State Auditor Nicole Galloway says calls for a federal investigation have surfaced after uncovering a lab company’s questionable billing practices at a northeast Missouri hospital. A 2017 review by Galloway’s office found the company – Hospital Partners – was funneling millions of dollars through the hospital as a shell organization. Galloway tells Missourinet the 2017 audit has led to legal action against Hospital Partners by major private insurance companies and others.

State Auditor Nicole Galloway

“This includes a hospital in Georgia and another in Florida. We have seen now other litigation pop up and calls for investigations. Our audit revealed a billing scheme that we now know extends well beyond Putnam County Memorial Hospital and could impact healthcare costs for all of us,” Galloway says.

The billing scheme began in September 2016, after the Putnam County Hospital Board hired David Byrns and his company, Hospital Partners, Inc., to take over day-to-day management of the hospital.

The hospital billed the insurance companies using the hospital account. In exchange, the hospital received a cut of the insurance payout. Galloway’s 2017 audit found that the hospital passed most of $90 million in insurance payments along to the lab company and its affiliates. Most of the billings were for patients who had never been to or received services from the hospital.

She says one of the members of the company also has a relationship with private hospitals in mid-Missouri’s Fulton and northern Missouri’s Sweet Springs.

“Fulton and Sweet Springs are not public county-owned hospitals,” Galloway says. “We do not have the authority to do those audits. We have passed this information on to the Attorney General and to federal law enforcement agencies.”

Galloway, A Democrat, says the Putnam County Memorial Hospital board did very little vetting of the company prior to the agreement, which spanned from September 2016 to February of this year.

“Unfortunately, they (the board) entered into a very unusual contract with this company that did not outline and clarify compensation. There was an unusual indemnity clause. It appears they did not have appropriate legal review of that contract,” she says.

The 2017 audit also found the hospital was paying the salaries of 33 employees from around the country to conduct lab work. Galloway says the “employees” were removed from the hospital payroll in October 2017. The board is working with attorneys to review these payments and determine whether any money can be recovered.

The board has since hired a long-term hospital employee to serve as the CEO.

To view this year’s follow-up audit, click here.

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