Becker's Hospital Review

38 CFO / FINANCE Massive billing scheme spread to 10-hospital group, lawsuit alleges By Ayla Ellison A $90 million billing fraud scheme highlighted in a state audit of a 15-bed Missouri hospital spread to as many as 10 other hospitals, accord- ing to e Kansas City Star, which cited a federal complaint. Here are five things to know: 1. James and Phyllis Shaffer, who are part owners of a 10-hospital group called HMC Hospitals, filed the lawsuit against several individuals they claim carried out a billing fraud scheme. 2. ey allege Jorge Perez and others or- chestrated a fraud scheme involving HMC Hospitals using the same questionable bill- ing practices Mr. Perez allegedly rolled out at Putnam County Memorial Hospital in Unionville, Mo. 3. A 2017 report by Missouri State Auditor Nicole Galloway highlighted the alleged billing fraud scheme at Putnam County Memorial. Mr. Perez and others alleged- ly used pass-through billing for labora- tory services to generate $92 million in revenue for the critical access hospital in six months. e auditor claimed Putnam County Memorial Hospital acted as a shell company by submitting claims for other labs and funneling the insurance payments through the hospital. 4. e Shaffer's lawsuit alleges Mr. Perez was the CEO of a company hired to manage HMC Hospitals' facilities. Aer taking con- trol, Mr. Perez's company allegedly imple- mented an illegal billing scheme at some of the hospitals that was "substantially similar to the scheme" being operated at Putnam County Memorial, the lawsuit alleges. 5. Mr. Perez and all other defendants named in the lawsuit are represented by counsel and claim the allegations are mer- itless, according to e Kansas City Star. n Moody's: Margin contraction puts nonprofit hospitals on unsustainable path By Ayla Ellison A nnual expense growth for nonprofit and public hospitals outpaced annual revenue growth in fiscal year 2017, according to Moody's Investors Service. The median annual expense growth rate was 5.7 percent in fiscal year 2017, down from 7.1 percent in fiscal year 2016. However, the annual revenue growth rate de- clined faster, falling from 6.1 percent in fiscal year 2016 to 4.6 percent in fiscal year 2017. "This is the second consecutive year expenses have topped revenues and this will remain the largest strain on NFP hospital profitability through 2019," Moody's said. The lower revenue growth was attributable to several factors, including the shift to outpatient care, increased ambulatory competition and lower reimbursement rates. The lower expense rate was largely due to better control of supply and labor costs, according to Moody's. Moody's expects nonprofit hospital margins will continue to be suppressed through 2018 after median operating margins and cash flow margins fell to all-time lows of 1.6 percent and 8.1 percent, respectively, in fiscal year 2017. "Reversing sluggish volume trends and growing profitable service lines will be critical to improving the sector's financial trajectory over the near-term as most hospitals continue to operate in a fee-for-service environment," said Rita Sverd- lik, a Moody's analyst. The medians are based on an analysis of audited fiscal year 2017 financial statements for 303 freestanding hospitals, single-state health systems and multistate healthcare systems, representing 78 percent of all Moody's-rated healthcare entities. n Texas hospital lays off 40% of administrative staff amid financial troubles By Ayla Ellison H untsville (Texas) Memorial Hospital is facing financial troubles, but the hospital is taking steps to shore up its finances, according to The Huntsville Item. The hospital, which has faced financial challenges for months, is behind on pay- ments to vendors and is unable to pay rent. To help improve its financial position, the hospital closed its clinic in Madison- ville, Texas, and plans to close its clinic in Riverside, Texas, by the end of August. Huntsville Memorial Hospital also cut expenses through employee layoffs. "We have right-sized all of the departments within the hospital, including re- ducing the administration staff by 40 percent," Michael Morgan, hospital interim CEO, said Aug. 22, according to the report. The hospital began seeking partnership opportunities earlier this year and has received interest from 38 organizations across the nation. "We are very pleased at the level of interest that has been shown so far, but no decisions have been made and we are continuing to evaluate all possibilities for charting the best path forward for the hospital," Mr. Morgan said. n

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