De Queen Hospital Owner Leaves Sevier County in the Lurch

Sevier County Judge Greg Ray last week at the De Queen Medical Center, which closed in February. He’s lobbying for building a new hospital.

The Sevier County judge is lobbying to build a new hospital after the De Queen Medical Center closed in February, leaving behind a pile of debt and lawsuits for its owner.

Sevier County Judge Greg Ray told Arkansas Business last week that he planned to ask the Quorum Court in a June 13 meeting (the day Arkansas Business went to press) to support a bond issue and a 1% sales tax for a new hospital. If the Quorum Court agrees, the issue will go before the voters in a special election before the end of the year. “We want local people to get control of it,” Ray said. “It’ll be local people caring for local people. That’s what needs to be done.”

The county of 17,000 has been scrambling to fill the health care void left when De Queen Medical Center Inc. stopped seeing patients in February after failing to pay its employees and other bills, including $120,000 owed to the county for property taxes, Ray said.

On March 25, Sevier County and three employees sued the hospital, its owner Jorge Perez and his brother Ricardo Perez, both of Miami, who is a partial owner of the hospital, to have a receiver appointed for the hospital. The county and employees alleged in the lawsuit, filed in Sevier County Circuit Court, that the hospital’s insolvency was caused by the mismanagement of Jorge Perez and his brother.

At the time, the county and the employees thought the hospital would receive an $800,000 payment from the federal Centers for Medicare & Medicaid Services, which would allow the hospital to be reopened, at least partially. Sevier County Circuit Judge Tom Cooper appointed a receiver on March 28. But the hospital didn’t receive the money from CMS, so it remained closed.

“The county and other interested citizens … are looking at what their options are to possibly build a new hospital,” said attorney Bruce B. Tidwell of Friday Eldredge & Clark of Little Rock, who represented the county and the hospital employees in the lawsuit. They are “just trying to get their hands around what would work and what’s their best option.”

The hospital, which was built in the 1960s, “is too far gone” to be reopened now, Tidwell said.

Allegations of Fraud

Meanwhile, Jorge Perez also is facing allegations of fraud in a lawsuit filed by more than a dozen Blue Cross & Blue Shield plans. That suit involves another rural hospital that Perez’s company operated. The insurance companies allege, among other things, that Perez and his companies billed the insurance companies for lab services at his hospital in Missouri for patients who had never been to or received services from the hospital.

Perez denied the allegations in his court filings.

Perez didn’t respond to an email seeking comment, or to a phone message left at the Empower Group of Florida, the Perez company that operated about a dozen rural hospitals.

In a March 24 text exchange with Lisa Moser, the director of human resources at the De Queen hospital, Perez said he had closed 10 hospitals and “it’s been a nightmare.” The text messages were filed in the Sevier County court case.

“I’m personally broke,” he said. “Several vendors have frozen my personal bank accounts as well as my other businesses unrelated to the hospital business.”

Perez on April 3 filed for Chapter 11 bankruptcy reorganization for De Queen Medical Center. In the initial filing, the hospital listed estimated debts at between $1 million and $10 million; its assets were in that same range.

The bankruptcy was dismissed from U.S. Bankruptcy Court in Miami less than two weeks later because only the receiver — not Perez — had authority to file the case.

The bankruptcy attorney for the hospital, Paul DeCailly of Florida, said Perez wasn’t aware of an amended order involving the appointment of a receiver for the hospital when he filed the bankruptcy.

“We didn’t have a copy of that amended order,” DeCailly said.

Nevertheless, he said the hospital had lined up financing to “keep the doors open and pay the employees.” But DeCailly said the hospital would only get the financing if the hospital were in Chapter 11, where “it’s much safer for a lender if they get priority status in a Chapter 11. … But it got dismissed.”

Hopes for New Hospital

County officials hope to have a new hospital in De Queen in early 2021, said Steve Cole, the chairman of the county’s Rural Development Authority.

The estimated cost for a new 25-bed hospital could be anywhere from $15 million to $30 million, he said.

“We do not have any architectural drawings because we wanted to wait until we’re a lot further along before we spent money on architects,” Cole said.

He said he wasn’t sure what caused the financial problems at the De Queen hospital.

“We’re going to start anew with a locally owned hospital,” he said. “We want our control back.”

In the meantime, health care providers in the area have extended their hours and the county still has an ambulance service and air ambulance to rush patients to neighboring hospitals. (The nearest is in Ashdown.)

Cole said that 100 people lost their jobs when the hospital closed. “That’s kind of a double whammy,” he said. “We miss emergency services and also a lot of people are out of jobs. So it hurts.”

The 25-bed De Queen hospital’s problems aren’t new. It also struggled under the previous ownership of John A. Matheson and Christy B. Matheson of DeQuincy, Louisiana.

For the fiscal year that ended Sept. 30, 2016, the hospital reported a loss of $288,000 on net patient revenue of $9.9 million.

Perez bought the hospital in April 2017; a purchase price was not publicly disclosed. His management appeared, at first, to make a difference. For the fiscal year that ended Sept. 30, 2017, the hospital’s net income was $431,000 but its net patient revenue dipped to $9.4 million.

Jorge Perez

Perez was considered to be the “‘last best hope’ for America’s rural hospitals and their communities,” according to a Feb. 6, 2018, news release from the Empower Group.

The news release touted how Empower became “recognized as an international leader in the health care billing and coding industry whose long list of clients come in every possible size.”

It saves money by improving the hospital’s infrastructure and sharing administrative and operating costs, the news release said. And the company appeared to be successful.

“People are used to identifying rural hospitals with failure and don’t readily accept anything that veers from that path,” Dylan Gauldin, Empower’s general counsel, said in the news release. “However, the transparency and controls we have invested in go beyond all benchmarks.”

But less than two months after the news release, Perez and his companies were under scrutiny.

On March 30, 2018, several Blue Cross & Blue Shield plans across the country filed a federal lawsuit in Missouri, naming Perez and others entities that he controlled as defendants.

The insurance carriers alleged that the defendants “have engaged in an illegal and fraudulent scheme” by using the 15-bed Putnam County Memorial Hospital in Missouri to bill for lab services for patients, many of whom had never been to the hospital or received its services.

Between August 2016 and March 2018, the BCBS plans paid Putnam more than $60 million for testing, money that it was not entitled to, much of which was distributed among the defendants, the lawsuit said.

“Jorge Perez designed and implemented this scheme in such a way that entities that he controlled each received a cut of any reimbursements paid by” the insurance company, the lawsuit said.

The BCBS companies are suing for fraud and negligent misrepresentation and are seeking to recover all the revenue and profits stemming from the alleged scheme.

Perez and the other defendants denied the allegations of wrongdoing in court filings and asked that the case be dismissed. The case is pending.

‘I’m Trying My Best’

Tidwell said that to the receiver’s knowledge excessive lab testing wasn’t going on at the De Queen hospital.

But there were other problems, such as allegations of employees not being paid since December and Ricardo Perez withdrawing $3,800 from the hospital’s bank account on March 28, the same day as the hearing for the receiver.

Jorge Perez said in his March text to the De Queen Medical Center employee that he’s been dealing with “a million issues … Between all the legal stuff and paperwork with the states, patient medical records, and vendors, my time has been totally consumed in this.”

Perez said he was trying to get a loan for the hospital or find a buyer. And until one of those things happens, he said, he didn’t know where he was going to get money.

“I’m trying my best,” he said in the text. “I know you guys are going through a lot, and I’m truly sorry for this. But it’s been nothing but he’ll [sic] in my life right now.”

He said he wants to the hospital issues to be resolved.

“It’s not about the money anymore, I know it lost it all,” he said. “I just want to do the right thing so life can get back to normal for everyone.”