Missouri Auditor Alleges Rural Hospital Involved in Billing Scheme

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Missouri Auditor Nicole Galloway has released a report alleging a rural hospital under financial strain in northern Missouri billed insurance companies for lab tests that didn’t occur at the hospital and received a cut of payments funneled to another lab company.

The audit says there wasn’t enough oversight by Putnam County Memorial Hospital’s board and that the hospital acted as a shell organization to funnel most of roughly $90 million insurance payments it received to another lab company.

“It’s deeply disappointing that the Putnam County Memorial Hospital was in such a dire situation that, in order to stay operational, the hospital’s board accepted these income sources without question,” Galloway said in a statement. “The citizens that live and work in this area and the patients that depend on the hospital are ultimately going to be the ones who pay for those mistakes.”

A request for comment from the hospital wasn’t immediately returned.

The audit claims the financially embattled hospital in September 2016 hired Hospital Partners Inc. to take over management and made its president, David Byrns, CEO of the hospital. Byrns then hired partner organization, Hospital Lab Partners LLC to do lab work.

But Galloway’s office said most of the lab tests were for patients who never went to Putnam County Memorial Hospital, and employees for the lab company worked in other states across the country.

The audit alleged the hospital billed insurance companies for the tests, then funneled most of the more than $90 million in insurance payments back to Hospital Lab Partners. Galloway’s office said in exchange, the hospital got a cut of the insurance payments.

In a July response included in the audit, the hospital said it needed more time to review allegations before commenting because it had just recently hired an attorney to handle any issues related to the audit.

Galloway’s office said the hospital could be liable for any potential fraud or negligence by Hospital Partners. The company wrote a contract the hospital signed that has an indemnity clause that says the hospital “shall at all times indemnify and hold harmless Hospital Partners, its officers and directors, from and against any and all claims, losses, liabilities, actions, management and proceedings, and expenses” from managing the hospital.

The audit also called out the hospital board for not more closely monitoring Byrns, who set and raised his own pay to $200,000 a year. In the July response, the hospital said Galloway’s audit made allegations but didn’t say if laws were broken.