1985, then reconverting to a hospital in 1986.
A county grand jury report in 2014-15 discovered that “mismanagement of the [hospital district] has been evident for at least the past five years.”
By final summer time, these in cost didn’t appear as much as the duty of operating a contemporary hospital. By then, it was hardly a hospital in any respect. Crushed by debt, it primarily supplied nursing dwelling care, an emergency room, a volunteer ambulance service and only one acute care mattress, with three others accessible if wanted.
Surprise Valley Community Hospital (Heidi de Marco/KHN)
Besides its ER and volunteer-staffed ambulance service, Surprise Valley’s hospital in recent times has functioned largely as a nursing dwelling, saddled with crushing debt. (Heidi de Marco/KHN)
(Heidi de Marco/KHN)
When state inspectors arrived final June, they discovered chaos. The hospital’s chief nursing officer resigned through the inspection. Staffers reported unpaid checks to distributors hidden in drawers. Inspectors realized that the hospital had despatched dwelling non permanent nurses as a result of it couldn’t pay them, in line with their report.
The hospital’s then-chief administrator, Richard Cornwell — who staffers stated had instructed them to cover the checks, in line with the report — had taken a go away of absence and was nowhere to be discovered. Cornwell, a well being care accountant from Montana, was later fired and changed with the hospital’s lab director, who in flip resigned, in line with public information. Reached by Kaiser Health News, Cornwell declined to remark.
Federal regulators suspended Medicare and Medicaid funds to the hospital — a hardly ever invoked monetary penalty — over issues about affected person care. Those funds have since been reinstated, however a follow-up state inspection in November 2017 recognized extra affected person care issues.
Jean Bilodeaux, 74, a journalist who lives in Cedarville says members of the hospital board “blew up” at her when she raised necessary questions concerning the hospital’s funds in tales she wrote for the Modoc County Record, a weekly newspaper. (Heidi de Marco/KHN)
Infighting ensued, with some residents fiercely dedicated to maintaining the hospital open and others favoring closure, maybe changing it with a small clinic. Local journalist Jean Bilodeaux, 74, stated board members typically saved the general public in the dead of night, failing to point out up for their very own conferences and generally making choices exterior public view.
When Bilodeaux raised questions concerning the hospital’s funds within the Modoc County Record, a weekly newspaper, she recalled, board members “started screaming at me,” she stated. Now “I don’t even step foot in that hospital.”
Ben Zandstra, 65, a pastor in Cedarville, stated that whereas Cornwell was in cost, he too bought a cold reception on the hospital, the place he had lengthy performed guitar for sufferers on Christmas Eve. “I became persona non grata. It’s the most divisive thing I’ve seen in the years I’ve lived here.”
Ben Zandstra, pastor of the Surprise Valley Community Church in Cedarville, says the hospital’s directors made clear he was not welcome on the hospital after he voiced issues. (Heidi de Marco/KHN)
A White Knight, Vanished
Even residents who say they’ve skilled poor care at Surprise Valley Community consider its continued existence in some kind is essential — for its 50 or so jobs, for its ER, and since it places the area on the map.
Eric Shpilman, 61, a retired probation officer, stated his now-deceased spouse acquired “unspeakable” remedy at Surprise Valley. But to close it down? “It would take out the heart of Surprise Valley, the heart out of Cedarville.”
Last summer time, the board turned to an outdoor administration firm for assist.
Jorge Perez, CEO of Kansas City-based EmpowerHMS — which guarantees on its website to “rescue rural hospitals” — agreed to take over Surprise Valley’s debt and function the hospital for 3 years, in line with a management agreement with the board.
Eric Shpilman, a retired probation officer who lives in Fort Bidwell, Calif., works at a ranch in Cedarville. “If the hospital closes, it’s irreplaceable,” says Shpilman, who says his spouse acquired “unspeakable” remedy on the hospital earlier than she died. (Heidi de Marco/KHN)
In the 2 months after EmpowerHMS took over administration, Surprise Valley’s income greater than doubled, in line with monetary documents supplied by the hospital.
Then, in line with hospital officers’ public statements, the corporate stopped making the promised funds, they usually haven’t been capable of contact EmpowerHMS or Perez since. In January, when Surprise Valley filed for chapter, paperwork filed in courtroom stated EmpowerHMS had “abandoned” the hospital.
Around the time Perez took over, he and firms with which he was concerned had been dogged by allegations of improper laboratory billing at services in Mississippi, Florida, Oklahoma and Missouri, in line with ongoing lawsuits by insurers and others, a state audit and media stories. Missouri’s lawyer basic in May opened an investigation into one of many hospitals Perez managed, and Sen. Claire McCaskill (D-Mo.) not too long ago called for a federal investigation into lab billing practices at one of many hospitals.
Medicare guidelines and industrial insurance coverage contracts, with some exceptions, require folks to be handled on an inpatient or outpatient foundation by the hospitals which are billing for his or her lab exams. But insurers have alleged in courtroom paperwork that hospitals Perez was concerned with billed for exams — to the tune of at the very least $175 million — on sufferers by no means seen at these services. Perez has maintained that what he’s doing is authorized and that it generates income that rural hospitals desperately want, in line with Side Effects Public Media.
Experts say insurers are catching on to voluminous billing by hospitals in communities that usually have generated a tiny variety of exams. At one Sonoma County district hospital not related to Perez, an insurer not too long ago demanded reimbursement for $13.5 million in suspect billings, forcing the hospital to droop the profitable program and put itself up for sale.
Lab exams for out-of-town sufferers have “been a growing scheme in the last year, slightly longer,” stated Karen Weintraub, government vp of Healthcare Fraud Shield, which consults for insurers. “There’s an incentive to bill for things not necessary or even services not rendered. It also may not be proper based on contracts with insurers. The dollars are getting large.”
Some residents had been conscious of controversy surrounding Perez and his firms and stated they tried to warn the hospital district board. “All they wanted to hear was, ‘We will pay the bills,’” Bilodeaux stated.
Neither Perez nor EmpowerHMS returned requests for remark. However, Michael Murtha, president of the National Alliance of Rural Hospitals, stated in an e-mail that he was responding on behalf of Perez, who chairs the coalition’s board.
“The mission to rescue rural hospitals and set them on a path of sustainability is a difficult undertaking, and it would be a disservice to their communities to preclude struggling facilities from availing themselves of every legal and regulatory means to generate badly needed revenue,” Murtha wrote, partly.
“Such pioneering efforts are not always welcomed by those who have benefited from the status quo,” he stated.
Regarding Perez’s function at Surprise Valley, Murtha wrote that Perez tried to assist save the power by “effectively” donating over $250,000 however then found it confronted “more challenges than had been initially realized.” Murtha stated Perez labored to draw others who is perhaps higher capable of assist the hospital.
Businessman Beau Gertz confronted a tricky crowd of nervous locals at a latest board assembly in Cedarville, hoping to promote his imaginative and prescient for his or her beloved however bankrupt hospital. (Heidi de Marco/KHN)
The Surprise Valley Health Care District held its assembly on the native church on March 28, 2018. (Heidi de Marco/KHN)
The Surprise Valley Health Care District is a public facility and supported by taxes on owners. Residents raised issues at public conferences that they’d personally be on the hook for 1000’s of dollars per family to repay the hospital’s debt. (Heidi de Marco/KHN)
A New Savior?
One of these “others” in Perez’s orbit was Gertz, the Denver entrepreneur, who arrived in Surprise Valley a number of months in the past.
The Denver government instructed residents and Kaiser Health News that he operated a lab that beforehand carried out exams for hospitals owned or managed by Perez’s firms. At one hospital board assembly, Gertz additionally stated he had handled marketing for Perez companies for 1½ years.
However, he stated he had parted methods with Perez after studying of his controversial dealings in different states, and Gertz stated Perez now owes him greater than $14 million. (Gertz and his firms haven’t been named as defendants in lawsuits reviewed by Kaiser Health News involving Perez and his firms.)
“I come in with a certain guilt by association,” he instructed the Modoc County Board of Supervisors in April, in line with a recording of the assembly. But Gertz sought to assuage any issues, telling the supervisors he had a “passion” for rural life. He’d grown up on a farm, he stated, the place he “hung out with the chickens” and cleaned the stables each morning.
Gertz stated his plan was completely different from Perez’s and authorized as a result of the hospital and one in all his Denver labs, SeroDynamics, had turn out to be one enterprise. With the hospital board’s approval earlier this yr, he loaned the district $2.5 million for it to purchase SeroDynamics — successfully an advance on the hospital’s buy value of $four million, in line with chapter courtroom documents. SeroDynamics’ website now proclaims the lab a “wholly-owned subsidiary” of the Surprise Valley hospital, with “national reach.”
Robert Michel, a scientific laboratory administration guide who realized of the phrases of the transaction from a reporter, supplied a crucial evaluation. “The essence of this arrangement is to use the hospital’s existing managed-care contracts with generous payment terms for lab tests as a vehicle to bill for claims in other states,” stated Michel, editor-in-chief of a trade magazine for the lab business. This association “should ring all sorts of bells” for the hospital board, he stated.
Cedarville (Heidi de Marco/KHN)
For now, Gertz has stated, dollars are flowing in. According to the journalist Jean Bilodeaux, Gertz phoned in to a Surprise Valley hospital board assembly final month to report that the lab billing to this point had netted about $300,000. According to chapter courtroom paperwork, 80 % of the earnings will go to his firms, 20 % to the hospital.
Those are phrases some in Surprise Valley are keen to stay with.
The subsequent step, for Gertz, is taking possession of Surprise Valley’s whole operation. For the 1,500 district residents, voting no on Tuesday virtually definitely means closure, leaving taxpayers with probably extra debt, together with any cash they could owe Gertz.
That is nice sufficient purpose to go along with the Denver entrepreneur, stated appearing hospital administrator Bill Bostic.
“He’s got something we haven’t got — which is money,” Bostic stated.