Medicare review results in Chap. 11 for Hartline Hospice

by Karen E. Culp

SBJ Staff

Hartline Hospice, a locally-owned hospice company, filed Dec. 12, 1997, for protection from its creditors under Chap. 11 of the U.S. Bankruptcy Code, a result, company officials said, of financial distress the company encountered while under a focused medical review by Medicare administration.

A focused medical review can take place for a variety of reasons, according to information from Wellmark Inc., the intermediary for Medicare. Representatives from Wellmark, who are registered nurses, examine information during a focused medical review.

Such a review can occur because of a complaint that is filed against the company or because of something found during a routine check by Medicare administration of the company's practices.

The focused medical review is used to obtain information about a company or to correct practices that are not in line with what is stipulated, and not necessarily because fraud or any other type of illegal activity is suspected, according to information from Wellmark.

Hartline Hospice came under focused medical review beginning in April 1997, said Mark Fitzsimmons, attorney for Hartline. The company became aware that it was being reviewed when the payments it normally received from Medicare were reduced.

"All of a sudden, I wasn't getting any money. I had to call to find out why and was told that Hartline Hospice was on focused medical review," said Richard Hart, chief executive officer for Hartline and co-founder of the company with his wife, Dottie Hart, an RN and vice president of development for the company.

Medicare accounts for 92 percent of Hartline Hospice's income, Hart said. Shortly after Hart noticed the reduction in his income, he asked Ruth Cossairt, quality management administrator for Hartline, for half of Hartline's patient audits and charts.

"On May 2, Richard greets me at the door and says Medicare needs half of our patients' charts and that until they were finished reviewing those charts, half of our livelihood was gone," Cossairt said.

Medicare payment is made once a case is reviewed, which takes about 60 days, according to information from Wellmark. Two registered nurses in Iowa, working for Wellmark, reviewed 52 percent of Hartline's charts. After a request from Hartline, two more nurses were added to the review in order to expedite the process.

The review had the effect, Fitzsimmons said, of cutting off 52 percent of Hartline's cash flow.

"Not many companies can withstand 52 percent of their cash flow being restrained. It had a dual effect on this company because, in this particular industry, your creditors are also your source for referrals for new patients the nursing homes, medical assistance providers, etc. As a result of this situation, the company began to see a downward spiral," Fitzsimmons said.

According to Chap. 11 schedules, the company owes $194,580 to Metropolitan National Bank for a Small Business Administration loan secured by a "blanket lien on all the business' tangible and intangible assets," Fitzsimmons said.

The company also owes $336,946 for state and federal taxes. The corporation also owes $632,504 in unsecured nonpriority debts, according to bankruptcy filings.

The company's total assets are valued at $183,573; its total liabilities at more than $1.16 million.

Dottie Hart said the company did not object to the focused medical review being performed, but added that the methodology of the review was costly and dangerous to the company's life.

"The nature of hospice care is such that you deal with patients who are facing death, and when something like this comes along, your worst fear is that those patients will suffer for it," Dottie Hart said.

Of the cases that Medicare reviewed, 72 percent, or a total of 483 cases, were paid immediately after the review was complete. Four percent received a partial denial, 24 percent were denied and 14 percent are open.

Hartline Hospice appealed 33 of the denied cases, and 16 of those were overturned. Many of the denials were the result of details the company overlooked when completing paperwork on a patient, Fitzsimmons said, such as a doctor failing to date when he signed a release form for a patient. The absence of the date was seen as lack of proof of when service began, he said.

Because the Medicare payments represented 92 percent of the company's income, when about half of that was suspended, the company had to determine how it would remain operational, Hart said.

"I had 84 employees when focused medical review began; now I have 38," Hart said.

Hart and his wife borrowed money against a piece of land they own and invested that money in the business to keep it going. The company began to miss payments to suppliers and vendors, Hart said.

"It was hard for our employees, who were out there in the field and dealing with the vendors and the pharmacies. Often they would get hit up for the money Hartline owed," Cossairt said.

In November, the company was removed from focused medical review.

By that time, Sens. Christopher Bond and John Ashcroft and Rep. Roy Blunt had written letters to Medicare administration on behalf of Hartline Hospice.

Blunt said that the review process itself was not at fault, but that the information shared and communication between the company and Medicare was not sufficient.

The nature of the correspondence that Bond and Ashcroft penned jointly was informational, requesting that Medicare administration release more information to Hartline Hospice. The Harts and Cossairt believe the correspondence was a factor in the company being released from the review, Dottie Hart said.

The company's charts "are in better shape than they've ever been," as a result of the review, Dottie Hart said, and the company is paying even closer attention to the details of its business, she added.

Hartline Hospice will rebuild itself and return to its former strength, Richard Hart said. The company had to close one satellite office, in Mountain Grove, but continues to serve that area.

It also operates satellite offices in Poplar Bluff, Rolla and Carthage, and its central office is at 3322 S. Campbell in Springfield.

A 40-year veteran of nursing, Dottie Hart said she would never knowingly commit Medicare fraud.

"I've been a nurse since before Medicare existed. I wanted to care for the sick then, and that is still my goal. There is no way I would allow any type of fraudulent practices to occur in a company I was affiliated with," Dottie Hart said.

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