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Overland Park Weight-Loss Hospital Sues After Government Cuts Off Medicare Funding

Blue Valley Hospital opened in 2010 and provides weight-loss surgery and other medical services.

An Overland Park hospital that specializes in weight-loss surgery is suing government health officials after they cut off its participation in Medicare.

Blue Valley Hospital (BVH), an acute care facility at 129th Street and Metcalf Avenue, claims to perform 35 percent of all Missouri Medicaid bariatric surgeries, the umbrella term for weight-loss operations. If it loses its Medicare funding and has to shut down, “the residents of Kansas and Missouri will lose access to crucial bariatric procedures, which are necessary to prevent a multitude of life-threatening and life-altering conditions,” the suit alleges.

In order to be covered by Medicare, a hospital must “primarily engage” in providing services to inpatients. State health officials conducted an unannounced survey of BVH last November and found it did not have any inpatients at the time. The officials’ subsequent report cited data provided by the hospital showing about 309 outpatient surgeries over a yearlong period, compared with 146 inpatient surgeries.

Although BVH submitted a plan of correction, Medicare officials found the plan was “aspirational only, did not provide specific dates when BVH would be in compliance and therefore is unacceptable.” Last week, they informed BVH that it did not meet the requirements for participation as a Medicare provider.

In its lawsuit, BVH says federal officials’ decision was “arbitrary, capricious and an abuse of their discretion.” BVH is seeking an injunction to restore the status quo, claiming the hospital’s patients will otherwise suffer substantial and irreparable harm.

The lawsuit says that Medicare reimbursements are a crucial part of BVH’s funding and private insurers might also stop paying if the hospital isn’t Medicare-certified. It names Alex Azar II, secretary of the U.S. Department of Health and Human Services; Seema Verma, administrator of the Centers for Medicare and Medicaid Services (CMS); and Jeff Hinson, the regional administrator of CMS.

Julie Brookhart, a spokeswoman for the regional office of CMS, said the agency does not comment on pending lawsuits.

The hospital’s CEO, Chris Dixon, said that none of CMS’ concerns related to patients’ safety or care. He otherwise declined to comment on CMS’ move or the lawsuit.

Dixon said the hospital was owned by private shareholders, but he declined to identify them. The hospital was incorporated in 2009 by Douglas Palzer, who was its original CEO, and opened in 2010. At the time, it primarily offered weight loss surgery, but Dixon said it has since expanded to other areas.

Palzer previously operated an ambulatory surgical center nearby specializing in weight loss. A 2010 release by the hospital said the practice began to move away from the ambulatory surgical environment and "into the hospital facility to help more of its patients obtain insurance approval.”

Dan Margolies is a senior reporter and editor for KCUR. You can reach him on Twitter @DanMargolies.

Dan Margolies has been a reporter for the Kansas City Business Journal, The Kansas City Star, and KCUR Public Radio. He retired as a reporter in December 2022 after a 37-year journalism career.
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