National news stories highlight billing schemes at rural hospitals similar to scheme uncovered by Auditor Galloway

2017 audit of Putnam County Memorial Hospital found $90 million in questionable lab billings for patients from around U.S.
March 27, 2018

JEFFERSON CITY, Mo. (March 27, 2018) Two national news stories broadcast Monday highlight billing schemes at rural hospitals across the country similar to one uncovered by State Auditor Nicole Galloway last summer at a hospital in northern Missouri. Work is underway to complete a follow-up report on the hospital and its practices. 

That audit discovered questionable billing practices at Putnam County Memorial Hospital, which had billed insurance companies more than $90 million for lab work, with the vast majority of the billings being for patients from across the country who had never been to nor received services from the hospital. When the report was released, Auditor Galloway said the scheme, in effect, made the hospital a shell organization through which millions of dollars were funneled to Hospital Lab Partners LLC and its affiliates.

The CBS News investigation reports broadcast on March 26 focused on similar situations in Florida and Georgia where health care management companies would either purchase financially strapped rural hospitals or take over their day-to-day management. Those companies then often would hire partner companies to perform lab services, which were billed to insurance companies at much higher reimbursement rates.

In the case of Putnam County Memorial Hospital, the hospital board hired David Byrns and his company, Hospital Partners Inc., in 2016 to manage operations. Soon after, Byrns hired a partner organization, Hospital Lab Partners LLC, to provide lab services. Auditor Galloway found that in addition to the $90 million in insurance payments -- most of which was passed on to the lab company and its partners -- the hospital also paid out more than $10 million in lab management fees, with little explanation of the fees. The audit also discovered the hospital paid the salaries of 33 employees located across the country to perform the lab work.

Byrns, the CEO, paid more than $700,000 to his management company during the audit period and paid himself an additional $200,000 annual salary out of county hospital funds, without hospital board approval. Auditor Galloway also noted more than $5,000 in questionable expenses for which Byrns received reimbursement.

"These news stories confirm the national impact of the type of scheme we uncovered last year and how it can result in higher health care costs for all of us," Auditor Galloway said. "It's especially concerning that these practices target rural communities where residents face the risk of losing access to acute care."

Auditor Galloway turned over records and information from the audit to state and federal law enforcement authorities. Work is currently underway on a follow-up report, which will check up on the activities of Putnam County Memorial Hospital and provide an update on any progress made to address the audit findings.   

 

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