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These Hospitals Pinned Their Hopes on Private Management Companies. Now They’re Deeper in Debt.

At least 13 hospitals in Oklahoma have closed or experienced added financial distress under the management of private companies. Some companies charged hefty management fees, promising to infuse millions of dollars that never materialized.

Lisa Larson-Walker/ProPublica. Source images: Nick Oxford for ProPublica.

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This article was produced in partnership with The Frontier, which is a member of the ProPublica Local Reporting Network.

At least 13 hospitals in Oklahoma have closed or experienced added financial distress under the management of private companies. These companies sold themselves to rural communities in Oklahoma and other states as turnaround specialists.

Revenues soared at some rural hospitals after management companies introduced laboratory services programs, but those gains quickly vanished when insurers accused them of gaming reimbursement rates and halted payments. Some companies charged hefty management fees, promising to infuse millions of dollars but never investing. In other cases, companies simply didn’t have the hospital management experience they trumpeted.

Below are examples of rural hospitals that pinned their hopes on private management companies that left them deeper in debt. They are based on interviews, public records and financial information from the Centers for Medicare and Medicaid Services and the American Hospital Directory.

Memorial Hospital of Texas County

Location: Guymon in Oklahoma’s Panhandle

Number of hospital beds: 25

Status: Open. Currently managed by a chief executive officer hired by the hospital board.

Financial status in 2019:

  1. Total assets, including real estate, cash on hand, investments and inventory: $4.5 million
  2. Total liabilities, including mortgages and other loans, payroll costs and money owed to vendors: $5.9 million
  3. Net income: -$331,493

Management history and finances: The county-owned hospital has cycled through four management companies in the past eight years. Oklahoma City-based Synergic Resource Partners, the most recent management company, failed to meet the emergency needs of patients, according to a 2018 investigation by the Oklahoma State Department of Health. The investigation found instances in which patients were not given critical life-saving medications, including antivenom for snake bites and a common clot-busting drug used to treat stroke patients. Synergic Resource Partners began managing the hospital in October 2017, but it took full control of operations in April 2018. In March 2019, Doug Swim, the company’s CEO, sent a series of emails to the hospital board saying he would close the facility if the board didn’t agree to take back ownership. One email asked the hospital board to sign a new $60,000 monthly management agreement with the company. Fearing Swim would close the hospital, the governing board filed a lawsuit in April 2019. The board settled with the company and regained control of the hospital the same month.

Company response: Swim declined an interview request. He said he would only answer questions if The Frontier and ProPublica granted him anonymity. The news organizations declined.

Latimer County General Hospital

Location: Wilburton in southeast Oklahoma

Number of hospital beds: 33

Status: Closed in October 2018.

Financial status in 2017:

  1. Total assets: $10.9 million
  2. Total liabilities: $1 million
  3. Net income: -$580,400

Management history and finances: In September 2018, Blue Cross Blue Shield of Oklahoma dropped the hospital from its network, citing allegations of billing fraud involving its management company. The hospital was run by the now-defunct Missouri-based EmpowerHMS. When Latimer closed a month later, the hospital owed more than $1 million in unpaid payroll taxes and outstanding vendor invoices, former Chairman Danny Baldwin said.

Company response: Attempts to reach a representative for the company and for Empower were unsuccessful. Empower has denied allegations of wrongdoing in response to a federal lawsuit filed by insurance companies.

Pauls Valley Regional Medical Center

Location: Pauls Valley, about 60 miles south of Oklahoma City

Number of hospital beds: 64

Status: Closed in October 2018

Financial status in 2018:

  1. Total assets: $6.6 million
  2. Total: $14.4 million
  3. Net income: -$8.1 million

Management history and finances: The governing board gave Alliance Health Southwest Oklahoma control of the hospital in July 2018. Officials say no written contract exists. Alliance pledged to invest millions of dollars with a plan to eventually purchase the hospital, according to town leaders. The board believed the investment from Alliance would help the hospital pay its debt to the former management company, NewLight Healthcare, giving it a chance to start fresh. The multimillion-dollar investment never arrived.

Company response: Frank Avignone, CEO of the now-defunct Alliance Health Partners Southwest Oklahoma, said he planned to seek a bank loan and use the hospital’s future payments as collateral. But Avignone said he was unable to secure financing because of the lien that the prior management company had placed on the incoming payments.

Seiling Regional Medical Center

Location: Seiling in northwest Oklahoma

Number of hospital beds: 18

Status: Open. The hospital is currently managed by Shawnee, Oklahoma-based Cohesive Healthcare Management and Consulting.

Financial status in 2019:

  1. Total assets: $1.2 million
  2. Total: $2.7 million
  3. Net income: -$85,956

Management history and finances: Town leaders say the hospital’s former management firm Alliance Health Southwest Oklahoma entered into contracts and paid for services that were not approved by the board. The company hired an accounting firm for nearly $100,000 despite stating that it had a financial expert on staff that would be available as part of its contract with the town. It signed a five-year pharmacy services contract for up to $4,500 a month, plus the cost of drugs. And it entered into another contract for medical billing software that town leaders say they didn’t approve. Officials in Seiling said they learned of the contracts when bills began appearing on the hospital’s monthly financial reports. Seiling ended its relationship with Alliance in February 2019. Cohesive Healthcare has since taken over management of the hospital.

Company response: Alliance Health Southwest Oklahoma did not respond to written questions about its management of the Seiling hospital. The company has denied any wrongdoing in its management of three Oklahoma hospitals.

Sayre Community Hospital

Location: Sayre in western Oklahoma

Number of hospital beds: 31

Status: Closed in August 2018.

Financial status: Financial information is not available for the hospital.

Management history and finances: The chronically troubled hospital, which closed in 2016, was revived the following year by SMH Acquisition, an Oklahoma-based management company. It continued to struggle financially. The company failed to pay at least three employees’ health and dental insurance premiums despite deducting them from paychecks, according to a ruling on wage claims by the Oklahoma Department of Labor. The hospital landed in court for unpaid bills and was sold to pay creditors in May 2018. Another management company, Synergic Resource Partners, purchased the hospital only to abruptly close the facility three months later.

Company response: In an email, Robert Hicks, the owner of SMH Acquisition, said that despite the Oklahoma Department of Labor ruling that his company was responsible for unpaid insurance, he was no longer in charge of the hospital at the time. Swim, the CEO of Synergic Resource Partners, declined interview requests. Swim said he would only answer The Frontier and ProPublica’s questions on the condition of anonymity. The news organizations declined.

Mangum Regional Medical Center

Location: Mangum in southwest Oklahoma

Number of hospital beds: 18

Status: Open. The hospital is currently managed by Cohesive Healthcare Management and Consulting.

Financial status in 2018:

  1. Total assets: $5.8 million
  2. Total liabilities: $11.3 million
  3. Net income: -$1.8 million

Management history and finances: Officials in the town of Mangum allege in an ongoing lawsuit that Alliance Health Southwest Oklahoma enriched itself and other companies controlled by its owners at the hospital’s expense. The town’s hospital board fired Alliance in December 2018. In a letter severing the relationship, the board said the company repeatedly breached its management agreement, citing a decision to use a $4 million cost reimbursement from the federal government to pay down the line of credit without the board’s consent. It highlighted payments to companies owned by Alliance’s partners. The hospital now owes Medicare a projected $3.5 million and is being sued by a bank for $1.8 million to repay the line of credit. The lawsuit is also ongoing. Cohesive Healthcare has since taken over management of the hospital.

Company response: Alliance Health Southwest Oklahoma has denied wronging. Avignone, the company’s CEO, said Alliance saved the hospital from closing.

Carnegie Tri-County Municipal Hospital

Location: Carnegie in western Oklahoma

Number of hospital beds: 17

Status: Open. The hospital is currently managed by Cohesive Healthcare Management and Consulting.

Financial status in 2019:

  1. Total assets: $7.2 million
  2. Total liabilities: $20.6 million
  3. Net income: $2.4 million.

Management history and financial situation: The Carnegie hospital board and the Oklahoma City-based First Physicians Capital Group cut ties in 2017. That year, state inspectors found violations of patient care so severe that they determined the facility no longer met the minimum requirements to receive Medicare payments. Violations included a lack of security and monitoring for psychiatric patients in the emergency room and failing to provide adequate nursing staff. Cohesive Healthcare has since taken over management of the hospital.

Company response: First Physicians did not respond to interview requests.

Newman Memorial Hospital

Location: Shattuck in northwest Oklahoma

Number of hospital beds: 25

Status: Open. The hospital board hired a full-time CEO instead of another private management company.

Financial status in 2018:

  1. Total assets: $11.9 million
  2. Total liabilities: $10.9 million
  3. Net income: -$3 million

Management history and financial situation: Under Illinois-based People’s Choice Hospital, a management company, Newman Memorial falsely claimed that it was performing a large number of blood and urine tests to collect more than $21 million in payments, according to allegations made by the insurer Aetna in an ongoing federal lawsuit. Between January 2016 and April 2017, the hospital billed the insurer for thousands of samples tested at laboratories in other parts of the country, the lawsuit claims. The strategy allowed the hospital to collect $2,250 per test instead of the standard $120 that the insurer would normally pay larger facilities. The town’s hospital board fired People’s Choice in 2017 and sued the company for fraud and breach of contract because of the lab billing. The company and the hospital settled out of court in 2018. The terms of the settlement were not made public.

Company response: Attempts to reach a representative for People’s Choice were unsuccessful. In response to the lawsuit, the company denied the allegations from Aetna, stating that it saved the hospital from bankruptcy.

Cimarron Memorial Hospital

Location: Boise City in Oklahoma’s Panhandle

Number of hospital beds: 25

Status: Open. The hospital board hired a full-time CEO instead of another private management company.

Financial status in 2018:

  1. Total assets: $1.2 million
  2. Total liabilities: $3 million
  3. Net income: -$493,157

Management history and financial situation: Austin, Texas-based NewLight Healthcare ran the hospital for about a decade before deciding in January to end its relationship with the county. In 2017, the hospital increased lab testing to bring in more money, but the insurers questioned a high volume of charges and halted payments. To save money, the hospital stopped providing health insurance for nurses and other employees in December 2018. The hospital owed NewLight more than $1 million from deferred management fees as of February 2020. It has since paid its debt to the company, according to hospital officials.

Company response: NewLight Healthcare did not answer detailed questions from The Frontier and ProPublica. Instead, it responded with a statement: “NewLight Healthcare, LLC has consistently worked alongside community leaders, providers, state associations, and other leaders to attempt to create new models and programs that will improve the business climate for rural hospitals. Ultimately, in order to maintain quality rural healthcare, leaders in government will need to make additional funding sources available to rural hospitals.”

Haskell County Community Hospital

Location: Stigler in southeast Oklahoma

Number of beds: 25

Status: Open. The hospital is currently managed by Indiana-based Boa Vida Healthcare.

Financial status in 2019:

  1. Total assets: $6.3 million
  2. Total liabilities: $3.8 million
  3. Net income: -$2.4 million

Management history and financial situation: The hospital laid off about 85% of its staff last year, leaving it with only eight nurses, who double as the cleaning crew. The cuts were part of an effort to make the hospital more appealing to buyers. Haskell County was among four Oklahoma hospitals that entered bankruptcy in 2019 after insurance companies stopped reimbursing for laboratory tests that they alleged were part of a billing scheme conceived by EmpowerHMS, the management company that ran the hospitals. Blue Cross Blue Shield of Oklahoma booted Empower hospitals from its network in 2018 after allegations of fraud against the company. While under the management of Empower, the hospital stopped paying employee salaries and health benefits, according to testimony at a state hearing in November 2019. During the hearing, Haskell hospital employees questioned why no one was held responsible for their lost wages, benefits and money that was supposed to be paid into employee retirement plans.

Company response: Attempts to reach a representative for Empower were unsuccessful. The company has denied allegations of wrongdoing in its response to a federal lawsuit filed by insurance companies.

Drumright Regional Hospital

Location: Drumright in northeast Oklahoma

Number of beds: 15

Status: Open. The hospital is currently managed by Missouri-based Rural Hospital Group.

Financial status in 2018:

  1. Total assets: $12.1 million
  2. Total liabilities: $13.7 million
  3. Net income: -$821,484

Management history and financial situation: In February 2019, a state court judge appointed a representative to oversee spending at the hospital. The hospital, one of four in Oklahoma that filed for bankruptcy in 2019 under the management of EmpowerHMS, lacked money to purchase medicine and supplies. It was getting toilet paper from the local Fire Department, according to court documents. Insurers flagged increased laboratory for blood and urine tests as possible fraud at Empower hospitals.

Company response: Attempts to reach a representative for Empower were unsuccessful. The company has denied allegations of wrongdoing in its response to a federal lawsuit filed by insurance companies.

Fairfax Community Hospital

Location: Fairfax in northeast Oklahoma

Number of beds: 15

Status: Open. The hospital is currently managed by First Physicians Capital Group.

Financial status in 2019:

  1. Total assets: $1.2 million
  2. Total liabilities: $3.6 million
  3. Net income: -$6.7 million

Management history and financial situation: After the hospital entered bankruptcy in March 2019, a skeleton crew of nurses worked without pay to staff the emergency room, according to Donna Renfro, the former chief nursing officer. Not doing so could have put the hospital at risk of losing its operating license under state law. The hospital, one of four in Oklahoma run by EmpowerHMS, ran out of money after insurance companies accused the company of fraud. Empower sought reimbursements for blood and urine tests that were not performed at the hospitals the company managed, insurance companies allege in a federal lawsuit.

Company response: Attempts to reach a representative for the Empower group were unsuccessful. The company has denied allegations of wrongdoing in its response to a federal lawsuit filed by insurance companies.

Prague Community Hospital

Location: Prague in eastern Oklahoma

Number of hospital beds: 25

Status: Open. The hospital is currently managed by Cohesive Healthcare Management and Consulting.

Financial status in 2019:

  1. Total assets: $8.2 million
  2. Total liabilities: $3.7 million
  3. Net income: -$812,868

Management history and financial situation: The hospital was forced to rely on food donations to feed its patients in January 2019 after Empower stopped paying its bills, according to news reports. The hospital and three others in Oklahoma run by Empower entered bankruptcy in 2019 when insurers accused the company of a lab billing scheme that charged for blood and urine tests performed elsewhere. Cohesive Healthcare has since taken over management of the hospital.

Company response: Attempts to reach a representative for the company were unsuccessful. The company has denied allegations of wrongdoing in its response to a federal lawsuit filed by insurance companies.

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