North Kansas City-Based Hospital Network Falls Behind On Payroll And Other Payments | KCUR

North Kansas City-Based Hospital Network Falls Behind On Payroll And Other Payments

Jan 4, 2019

Rural hospitals affiliated with North Kansas City-based EmpowerHMS are struggling to meet their financial obligations, leaving employees and vendors holding the bag.

Various news outlets have reported that EmpowerHMS hospitals in Kansas, Oklahoma, Tennessee and Arkansas have failed to meet payroll or defaulted on their rent and utility payments.

Larry Paine, the city administrator of Hillsboro, Kansas, said Hillsboro Community Hospital’s October utility check of about $10,000 was returned for insufficient funds.

“We have a policy here that if a customer will talk to us and say, hey, we’ve got a problem, we will work with them,” Paine said. “And if we don’t hear from them, we take more stringent actions, which includes shutting off the electricity.”

That apparently got the attention of EmpowerHMS, which Paine said pledged to make the payment on Thursday.

“They said I will be receiving a wire transfer payment for some or all of the utility bills that are outstanding,” Paine said.

At the close of business Thursday, no wire transfer had arrived.

EmpowerHMS took over Hillsboro Community Hospital in 2017 when it acquired Rural Hospitals of America, which operated rural hospitals in Kansas and Missouri. Hillsboro has about 3,000 residents, and the hospital is one of its largest employers.

EmpowerHMS is headed by Jorge Perez, a Florida resident who has steered the acquisition of more than a dozen distressed rural hospitals over the last few years in the Midwest, Southeast and California. An Empower release a year ago said the group’s strategy was “to identify, assess and take over operations of distressed hospitals across the United States in order to avert their closure.”

One of those hospitals, Putnam County Memorial Hospital in Unionville, Missouri, was the subject of a highly critical audit in 2017 by Missouri Auditor Nicole Galloway, who questioned the legality of a lab billing arrangement instituted at the hospital. Since then, some commercial insurers have balked at reimbursing the hospitals.

Putnam County Memorial Hospital's board of trustees has since terminated the contract of Perez's group. The group has sued the board and Galloway, alleging the board acted illegally and Galloway overstepped her bounds. 

Mike Murtha, the president of the National Alliance of Rural Hospitals, which is affiliated with Perez and EmpowerHMS, acknowledged its hospitals were having cash flow difficulties. But in a telephone interview, he said December is always a bad time of year for rural hospitals.

“And then you wait until late January and February and you get that money in compensation, and you move forward with your next year,” he said, referring to Medicare and Medicaid reimbursements.

“And that’s why you always hear lots about them being in financial straits towards the end of the year. It’s not untypical. This is not an anomaly. I mean, again, you guys report when things don’t go well and there’s a lot to report on, but it’s very myopic.”

At least some of EmpowerHMS’s cash flow difficulties stem from the increasing unwillingness of insurers to enter into contracts with its hospitals. Last year, Blue Cross Blue Shield of Oklahoma dropped EmpowerHMS’s hospitals from its network, citing what it called the questionable lab billing practices at the hospitals.

Brock Slabach, senior vice president for member services at the National Rural Health Association in Leawood, Kansas (which is not related to the National Alliance of Rural Hospitals), said that without a provider agreement with Blue Cross Blue Shield, “that’s a book of business they were doing without.”

“So that’s one thing,” he said. “And then there’s seasonal variation in volume… But you to have to budget for these realities and you have to plan for it.”

Slabach noted that while each of EmpowerHMS’s hospitals has its own separate provider number, “this is all under one corporate tax identifier number and so what impacts one (hospital) could impact all.”

That means the closure of one hospital could have a domino effect, leading to the closure of others.

“There are concerns about that,” said Paine, the city administrator of Hillsboro, Kansas. Asked whether he had faith in the people running the hospitals, Paine said, “Well, I can’t really answer that one. And you can read between the lines and figure out why I can’t.”

Clarification: The story has been clarified to make it clear that Putnam County Memorial Hospital in Unionville, Missouri, is no longer owned by a group connected to Jorge Perez.

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