In , Perez partnered with a company run by a Chicago-based emergency room physician, Dr. A year later, he invested in a struggling hospital in Williston, Fla.
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In , Perez formed a partnership with Paul Nusbaum, a former secretary of health and human resources in West Virginia, and acquired controlling interest in 10 hospitals in Oklahoma, Kansas, Missouri, Tennessee and North Carolina, swallowing them whole. Perez was adamant he has operated in the best interests of the communities he sought to serve. But his inner circle included some people with questionable backgrounds. Byrns returned the money, and criminal charges were dropped. To generate income for foundering hospitals, Jorge Perez took advantage of federal health care regulations that allow some rural hospitals to bill for laboratory tests at substantially higher rates than other providers.
The goal is to keep hospitals that provide vital care in remote areas afloat, by paying generously for the relatively small number of tests needed in such locations. But several of the Perez-affiliated hospitals established lab programs that reached well beyond the hospital doors. They contracted 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. In recent years, Perez and a handful of other rural hospital owners who have established similar operations have defended the billing setup as in alignment with federal regulations.
What is not in dispute is that the strategy can be lucrative. In interviews, multiple employees said they had no idea what Empower did with the money their hospitals earned, since the facilities seemed perpetually starved for cash.
Perez had taken control of the regional hospital in Drumright, Okla. Instead, he said, the bills quickly piled up. In an interview, Perez maintained that the Florida properties were bought with earnings from unrelated software companies. He declined to get into details about his finances. A routine audit of Putnam County Memorial had uncovered questionable financial dealings.
The reaction was explosive. Dozens of major insurers banded together to file lawsuits against Perez-affiliated hospitals in Missouri and other states, demanding hundreds of millions in restitution. In court documents, Perez has denied wrongdoing and asked for dismissal based on questions of jurisdiction, among other issues.
Legal or not, as public scrutiny intensified, the revenue generated by lab tests slowed to a trickle. Blue Cross Blue Shield of Oklahoma dropped four Perez-affiliated hospitals from its network, cutting off a crucial source of funding. Lenders took Perez and his partners to court to force them out of other hospitals. Across the Midwest, employees were living the fallout. In hospital after hospital, paychecks came late — and then not at all, according to employee interviews and bankruptcy court documents.
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Doctors quit. Vendors stopped delivering vital supplies. One resident brought packages of hamburger and bison for every employee.
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About two hours west, the local middle school in Prague, Okla. A veterinary clinic delivered medical essentials. Still, supplies fell so low, said City Manager Jim Greff, that the hospital had to stop admitting patients. By December, she said, they were so far behind on bills that the company that rented them hospital beds came to repossess them — despite patients still using them. By March , seven Perez-affiliated hospitals had closed.
And as bankruptcy proceedings unfolded at those and others, employees got more devastating news, according to interviews and trustee reports : Along with missing paychecks, the company had stopped funding their health insurance; their medical and dental policies had been discontinued.
Perez said in an interview that the hospitals were not making enough money to cover their expenses and debt. He said he faced constant pressure about which bills to pay. Do we pay the pharmacy stuff? Do we pay the doctors? Do we pay the nurse? It marks a searing loss for a town where the last dentist recently closed shop and multiple storefronts sit abandoned.
Mayor Vaught said the town lost dozens of jobs. Medical equipment bought with money raised at hot dog fundraisers sits unused.
Perez has not been criminally charged, but federal prosecutors recently indicted one of his associates. Marcotte admitted cooperating with unnamed hospital managers to provide urine samples from his patients for lab testing that was billed through the rural hospitals and, in exchange, getting a cut of the proceeds.
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