Another example of how relations among hospitals, insurers and third-party administrators can turn contentious-and expensive-is being highlighted in federal bankruptcy litigation and a law-enforcement probe.
The fight pits hospitals, physicians and self-funded employers against Healthcare Resources Group, which owns two medical claims-processing companies. The providers and employers contend Healthcare Resources owes them millions in unpaid claims. One of the creditors, Memorial Health System of South Bend, Ind., alleges it is owed $1.1 million.
While most of the creditors are in South Bend, others include hospitals and physicians in Illinois, Kentucky, New York and Ohio, which argue they are owed more than $2 million.
The two claims-processing companies are owned by Healthcare Resources President Terry Grant of Henderson, Nev. The companies, National Health & Claims Administrator and GS Consulting Services, also known as Healthcare Resources Group, filed for Chapter 7 liquidation bankruptcy on May 23 in Delaware, where National Health & Claims was incorporated.
Healthcare Resources companies' offices are in South Bend. The top 25 creditors alone claim Healthcare Resources owes hospitals, physicians and self-funded employers more than $11 million; estimates of the total liability go as high as $20 million.
The Healthcare Resources companies performed two functions: They contracted with providers to evaluate claims, but with self-funded employers, they both evaluated and paid healthcare claims. When Healthcare Resources did the latter, the employers paid them service fees and fronted them the money to pay the claims.
With the bankruptcy filing and Healthcare Resources claiming to have no funds to pay creditors, the likelihood that employers and government organizations will recoup money paid to the company is slim.
South Bend lawyer R. William Jonas Jr., of Hammerschmidt, Amaral & Jonas, which represents Memorial, said Memorial and most of the hospitals and other providers can still go to the self-funded employers to obtain payment for services they provided.
But there's no such recourse for employers, such as the largest-known creditor, South Bend-based Hummer manufacturer AM General, which is owed $3 million. St. Joseph County, the University of Notre Dame and the city of South Bend are other employer creditors.
Grant could not be reached for comment.
Richard Clarke, president and CEO of the Healthcare Financial Management Association, said the incident dramatizes a constant potential risk to hospitals.
"It's a question many hospital financial managers worry about," Clarke said. "Most hospitals would do background checks. But unless there's some kind of a warning, you never really know. Barring that, I'm not sure how anyone could have known they'd go belly up."
The Indiana Department of Insurance has suspended Health Resources' license to administer health insurance and the Labor Department has seized company documents and the company no longer operates.