Crittenden Regional Hospital of West Memphis, which closed its doors permanently on Sunday, is the subject of a lawsuit alleging that it misused employee funds for health insurance coverage.
The lawsuit was filed Friday in Crittenden County Circuit Court by Deloris Sumpter, a 36-year employee of the hospital, and her husband, Roger, after they discovered about $28,000 in unpaid claims since January, despite making their monthly premium payments. The couple is represented by their son, Denny Sumpter, of Fogleman Rogers & Coe of West Memphis.
More: View the entire complaint here (PDF).
Since filing the civil suit, Sumpter says he's heard from other former hospital employees who also claim to have unpaid insurance claims dating back to January, despite paying monthly premiums. Sumpter is now representing about 60 plaintiffs and is expected to add defendants to the case at some point this week, expanding the suit to a class-action filing.
The lawsuit says CRH could now leave its former employees accountable for tens of thousands of dollars in unpaid insurance claims.
"At some point, somebody made the decision to use the money for other purposes," Sumpter said. "They had the responsibility to put the money into the insurance fund."
According to the lawsuit, the hospital was self-insured and switched to a different third party administrator, CIGNA of Bloomfield, Connecticut, at the beginning of 2014.
The lawsuit claims the hospital failed to properly use employee money for payment of insurance premiums, to fund its portion of the premium and to notify its employees of its failures. CIGNA is alleged to have failed to notify hospital employees their claims were not being adequately funded.
The hospital, its former CEO Gene Cashman and President of the Board of Directors David Raines, and CIGNA are named as defendants and are alleged to have committed "ordinarily and grossly negligent acts, intentional acts, acts of conversion and breach of fiduciary duties owed to Plaintiffs."
Sumpter said he was not sure of the amount of money that could be tied up in unpaid claims, but noted the claims are adding up quickly. Sumpter said further research has shown that Sumpter's mother has nearly $100,000 in unpaid claims, dating back to 2013.
A Failing Hospital
The West Memphis hospital announced late last month it would close its doors Sunday as a result of "challenges of a struggling economy and continued declines in patient volume and reimbursement."
More than 400 people worked at the hospital.
"We are deeply saddened to have to make this decision after all the attempts that have been made to preserve the hospital for our community," Cashman said in a news release announcing the closing. "With counsel from national health care consulting firms and the passage of a county-wide sales tax, we had identified a long-term strategic plan that had set our organization on a path to improvement."
More: Read Cashman's internal memo to the staff here (PDF).
The hospital reported a $2.85 million loss on net patient revenue of $54.03 million last year. It was the third consecutive year it reported a loss, followed by $5 million in 2012 and $3.3 million in 2011.