This week's closure of Pinnacle Regional Hospital in Boonville, Missouri, caps a year of worse financial troubles than were previously known.
Over the last year, the hospital has been sued by vendors for nonpayment, by the Missouri Division of Employment Security for failing to pay into the state’s unemployment insurance program and, most recently, by employees for failing to pay their health insurance premiums.
“There’s considerably more to this story than what’s currently in the public domain,” said an attorney for the employees, North Kansas City lawyer Blake Green.
“And as the truth always does, it will come out eventually. Right now, our focus is on protecting the legal interests of Pinnacle Health System’s employees, who reasonably believed they had health insurance for months and acted in reliance on that belief.”
State health regulators recently found deficiencies in Pinnacle’s sterile processing procedures and ordered it to correct them. On Wednesday, the hospital declared the cost of complying with the regulators’ demands was too great and announced it was shutting down its operations, including a rural health clinic, outpatient clinic and emergency department.
That came after the hospital was forced to shut down its surgery department, its chief source of income.
The hospital, which was known as Cooper County Memorial Hospital until it was bought by Overland Park, Kansas, businessman Douglas Palzer in late 2018, specialized in bariatric surgery, a procedure to help extremely obese people lose weight.
It’s the only hospital in Boonville, which has a population of about 8,400. The next closest hospital is in Columbia, about 25 miles east.
Palzer also owns Pinnacle Regional Hospital in Overland Park, formerly known as Blue Valley Hospital. That hospital, too, has run into trouble with regulators. More than two years ago, federal health regulators cut off its participation in Medicare after finding Blue Valley did not “primarily engage” in providing services to inpatients, a requirement for Medicare coverage.
While the hospital in Boonville has closed, the one in Overland Park remains open.
The Overland Park hospital sued to regain its Medicare certification, but a federal judge dismissed the lawsuit on procedural grounds and a federal appeals court upheld the dismissal.
Medicare reimbursements were a crucial part of the hospital’s funding, and private insurers often will stop paying if a hospital is not Medicare-certified.
Palzer informed Pinnacle employees by email Thursday that both hospitals’ parent company, Pinnacle Health Care System, may be forced to seek Chapter 11 protection. He said doing so would allow Pinnacle to continue operating and close down unprofitable operations.
Palzer said he had personally invested $4 million into Pinnacle in the last six months “in order to make payroll and keep the company open and viable.”
Palzer could not be reached for comment.
Pinnacle missed its regularly scheduled payroll on Wednesday but Palzer told the employees they will be paid by this Friday or Saturday. He said Medicare funds were in the mail and would be used to make the payments.
But in their class action lawsuit filed Wednesday, the employees claim Pinnacle promised to pay 100% of their health insurance premiums but failed to do so, leaving them with outstanding medical claims not covered by insurance. The lawsuit, filed in Cooper County, seeks unspecified damages for fraud and other counts.
Palzer, in his email to employees, said projected cash flow between now and the end of the month would allow Pinnacle to pay the employees’ health insurance.
“Employee payroll, taxes and benefits will continue to be our first priority followed by payments to critical vendors,” he wrote. “I hope that you will continue to support management to ensure that we continue to operate for the foreseeable future.”
He added: “Now is the time to increase surgical volume, increase and improve cash collections and concentrate on determining what services and facility changes may be needed.”
The employees' class action suit comes just weeks after a health care staffing company, Favorite Healthcare Staffing Inc., sued the Boonville hospital for alleged nonpayment of nearly $211,000. The company said it provided temporary health care personnel to the hospital.
Just a month before that, a physician services company, Premier Specialty Network in Columbia, Missouri, sued Pinnacle for alleged nonpayment of $24,000 for rheumatology services.
And just two months before that, a laboratory services company, Boyce & Bynum Pathology Laboratories in Columbia, Missouri, obtained a $92,000 default judgment against Pinnacle after suing it for nonpayment.
Also last year, the Division of Employment Security assessed about $197,000 in lapsed contributions, interest and penalties against Pinnacle, according to court records. It’s not known if Pinnacle has since paid the money.
In the meantime, Pinnacle has asked the Missouri Department of Health and Senior Services not to terminate its license but instead suspend it for 90 days. Pinnacle is hoping that a buyer will emerge for the Boonville facility.
“A 90-day suspension allows them time to re-evaluate the situation and develop a plan, and offers them a better opportunity to sell the structure,” Lisa Cox, a spokeswoman for the Department of Health and Senior Services, said in an email.
Cox said the department had granted Pinnacle’s request.
In another development, Pinnacle Health Care System has let go of its chairman, Todd Wells, and its chief financial officer, Dale Farrell. It said it had named Kelly Hagerich to replace Farrell. Joe Conigliaro, a physician, remains its CEO.
Dan Margolies is a senior reporter and editor at KCUR. You can reach him on Twitter @DanMargolies.
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