Data show pattern of high lab charges at Little River Healthcare hospitals

By the time Alliance Health Southwest Oklahoma took over operation of the 18-bed hospital in the small town of Mangum, Okla., in July 2017, the company's CEO, Frank Avignone, said the hospital's largest commercial insurers had canceled their contracts. Medicare had cut off payments and was clawing back $2.7 million for claims the agency determined it shouldn't have paid under the hospital's former management.

The previous operator, Little River Healthcare, Rockdale, Texas, had taken over the hospital's operations in 2016 under a deal with its former operator, Blackhawk, which appears to be connected to Little River, sharing personnel. City officials sued both companies, arguing the transfer breached Blackhawk's lease agreement on the city-owned facility and urged a judge to force them to leave, but not until a new provider could be brought in.

During Little River's short time as operator, outpatient lab charges grew from $8.4 million in 2015 to $45.2 million in 2016, or 53% of total charges in the latter year.

The Mangum hospital, formerly known as Quartz Mountain Medical Center, is among dozens of rural hospitals whose lab charges have spiked in recent years, several of which had a connection to Little River.

Insurers and public officials have accused hospitals of entering lab test arrangements in which they agree to bill for high volumes of tests or expensive tests that sometimes were performed elsewhere, a pattern that fits in Mangum.

"I would say the consensus in the town was that it wasn't being run like a hospital, I'll put it that way," said Corry Kendall, attorney for the city of Mangum. "It just didn't seem like they carried out hospital services."

Little River's CEO, Jeff Madison, declined to comment. "As a general policy, we do not comment on our financial information publicly," he wrote in an email.

Today, Avignone said the hospital still gets calls from people asking about lab test bills. "We still have people calling that facility from Maryland, New York and Maine saying, 'Hey, why do I have a bill for thousands—and in at least one case tens of thousands—of dollars from you guys? I've never even been to your facility before.'"

Little River's website currently lists only two hospitals, although it has operated others. Its flagship Rockdale hospital reported extremely high outpatient lab charges in 2015 and 2016: $213.6 million and $372.2 million, respectively, according to Medicare cost reports. Outpatient labs accounted for 62% of the hospital's total charges in 2015 and 86% in 2016. The hospital billed just $7.6 million for outpatient labs in 2014—5% of total charges.

It's unclear why lab charges constituted such a substantial portion of the Rockdale hospital's total charges in 2015 and 2016, or whether that trend continued into 2017 and 2018.

A number of other Little River hospitals show a pattern of high outpatient lab charges to total charges. Aside from Mangum, Little River briefly ran another hospital in Crockett, Texas, from April 2016 to June 2017. That hospital's outpatient lab charges went from $14.4 million in 2016 to $59.4 million in 2016, or from 18% of total charges to 55%.

The hospital, formerly known as Timberlands Hospital, shut down unexpectedly when Little River left.

Deborah Porth Blackwell, past president of the board for that hospital, said the company left vendors, utility bills and pharmacy contracts unpaid. "We're not very happy with them," she said. "They left us with quite a substantial liability."

Blackwell said she heard rumors of a lab test arrangement, but the board never saw the hospital's lab charges.

The two Austin physicians reopening the Crockett hospital are quick to differentiate themselves from Little River. One of them, urologist Dr. Subir Chhikara, called the hospital's closure "atrocious."

"There is no situation I would imagine where a hospital operator would close a hospital and cut off healthcare in that timeline," he said. "So they obviously have some intrinsic issues."

The other, plastic surgeon Dr. Kelly Tjelmeland, said he briefly partnered with Little River in 2013 to expand a service line in a surgery center, but is not currently affiliated with the company.

"We don't want problems," he said. "We basically want to do everything exactly as it should be done. "

Little River also runs a hospital in Cameron, Texas, whose cost reports do not show elevated lab test charges. It also briefly ran a hospital in Guymon, Okla., which also does not show elevated lab charges.

Numerous city officials in Rockdale declined to comment or did not respond to interview requests about the hospital's lab charges. City manager Chris Whittaker referred a reporter to a Little River executive, who did not respond. The city's attorney declined comment, and the mayor and several city council members did not respond to calls or emails.

Back in Mangum, Avignone, with help from state and local politicians, doctors and community members, is slowly getting the hospital, now called Mangum Regional Medical Center, back in business.

Kendall, Mangum's city attorney, said he's focusing on building a relationship with the hospital's new operators. Without it, residents would have to drive 30 minutes to the nearest emergency room.

"That 30 minutes could be the difference between living and dying," he said.

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