The Collapse Of A Hospital Empire — And Towns Left In The Wreckage

SWEET SPRINGS, Mo. — The cash was so good to start with, and it appeared it would gush eternally, proper via tiny nation hospitals in Missouri, Oklahoma, Tennessee and into the coffers of firms managed by Jorge A. Perez, his household and enterprise companions.

It was his “secret sauce,” the rotund Miami entrepreneur would smilingly inform individuals of their no-stoplight cities. The money-making ventures he proposed sounded sophisticated, certain, however he stated they’d usher in sufficient money to save lots of their hospital and dozens, even a whole bunch, of fine jobs in rural cities the place gainful employment is tough to return by.

And, on the town after city, the individuals believed him. He supplied what they may not resist: hope, and the promise of survival.

Then just a few main medical insurance firms obtained suspicious, as did some authorities officers. How might Unionville, Mo. — a city of 1,790 — generate $92 million in hospital lab charges for blood and urine samples in simply six months? Why had lab billings at a 25-bed hospital in Plymouth, N.C., nearly tripled to $32 million within the 12 months after Perez’s firm took management?

The lab billings, insurers alleged, have been merely fraudulent. Blue Cross Blue Shield and different insurers began submitting lawsuits, stopped making reimbursements and shut off the spigot.

At the peak of his operation, Perez and his Miami-based administration firm, EmpowerHMS, helped oversee a rural empire encompassing 18 hospitals throughout eight states. Perez owned or co-owned 11 of these hospitals and was CEO of the businesses that supplied their administration and billing companies. He was affiliated with firms that owned or managed the remaining.

Now, with funding from the lab-billing enterprise dried up, 12 of the hospitals have entered chapter and eight have closed their doorways.

The staggering collapse left a whole bunch of workers with out jobs and lots of extra owed months of again pay. Only in current months did they be taught that their medical protection had been terminated as a result of EmpowerHMS had stopped making funds, in response to interviews and bankruptcy documents.

At a few of the hospitals, EmpowerHMS stopped paying worker payroll taxes, Perez acknowledged in an interview. Some of the shuttered hospitals owe a whole bunch of hundreds in property taxes, in response to native officers.

How firms run by this Miami businessman and his associates have been capable of drive so many hospitals into the bottom so shortly, devastating their communities, is a narrative concerning the fragility of well being care in rural America and the kinds of money-making ventures which have flourished in authorized grey areas of America’s sophisticated medical system.

Perez styled himself as a savior of rural hospitals. “My only fault is I tried everything in the world to save them,” he instructed Kaiser Health News.

But for the townspeople left within the wreckage, the fact feels extra sinister.

EmpowerHMS “is like a curse word,” stated Tara Brewer, head of the Chamber of Commerce in Sweet Springs, Mo., the place the I-70 Community Hospital closed in February, taking with it dozens of jobs and emergency care.

The city’s mayor, Francis Vaught, put it extra merely: “We were robbed.”

Building An Empire On Promises

Jorge Perez’s firm jet by no means appeared to take off on time.

Whether he was headed to Kansas, Missouri or Arkansas, Perez all the time was operating late, stated Scottie Collins, who joined the Empower workforce in 2017 with the expectation his Florida-based drug rehab program could be built-in into the burgeoning hospital group. It struck Collins as a luxurious, given the flight crew charged by the hour, however neither Perez nor his entourage appeared involved.

In September 2017, Perez and his workforce swooped into Fulton, Mo., days earlier than the city’s almost 100-year-old hospital was set to shut. Fulton Medical Center, with 140 staffers, was a serious employer and the one hospital in Callaway County. The hospital had struggled for a quarter-century, escaping closure at the least 3 times because the financial forces battering rural hospitals throughout America took their toll.

At what was presupposed to have been a farewell potluck for the power’s employees, Perez appeared, asserting that he’d simply purchased the hospital and was maintaining it open, in response to media reports. From the rostrum, he delivered what had develop into his customary pitch in small cities throughout the Midwest: He noticed a neighborhood desperately preventing to maintain its hospital, and he would assist them win.

Fulton Medical Center has struggled for a quarter-century, escaping closure at the least 3 times because the financial forces battering rural hospitals throughout America took their toll.

“He seemed to be a nice enough guy,” stated LeRoy Benton, Fulton’s mayor on the time, “and seemed to say the right things.”

If the communities he wooed had the time or capability to look deeper, they may have seen a crimson flag: Perez had no expertise managing hospitals. Trained as an electrical engineer, Perez helped his father run a medical billing firm in Miami that served docs and hospitals. He repeatedly noticed rural hospitals closing, he stated, and felt moved to save lots of them.

In 2015, Perez partnered with an organization run by a Chicago-based emergency room doctor, Dr. Seth Guterman, to take over the Campbellton-Graceville Hospital in Graceville, a city of two,200 individuals within the Florida Panhandle.

Perez instructed the local paper the brand new possession group would make investments $2 million and scale back prices by 30%. “Consider Campbellton-Graceville Hospital SAVED,” enthused the Jackson County Times.

A 12 months later, he invested in a struggling hospital in Williston, Fla., and with companion David Byrns landed a administration contract for Putnam County Memorial in Unionville, Mo. In 2017, Perez shaped a partnership with Paul Nusbaum, a former secretary of well being and human assets in West Virginia, and bought controlling curiosity in 10 hospitals in Oklahoma, Kansas, Missouri, Tennessee and North Carolina, swallowing them entire.

“When you rescue a hospital, you rescue a community” was his mantra on social media.

In an interview, EmpowerHMS CEO Jorge A. Perez was adamant he has operated in the perfect pursuits of the communities he sought to serve. If something, he stated, the townspeople ought to thank him, as a result of he gave their dying hospitals “two to three years of life.”

People describe Perez as genial and courteous — “Everybody that knows me says I have a big heart,” he stated of himself. But his inside circle included some individuals with questionable backgrounds.

One of Empower’s high executives, J.T. Lander, had achieved time in federal jail after being convicted in 2009 of mail fraud and cash laundering whereas serving as county legal professional for Florida’s Dixie County. Byrns’ criminal record contains an arrest for examine forgery at a Louisiana hospital he managed. (Byrns returned the cash, and legal prices have been dropped.)

Neither Byrns nor Lander responded to a request for remark; a lady who answered Nusbaum’s telephone stated he was unavailable for remark.

Fernando Barroso, who labored as an assistant controller for EmpowerHMS in 2018, stated the corporate’s monetary methods have been a large number, even because it wrestled with huge debt collected via rapid-fire hospital acquisitions.

“I’ve been an accountant for a long time and I thought I’d seen everything, but I’d never seen anything like this,” Barroso stated. “It was total disorder.”

Perez and his workforce swooped into Fulton, Mo., in 2017, days earlier than the city’s almost 100-year-old hospital was set to shut. “He seemed to be a nice enough guy,” says LeRoy Benton, Fulton’s mayor on the time, “and seemed to say the right things.”

A Lucrative Venture

To generate earnings for foundering hospitals, Jorge Perez took benefit of federal well being care rules that enable some rural hospitals to invoice for laboratory assessments at considerably larger charges than different suppliers. The aim is to maintain hospitals that present very important care in distant areas afloat, by paying generously for the comparatively small variety of assessments wanted in such places.

But a number of of the Perez-affiliated hospitals established lab applications that reached properly past the hospital doorways. They contracted with outdoors labs, in different cities and states, to attract and course of blood and urine assessments for hundreds of people that by no means set foot within the hospital. Insurers have been billed utilizing the upper charges afforded the agricultural hospitals, and the contractors obtained a portion of the proceeds.

In current years, Perez and a handful of different rural hospital homeowners who’ve established comparable operations have defended the billing setup as in alignment with federal rules. But amongst some medical finance consultants, it’s thought-about legally murky and has resulted in allegations of fraud involving homeowners in a number of states.

What isn’t in dispute is that the technique will be profitable. At 14-bed Putnam County Memorial alone, the lab-billing operation generated almost $120 million in funds to outdoors distributors within the first six months of 2017, in response to inner paperwork obtained by Kaiser Health News. And a bit of these funds — almost $80 million in lab-related prices — went to Perez-affiliated firms, in response to the paperwork.

The closure of I-70 Community Hospital marked a searing loss for Sweet Springs, Mo. At the peak of his operation, Perez and his administration firm, EmpowerHMS, helped oversee a rural empire encompassing 18 hospitals throughout eight states.(Heidi de Marco/KHN)

Lewis Bybee, a retired veterinarian and I-70 Community Hospital board member, and his spouse, Janice, on their porch in Sweet Springs, Mo. “All he did was take from us,” Lewis says of Perez.(Heidi de Marco/KHN)

In interviews, a number of workers stated they’d no concept what Empower did with the cash their hospitals earned, for the reason that services appeared perpetually starved for money.

Melva Price Lilley, an X-ray technician at Washington County Hospital in Plymouth, N.C., recalled usually being wanting provides. “Sometimes we wouldn’t have soap to bathe patients,” Lilley stated. “We didn’t have any crackers, orange juice. We didn’t have enough staff at night to run a code.”

“They never invested any money in our hospital,” she stated. “You have to go on top of the roof to adjust the heat or air conditioning with a broomstick.”

Perez had taken management of the regional hospital in Drumright, Okla., in 2017 promising brighter days, stated Tracy Byers, hospital CEO on the time. Instead, he stated, the payments shortly piled up.

“I would dread Mondays as that’s when all the certified letters would start showing up in the mail,” Byers stated. “Typically, by Thursday and Friday, you’d have an idea of what bills you could pay, if any.”

Even because the hospitals struggled, Perez, on his personal and thru Empower-affiliated firms, was investing in actual property in 2016 and 2017, shopping for up 9 South Florida properties that totaled greater than $three.7 million, together with three condos on Key Largo, in response to property information.

In an interview, Perez maintained that the Florida properties have been purchased with earnings from unrelated software program firms. He declined to get into particulars about his funds. “The little I have left I need to preserve and protect,” he stated. “I’m as broke today as anybody out there.”

Sweet Springs Mayor Francis Vaught is among the many native officers who really feel a way of betrayal for the reason that closure of I-70 Community Hospital. “We were robbed,” he says.

Fallout From A Damning Report

In August 2017, Missouri State Auditor Nicole Galloway delivered a surprising blow.

A routine audit of Putnam County Memorial had uncovered questionable monetary dealings. From December 2016 to May 2017, Perez and Byrns’ firm, Hospital Partners, had managed to generate $92 million from lab assessments run via Putnam. By comparability, hospital income totaled $7.5 million in fiscal 12 months 2016, in response to the audit.

The evaluation discovered 80% of that cash was flowing to laboratory firms, together with some by which Byrns had a monetary stake; one other 6% to a Perez-controlled billing firm; and a serious portion to 33 out-of-state phlebotomists — blood draw specialists — they’d placed on the hospital payroll.

“What was astounding to me was that the hospital was not better off during and after this lab activity,” Galloway instructed KHN.

The response was explosive. Dozens of main insurers banded collectively to file lawsuits in opposition to Perez-affiliated hospitals in Missouri and different states, demanding a whole bunch of thousands and thousands in restitution. The lawsuits, nonetheless ongoing, describe the lab-billing operation as a “widespread fraudulent scheme” that aimed to complement Perez, a few of his associates and affiliated firms, in addition to taking part labs.

Tara Brewer, head of the Sweet Springs Chamber of Commerce, together with her kids, Keegan and Kendall,  and canine, Sawyer. Brewer worries Sweet Springs gained’t survive the closure of I-70 Community Hospital. “What is it that we’re going to have for our kids?” she asks.

In court docket paperwork, Perez has denied wrongdoing and requested for dismissal based mostly on questions of jurisdiction, amongst different points. In an interview, he stated his billing setup was “done according to Medicare and state guidelines.” He added: “I’m still waiting [to see] where we’ve done anything wrong.”

Legal or not, as public scrutiny intensified, the income generated by lab assessments slowed to a trickle. Blue Cross Blue Shield of Oklahoma dropped 4 Perez-affiliated hospitals from its community, slicing off an important supply of funding. Lenders took Perez and his companions to court docket to pressure them out of different hospitals.

Across the Midwest, workers have been dwelling the fallout. In hospital after hospital, paychecks got here late — after which by no means, in response to worker interviews and bankruptcy court paperwork. Doctors stop. Vendors stopped delivering very important provides.

At Haskell County Community Hospital in Stigler, Okla., former laboratory supervisor Shawna Smith recalled an alarming scarcity of antibiotics and IV catheters as early as October 2018. By January 2019, she stated, workers weren’t getting paid. The Ladies Auxiliary arrange a fund for workers who couldn’t pay their utility payments. One resident introduced packages of hamburger and bison for each worker.

About two hours west, the native center college in Prague, Okla., held a drive to gather bathroom paper and cleansing provides for Prague Community Hospital. A veterinary clinic delivered medical necessities. Still, provides fell so low, stated City Manager Jim Greff, that the hospital needed to cease admitting sufferers.

At Drumright Regional Hospital, Human Resources Director Allyson Lunsford stated they ran out of oxygen and blood. By December, she stated, they have been to date behind on payments that the corporate that rented them hospital beds got here to repossess them — regardless of sufferers nonetheless utilizing them.

I-70 Community Hospital in Sweet Springs, Mo., is one among eight hospitals owned or managed by Miami businessman Jorge A. Perez that closed in recent times. Twelve Perez-affiliated hospitals are in chapter.

A Sense Of Betrayal

By March 2019, seven Perez-affiliated hospitals had closed. And as chapter proceedings unfolded at these and others, workers obtained extra devastating information, in response to interviews and trustee reports: Along with lacking paychecks, the corporate had stopped funding their medical insurance; their medical and dental insurance policies had been discontinued.

Perez stated in an interview that the hospitals weren’t making sufficient cash to cowl their bills and debt. He stated he confronted fixed stress about which payments to pay.

“I had a whole executive team of experts, and they made decisions — we all made decisions — of what needed to be paid so we can live another day,” Perez stated. “Do we pay the medication? Do we pay the pharmacy stuff? Do we pay the doctors? Do we pay the nurse?”

“We felt at that moment we were going to be able to pull out of it in a month or two,” he stated of the missed payroll taxes. “Hindsight on that looks bad.”

In February, the I-70 Community Hospital in Sweet Springs grew to become one of many newest Empower hospitals to close its doorways, leaving its red-lettered “Emergency” signal shrouded in a white sheet. It marks a searing loss for a city the place the final dentist lately closed store and a number of storefronts sit deserted.

Like many rural cities, Sweet Springs faces financial challenges. The hospital closed owing $300,000 in unpaid property taxes, says the county assessor.

The closure left $300,000 in unpaid property taxes that would have been spent on colleges, in response to the county assessor. Mayor Vaught stated the city misplaced dozens of jobs. Medical gear purchased with cash raised at scorching canine fundraisers sits unused.

Brewer, the Chamber of Commerce head, worries Sweet Springs gained’t survive the hit. “What is it that we’re going to have for our kids?” she requested.

It’s not clear what recourse the cities have. Bankruptcy court docket paperwork point out the Department of Justice is investigating Perez’s firms, although DOJ officers wouldn’t remark. Perez has not been criminally charged, however federal prosecutors lately indicted one among his associates.

On July 9, Kyle Marcotte, proprietor of a Jacksonville Beach, Fla., habit therapy middle pleaded guilty for his half in a $57 million lab-billing scheme involving two Perez-affiliated hospitals, together with Campbellton-Graceville. Marcotte admitted cooperating with unnamed hospital managers to supply urine samples from his sufferers for lab testing that was billed via the agricultural hospitals and, in change, getting a minimize of the proceeds. His sentencing has but to be scheduled.

Perez, who nonetheless lives in Miami, stated the corporate jet has been bought and he’s turning his consideration to software program growth. He instructed KHN he’s dropping sleep over the chance he might go to jail however was adamant he has operated in the perfect pursuits of the communities he sought to serve. If something, he stated, the townspeople ought to thank him, as a result of he gave their dying hospitals “two to three years of life.”

“I wanted to see if I could save these rural hospitals in America,” Perez stated. “I’m that kind of person.”

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