Nurses Registry and Home Health Corp. has filed for bankruptcy and seeks $1 million in suspended Medicare payments for health-care services that the Lexington-based company says it provided.
The company, which continues to operate, filed for Chapter 11 on Friday in U.S. Bankruptcy Court in Lexington.
"It's our goal to continue to operate," said Laura Day DelCotto, the attorney for the company.
Bankruptcy Judge Gregory R. Schaaf has scheduled a hearing for Wednesday morning to hear motions in the case.
In its bankruptcy petition, the company said its estimated assets are between $1 million and $10 million, and its liabilities are in the same range. A more detailed statement will be filed later, DelCotto said.
In May, Medicare payments to Nurses Registry were suspended. Those payments represent an average of $1.3 million a month to the company — about 65 percent of its revenue, court filings said. The company submits an average of about 5,900 Medicare claims each year.
Since the suspension notice, the company said, it has been unable to fully pay its operating expenses. As a result, the company procured several loan advances totaling $2.4 million from the estate of Lennie House, the company's CEO, who died in February at age 72. His widow, Vicki House, has been president since his death.
The company said in court filings that it has been unable to obtain funding "from any source" to pay for its operations.
Without delivery of the money from Medicare, the company "will have no choice but to cease operations and discharge its patients and employees," the court filings said.
The company provides home health-care services to nearly 1,350 patients in Central Kentucky, including skilled nursing, physical therapy, occupational therapy, nursing assistants, speech language pathology and social work.
Nurses Registry employs slightly fewer than 200 employees, and numerous third-party contractors, to provide care and services to its patients.
Since 2011, the federal government has alleged that Nurses Registry submitted "false and fraudulent records, statements and Medicare claims," resulting in overpayment for services from the taxpayer-funded system.
The government claims that Nurses Registry executives encouraged case managers to exaggerate patients' medical conditions to bill for more expensive services, provide services to patients with no medical problems, backdate patient records and create a program to waive Medicare cost-sharing requirements.
In a rebuttal, the company said it has "made numerous substantive changes in personnel and management practices." Nevertheless, the government says that even if some problems have been corrected, Nurses Registry "may still be liable for a substantial overpayment as well as a civil money penalty based upon past conduct."
The government also alleges that Nurses Registry used cash, concert tickets and University of Kentucky basketball tickets to induce doctors to refer patients to the agency.
A trial in the case is scheduled to begin in August before U.S. District Judge Karen Caldwell. Nurses Registry has attempted to negotiate and resolve matters that would result in lifting the suspension of Medicare payments, but a consensual agreement has not been reached.
DelCotto contends that the bankruptcy filing acts as a "stay" or temporary suspension of trial proceedings. But assistant U.S. attorneys argue in a motion that an automatic stay does not apply because the government's claims "are an exercise of its police or regulatory powers."
Among the 20 largest unsecured creditors is First Choice Medical Supply of Jackson, Miss., which is owed $101,821.64. Horn Richardson & Associates of Lexington, an independent contractor for patient care, is owed $89,436. The amounts owed to the remaining largest creditors range from $9,469 to $30,679.
Aside from the estate of Lennie House, the only other secured creditor listed in the bankruptcy filing is Insight Global Finance of Jacksonville. Fla.
Chapter 11 bankruptcy frees a company from the threat of creditors' lawsuits while allowing it to reorganize its finances. The debtors' reorganization plan must be approved by a majority of its creditors.
Unless the court rules otherwise, the debtor remains in control of the business and its finances.
Nurses Registry was founded and incorporated in 1984.
Lennie House was familiar to many people in Central Kentucky from his company's television commercials, which usually ended with House saying the motto, "One call does it all."
From 2009 through 2014, the company was one of the largest corporate sponsors of UK athletics. Former UK basketball coach Joe B. Hall and current coach John Calipari appeared in those TV commercials alongside House.