Posted 6/24/2013 12:00 am
Updated 10 months ago
Two years after reaching a $2.7 million settlement with the federal government over allegations of overbilling Medicare, Hospice Home Care Inc. of Hot Springs is facing two lawsuits from business partners alleging breach of contract.
The two lawsuits — the first filed in April by Wellspring Hospice Solutions LLC of Texarkana, Texas, and the second filed in May by NEA Hospice LLC of Garland County — allege a continued pattern of questionable business practices by HHC, which opened Arkansas’ first free-standing inpatient hospice center nearly a decade ago.
In its complaint, Wellspring claims its management brought HHC back from the brink of bankruptcy, a financial meltdown that resulted from the allegations of Medicare overbilling.
Wellspring was entitled to 15 percent of HHC in exchange for providing services during a one-year contract Wellspring signed in 2009, the company said in its suit, filed in Pulaski County Circuit Court. But it never received the ownership interest, Wellspring said.
Wellspring said it filed the lawsuit this year because HHC is in negotiations to be sold for $18 million. Wellspring’s suit didn’t name the prospective buyer, but a source close to HHC said the interested buyer is Central Control LLC of Pineville, La., which operates health care facilities in Louisiana and Texas. Central Control CEO James Richardson did not respond to an email from Arkansas Business asking for comment.
Founded in 1992, HHC has locations in Conway, Little Rock, Hot Springs, Monticello, Pine Bluff and Searcy.
Camille Gamble, the manager of Wellspring, said in her court filings that if HHC is sold, she wants a portion of the sale proceeds to be held in escrow until her lawsuit is settled.
NEA Hospice, in its lawsuit filed in Garland County Circuit Court, alleges that HHC breached the contract the two companies entered in June 2010.
NEA Hospice, led by Hot Springs businessman Rick Williams, paid HHC $300,000 for HHC’s Searcy location. NEA also then paid $200,000 to cover HHC’s outstanding debt to White County Medical Center.
NEA said it was misled into giving the money so HHC could use it to help pay the $2.7 million settlement with the government. HHC has continued to manage the Searcy location since the agreement was signed.
NEA is seeking an unspecified amount of damages.
“The parties are cooperating to diligently pursue settlement,” according to a joint statement issued June 11 to Arkansas Business by attorneys Dylan Potts of Little Rock, representing NEA, and Tim Ezell of Little Rock, representing HHC. They didn’t comment further.
Cecilia Troppoli and her sister, Dr. Theresa Travis, started Hospice Home Care Inc. in the early 1990s. Hospice care is for people who have a terminal diagnosis and are expected to live only six months.
HHC’s big move came in 2003 when it started construction on Arkansas’ first free-standing inpatient hospice center, according to a Nov. 7, 2003, article in the Arkansas Democrat-Gazette.
At the time HHC was treating about 450 patients in its six locations, the article said.
The 36-bed, 30,000-SF center cost a little more than $5 million to build, and it opened in 2004.
“We’re not doing this to make money,” Lisa Thompson, who was chief operating officer at the time, told the Arkansas Democrat-Gazette in November. “We want this facility to break even. We’re doing this so our patients and families will have a place to go when they can’t stay at home anymore that’s not a hospital or a nursing facility.”
But at the time the center opened, health care workers had concerns about how the company generated revenue.
Troppoli and Travis weren’t available for comment to Arkansas Business.
In 2004, health care workers and patients thought that HHC might be defrauding the federal government in its billing of Medicare, according to a whistleblower lawsuit that Arkansas Hospice Inc. of North Little Rock filed in 2004 in U.S. District Court.
The complaint alleged that HHC billed Medicare for higher priced general inpatient services when the patients actually only received routine care, which has a lower reimbursement rate, according to the lawsuit filed under the federal False Claims Act. The lawsuit alleged that HHC overbilled Medicare between $1.5 million and $3 million between 2002 and 2004.
The U.S. Attorney’s Office intervened in the civil case in 2009. After examining 34 patient files, the U.S. Attorney’s Office found HHC submitted 242 false claims to Medicare, resulting in $1.6 million in false claims.
While not admitting wrongdoing or liability, HHC entered into a settlement with the federal government and agreed to pay $2.7 million to the government and $157,000 to Arkansas Hospice’s attorneys at the law firm Mitchell Blackstock Ivers & Sneddon PLLC of Little Rock.
The case was dismissed in December 2011.
The Medicare allegations and settlement left HHC and its related company, Hospice Home Care of Pine Bluff, “in danger of becoming defunct,” Wellspring said in its lawsuit.
Camille Gamble, the manager of Wellspring, said in an April 17 affidavit that Wellspring’s job was to find a buyer for HHC’s businesses while providing bookkeeping and accounting services.
Wellspring entered into a one-year contract in March 2009 and was supposed to receive 10 percent of the HHC companies plus the option to buy another 5 percent for $300,000, Gamble said.
Wellspring helped turn the HHC companies “into profitable businesses, while Defendants completely reneged on their obligations … and offered no compensation to Plaintiff for its months of work and personal expenditure.”
Wellspring also found buyers for HHC, but Gamble said Troppoli derailed the sales negotiations by refusing to hand over requested financial documents so the potential buyer could do its due diligence.
Gamble said Wellspring would have made “substantial profits” if the sale had occurred.
Gamble, who makes about $250,000 annually managing Wellspring, said the company spent more than $385,000 turning the HHC companies around.
Gamble said the agreement they signed would allow her to apply the money she was owed to the price of buying 5 percent of the company.
Once the HHC companies were salvaged and profitable, Troppoli “decided they did not need me anymore, and I received an e-mail telling me to ‘take a hike,’” Gamble said in her affidavit.
She said she believes that Hospice Home Care currently has $3.8 million in debt, which would leave proceeds of $14.2 million before taxes and closing costs if it is sold for the $18 million offered, presumably by Central Control.
Gamble said she wants HHC to put 15 percent of the sale proceeds into escrow until the lawsuit is settled.
One of HHC’s attorneys, Jamie Huffman Jones of Little Rock, said in her court filings that HHC did nothing wrong and Wellspring’s case should be dismissed. HHC also said Wellspring should be limited to no more than 10 percent ownership because it never paid the $300,000 for the remaining 5 percent of the companies.
This isn’t the first time Wellspring sued HHC. It filed a case with the same allegations in 2009, but that lawsuit was dismissed in 2012 after Wellspring failed to take action to move forward with the case. In the order of dismissal, Pulaski County Circuit Court Judge Chris Piazza allowed Wellspring to refile the suit.
Within months after Wellspring stopped doing business with HHC’s companies, NEA Hospice struck a deal to buy HHC’s Searcy location.
But NEA also said it had trouble dealing with HHC, Troppoli, Travis and HHC CEO Michael Tankersley, who have been named as defendants in the lawsuit.
NEA said after it entered into the agreement for the Searcy location, HHC was supposed to sign over the Medicare provider number, which is key in operating a hospice business.
Without the provider number, “NEA Hospice cannot independently bill for its services provided under the Medicare Program,” it said in the lawsuit.
Also as part of the transaction, NEA was supposed to be given the opportunity to buy more of HHC’s stock before it was sold to someone else, the lawsuit said.
NEA said that didn’t happen. Right after NEA signed the agreement with HHC, HHC sold shares of its stock to Tankersley, Margaret Bodemann and Kim Bodemann, who serve on HHC’s board and live in Garland County, NEA said in the lawsuit.
The Searcy location is being managed by HHC, and the Arkansas Health Services Permit Agency shows that HHC is still the owner of it.
The complaint didn’t say why NEA waited for three years to file the lawsuit. NEA’s Williams didn’t return a call for comment.