What happens in a bankruptcy case?
Hundreds of current and former employees of a bankrupt Eastern Kentucky hospital claim hospital officials routinely deducted money from their paychecks in 2017 and 2018 for health care coverage they never received.
In a federal class action complaint filed against Pineville Community Hospital Association, Inc. and Americore Health, LLC on June 20, three named plaintiffs — Amy Jackson-Bolinger of Pineville, Pamela Johnson of Middlesboro, and Melissa North of Harrogate — allege the Bell County hospital improperly withheld money from their paychecks for at least a year under the guise of health insurance plan payments.
As a result, the employees “lost their health care coverage, [costing them] millions of dollars in health care bills,” according to the lawsuit. They’re seeking to recover those damages.
Ronald E. Johnson, Jr., a northern Kentucky attorney representing the plaintiffs, said his clients began noticing a problem in early 2017, when they began receiving medical bills that should have been covered by their health plans. One of the plaintiffs was hospitalized in Tennessee for a severe case of the flu, Johnson said, and despite providing her insurance card to the hospital, months later she received bills for nearly $400,000.
Johnson said he believes hospital administrators “started diverting these funds for other programs,” leading to the eventual depletion of the fund.
The effects of the hospitals actions are so far-reaching and those affected “are so numerous” that including everyone in the lawsuit is “impracticable,” the lawsuit reads.
The hospital has been no stranger to woes in the last year. The dominoes began falling after the facility, under the ownership of Pineville Community Hospital Association, Inc., sold all of its non-real estate assets in 2017 to Florida-based Americore Health. A year later, PCHA declared Chapter 7 bankruptcy.
In early 2019, dozens of severe problems were discovered at the hospital, which were enumerated in a 135-page report released in January. Issues ranged from a failure to stock the hospital with necessary medical devices, medications and an adequate number of staff, to performing the wrong procedures on patients without their permission and delaying administering of medication, even in emergency cases.
An official with the Centers for Medicare and Medicaid Services, which completed the January report, recorded on Jan. 22, 2019, that the hospital’s chief nursing officer at the time confirmed “that employees had been having health insurance premiums deducted from their paychecks by the facility; however, the facility had not been paying the insurance premiums and the staff was without coverage.”
During that time, the hospital also had no operating budget, had incurred half-a-million in debt with its pharmacy distributor and owed roughly $600,000 to its electronic medical records vendor.
In May, the hospital lost its provider agreement with CMS, which means the federal government has stopped reimbursing the hospital for providing care that’s typically covered by Medicare and Medicaid. A bankruptcy court earlier this month interceded and transferred temporary control of the facility to a trustee and the city of Pineville. By that time, employees hadn’t received paychecks in more than a month.
Defendants listed in the complaint include the hospital’s 10-member board of directors and past administrators, including former Chief Financial Officers Matthew Brock and H.D. Cannington, all of whom the plaintiffs say “exercised control over assets” of the Pineville Community Hospital Administrative Services Agreement Health Care Plan, according to the complaint. Brock and Cannington, the plaintiffs claim, “controlled withholding money from participants’ payroll to fund the ERISA health plan, as well as how the withheld money was used.”
Between 2017 and 2018, the hospital contracted with Anthem Blue Cross and Blue Shield to provide health care coverage. Money was deducted from employee paychecks, but those funds were never paid to Anthem, who submitted 25 invoices between April 2017 and May 2018 that ultimately went unpaid, causing Anthem to terminate its contract with the hospital on June 1, 2018, according to the complaint. By that time, Johnson said, more than $700,000 was owed to Anthem.
James Irving, a Louisville-based attorney who will likely serve as counsel for the Pineville Medical Center, LLC — the affiliate of Americore that ran the hospital for less than a year — said his organization did not contribute to the problems outlined in the suit and that the facts alleged “relate to the period before we were owners.”
“Americore operates other facilities and is a good company with a good track record,” Irving said. “The facts in the complaint are not consistent with our understanding of who was paid.”
The class action complaint was filed on the same day a Kentucky bankruptcy court agreed to sell the beleaguered facility by way of a sealed bid auction, which will take place next month, according to court filings.
Interested buyers of the hospital have the option of bidding on the entire 120-bed facility and campus, which includes an emergency room, intensive care unit and operating room, or on individual assets such as medical infrastructure or ancillary properties, including parking lots and two single-family homes owned by the hospital.
Elizabethtown-based Tranzon Asset Advisors will oversee the auction, and Ed Durnil, Tranzon president, said priority is likely to be given to the highest eligible bidder unless an organization with a particularly well-regarded reputation places a competitive bid.
Sealed bids are due to Tranzon by 5 p.m. Monday, July 15. Only eligible bidders will be considered by the court, which includes licensed hospitals, medical centers or health care providers with stable financial capacity.