Insurers Blew the Whistle on What They’re Calling a Hospital Scam

But not before EmpowerHMS allegedly bilked millions from payers and left hundreds of employees in rural areas without jobs, back pay, and health insurance.

“My only fault,” Jorge A. Perez tells Kaiser Health News (KHN), “is I tried everything in the world to save them.”

By them, Perez means 18 rural hospitals across eight states, 11 of which he owned or co-owned. He was affiliated with the companies that owned or managed the rest. What those hospitals today have in common is that they’re in deep financial trouble: 12 have entered into bankruptcy and eight have closed their doors altogether, dealing a double blow to the rural communities. Not only did they provide the only hospital care for miles around, but they often represented the biggest employer in the struggling towns.

Blue Cross Blue Shield and other insurers knew something was up just by a cursory review of the bills they received. They were fraudulent, they charged.

As KHN puts it: “How could Unionville, Mo.—a town of 1,790—generate $92 million in hospital lab fees for blood and urine samples in just six months? Why had lab billings at a 25-bed hospital in Plymouth, N.C., nearly tripled to $32 million in the year after Perez’s company took control?”

Perez denies any wrongdoing and wants the lawsuits against him dismissed on questions of jurisdiction, and also argues that he his billing setup adhered to Medicare and state guidelines. Federal regulations allow rural hospitals to charge substantially higher rates for lab tests, the goal being to keep those hospitals afloat financially.

KHN reports that Perez took this to extremes, contracting “with outside labs, in other cities and states, to draw and process blood and urine tests for thousands of people who never set foot in the hospital. Insurers were billed using the higher rates afforded the rural hospitals, and the contractors got a portion of the proceeds.”

Perez maintains he abided by the rules.

He tells KHN: “I’m still waiting [to see] where we’ve done anything wrong.”

Melva Price Lilley, an X-ray technician at Washington County Hospital in Plymouth, N.C., told KHN what it was like. “Sometimes we wouldn’t have soap to bathe patients. We didn’t have any crackers, orange juice. We didn’t have enough staff at night to run a code. They never invested any money in our hospital. You have to go on top of the roof to adjust the heat or air conditioning with a broomstick.”