Bankrupt health system with huge lab charges closes hospitals, clinics

Little River Healthcare, a bankrupt Texas health system with ties to an apparent lab billing scheme, has officially shuttered its two hospitals and numerous clinics, according to posts on the company's website and Facebook page on Thursday.

The closures mean more than 600 employees are out of a job, including more than 60 employed physicians. Former patients will no longer be able to visit Little River's flagship critical-access hospital in Rockdale, the company's acute-care hospital in Cameron, a surgery center in Temple and numerous imaging, specialty and primary-care clinics across central Texas. The nearest hospital to Rockdale is about a half-hour drive away in Taylor.

"We apologize for this inconvenience and will miss providing healthcare to the community," the statement said. "Thank you for many years of support."

The closures come after the company's Chicago-based lender, Monroe Capital, declined to provide requested funding. The two are duking it out in bankruptcy court, with Little River arguing that Monroe refuses to fulfill its budget requests, and Monroe arguing that Little River has not stuck to its agreed-upon budgets, according to filings. Monroe argues Little River owed it more than $50 million at the outset of the case, not including additional post-petition funding it provided. Insurers say they are owed at least $92 million, according to court records.

A Modern Healthcare investigation this year found Little River was likely billing insurers for extremely high volumes of lab tests that may not have been performed for their patients or even in their facilities. That's because critical-access hospitals like the one in Rockdale get paid more for such services than other types of facilities.

The Rockdale hospital reported extremely high outpatient lab charges in 2015 and 2016: $213.6 million and $372.2 million, respectively. Outpatient labs accounted for 62% of the hospital's total charges in 2015 and 86% in 2016. Other hospitals Little River previously managed showed similar spikes.

Ascension's Seton Healthcare, an Austin-based not-for-profit system that operates more than 100 locations, has been working to help Little River's physicians continue providing care to their patients since Little River filed for bankruptcy in July, Ascension spokesman Nick Ragone wrote in an email.

"Seton welcomes a partnership with physicians formerly affiliated with Little River, as their continued commitment to residents of central Texas aligns with the compassionate healthcare we provide to our communities," he said.

Little River, after trying unsuccessfully to find buyers to take over its facilities, is seeking to convert its Chapter 11 bankruptcy case to Chapter 7, under which a trustee would be appointed to liquidate its assets and shut down facilities. That hasn't happened yet, but court records show Little River was already unable to pay its employees for the week ended Nov. 30. Little River's attorney did not immediately return a request seeking comment.

Hundreds of insurers, service providers, physicians and employees say Little River owes them money, and insurers are trying to claw back the money they paid for lab tests. Court records show UnitedHealthcare is Little River's second-largest creditor, at about $39 million. Aetna says Little River owes it more than $27 million. Blue Cross and Blue Shield of Texas claims the company owes it about $26 million.