An Indianapolis physicians’ group is suing Fayette Regional Health System in Connersville for breach of contract and fraud, claiming the system’s actions pushed it into financial distress.
The doctors’ group, Siskin Physicians LLC, claims that Fayette Regional drastically overestimated the volume of patient visits per year and revenue per patient at the hospital’s emergency room when the two sides signed a contract to have Siskin doctors treat patients there.
As a result, Siskin claims it was underpaid by at least $1.48 million over a 30-month period ending Dec. 31, 2017, due to lower-than-expected revenue and higher-than-expected expenses.
That forced Siskin and a sister company to turn to “hard-money lenders and merchant cash advance providers” to fund the operation and pay its doctors, according to a lawsuit filed Tuesday in Fayette Circuit Court.
Fayette Regional declined to comment, saying it hasn’t had time to analyze the claims. “In the meantime, we ask the public to withhold judgment until all facts in the case are revealed,” Fayette Regional said in a statement to IBJ.
The hospital, with 57 beds, has been struggling in recent years. It lost $201,676 last year on revenue of $113.5 million, according to the American Hospital Directory.
On Wednesday, Fayette Regional filed for Chapter 11 bankruptcy reorganization. It listed assets between $10 million and $50 million, and liabilities in the same range. Unsecured creditors in Indiana include ORS Inc. of Fishers ($198,322), American Health Network of Indianapolis ($168,000), Osman Clinic & Associates of Indianapolis ($112,100) and Manta Resources of Noblesville ($117,250).
The case was assigned to Judge Jeffrey J. Graham of the South District of Indiana in Indianapolis.
CEO Randy White told the Connersville News-Examiner last week the health system is caught in the midst of a cost squeeze and is trimming jobs.
“You’re talking about a perfect storm, a poorer, sicker community that has a very high Medicaid and Medicare reimbursement, losing revenue on what is at best a break-even proposition, you have decreasing cash flow,” White told the newspaper.
In response, the hospital has reduced overall expenses by 20 percent in the past four years, he said.
According to the lawsuit, Fayette guaranteed it would provide 15,000 emergency room patients per year, with a collection rate of $92.26 per patient, providing an estimated practice revenue of $1.38 million a year.
But actually, fewer than 14,000 patients visited the ER in 2016 and fewer than 13,000 patients in 2017, the lawsuit said, pushing down revenue sharply.
Under the contract, Siskin received the right to bill and collect professional fees and charges for services rendered. The health system acknowledged that the billings would not fully compensate the doctors’ group for the costs of staffing the emergency room—including wages, fees for medical scribes and other professionals and administrative expenses—and so agreed to pay Siskin a monthly subsidy to make up the difference.
To mitigate against incorrect projections, the parties had negotiated a provision to re-evaluate the subsidy quarterly and adjust it based on volume, revenue and expenses.
“However, despite consistent request, Fayette refused for June 1, 2015 through December 31, 2017 to exercise the readjustment provision,” the complaint said.
The financial crunch pushed the doctors’ group into a liquidity crisis to the point it could not pay its doctors. At that point, Fayette began poaching the doctors, in violation of the contract, the lawsuit said.
“Even with its best efforts, Siskin could not pay certain doctors, and because of that, has and continues to lose credibility and goodwill with the local healthcare community,” the complaint said.
In a separate statement, Siskin’s parent, OPYS Holdings Inc., said Siskin's doctors aren't providing patient care at Fayette's emergency room but are willing to resume providing care while the dispute is being resolved.