Struggling Rural Hospitals Pin Hopes On Risky Billing Schemes

Featured, Hospital Management

More than 83 rural hospitals have closed since 2010. Even more alarming is the fact that roughly a third of America’s rural hospitals are at risk of closure. These stunning statistics are at the heart of a recent NPR article, which investigates what can happen when struggling rural hospitals are forced to act.

According to the article, Jorge Perez, a management consultant and entrepreneur, is known for buying vulnerable hospitals with a promise to turn things around. In 2016, he purchased Putnam County Memorial Hospital, a small-town facility in Missouri fighting for survival.

Perez’s business approach seemed like a godsend to Putnam. In just six months, Perez’s company had helped the hospital generate roughly $92 million in revenue. In contrast, the hospital had made just $7.5 million the year before, according to an audit report released by Missouri State Auditor Nicole Galloway.

So how did Perez’s company manage this incredible turnaround? According to the NPR article, Putnam began operating a lab billing program just days after the takeover. However, the large amounts of revenue that started pouring into the 15-bed hospital raised red flags with regulators. The Galloway report noted that most of the program’s profits didn’t stay with the hospital. Instead, more than 80 percent of the revenue when to management companies with ties to Perez.

“It appears that Putnam County Memorial Hospital is being used as a shell company for questionable lab activity that’s occurring across the country,” Galloway said in an interview after releasing the audit.

Perez is now under federal investigation and has been ousted from leadership at Putnam, according to the NPR article. Unfortunately, the hospital may once again be in financial difficulties as many insurers try to recover their losses.

You can read the full report by NPR here.

  • Subscribe to the Medical Solutions Blog

    Get updates sent to your inbox

  • This field is for validation purposes and should be left unchanged.