Entrepreneur promises bankrupt California hospital solvency through remote lab billing

After going bankrupt in January, Surprise Valley Hospital in Cedarville, Calif., is contemplating a $4 million sale to a 34-year-old entrepreneur who runs multiple Denver-based labs, according to Kaiser Health News.

Here are six highlights from the story:

1. Surprise Valley Health Care District, which operates the 26-bed rural hospital, filed for Chapter 9 bankruptcy Jan. 4. Local residents will vote June  5 to determine whether to sell the company to Beau Gertz, who runs CadiraMD and SeroDynamics, both labs in Denver, along with other companies.

2. Recent court documents show Mr. Gertz pledged to buy the hospital for $4 million plus debt. Bankruptcy court documents also revealed Mr. Gertz  loaned the hospital district $2.5 million for it to buy SeroDynamics, which is now a wholly owned subsidiary of Surprise Valley Hospital — and effectively an advance on the hospital's $4 million sale point, according to KHN.

3. Mr. Gertz said he will turn around the hospital by billing insurers for lab tests through the hospital, regardless if the patients receiving them have been to the facility. Should Mr. Gertz buy the hospital, he said it will begin offering services via telehealth, through which physicians could order tests for remote patients.

4. While some rural hospitals have found a lifeline in lab billing for remote patients, the strategy is controversial and its legality is muddled. Medicare and commercial insurers often pay more for tests administered at rural hospitals than their urban counterparts, according to the report. Recently, the tactic has been subject to fraud allegations in several states; however, Mr. Gertz argues through use of telehealth and the fact SeroDynamics is a part of Surprise Valley Hospital, the plan is legal.

"If you do it correctly, there is a nice profit margin," he told KHN. "There [are] extra visits you can get from telemedicine but … it has to be billed correctly and it can't be abused."

5. Mr. Gertz told local journalist Jean Bilodeaux remote lab billing has generated about $300,000 under his partnerships with the hospital. Bankruptcy court documents show the agreement allows Mr. Gertz's company to collect 80 percent of profits, with 20 percent going to Surprise Valley Hospital.

6. Resident voters are torn. Many see the hospital as vital to the community, and will take any funds to help it stay afloat. Others are weary after a different outsider offered a similar deal months before Mr. Gertz's proposal, only to pull out. Jeanne Goldman, 72, a retired businesswoman, told KHN outsiders "come in and promise the moon. The [hospital's] board is just so desperate with all the debt, and they pray this angel's going to come along and fix it. If this was a shoe store in Surprise Valley, I could care less, but it's a hospital."

Access the full KHN article here.

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