Missouri State Auditor Nicole Galloway says an audit of Putnam County Memorial Hospital in northeast Missouri’s Unionville has uncovered $90 million in inappropriate lab billings by hospital leadership and associates.

In September 2016, the Putnam County Hospital Board hired David Byrns and his company, Hospital Partners, Inc., to take over day-to-day management of the facility. Byrns hired a partner organization, Hospital Lab Partners, LLC, to provide lab services.

The audit has uncovered a billing scheme involving the lab company and its affiliates that conduct lab work nationwide. Putnam County Memorial Hospital bills the insurance companies using the hospital account. In exchange, the hospital gets a cut of the insurance payouts.

“The decisions made by hospital management and the board are astounding in their irresponsibility and have the potential to negatively impact the hospital and the residents of Putnam County for years to come,” says Galloway.

She says since November 2016, the hospital has passed most of $90 million in insurance payments along to the lab company and its affiliates. Most of the billings were for patients who had never been to or received services from Putnam County Memorial Hospital. The practice funnels millions of dollars through the hospital and reduces it to what Galloway says is essentially a shell organization for labs across the country.

The audit also shows that the hospital pays for the salaries of 33 employees from around the country who conduct the lab work. Galloway says the “employees” do not report to work at the hospital and most live out of state, some as far away as California, Georgia and Texas.

The employees ship blood specimens to various labs for testing, while Putnam County Memorial Hospital submits the insurance claims for payment. The hospital also paid out more than $10 million in lab management fees, with little explanation of the charges.

“It’s deeply disappointing that the Putnam County Memorial Hospital was in such a dire situation that, in order to stay operational, the hospital’s board accepted these income sources without question,” says Galloway. “The citizens that live and work in this area and the patients that depend on the hospital are ultimately going to be the ones who pay for those mistakes.”

The audit also reveals that Byrns has paid more than $700,000 to his management company and paid himself an additional $200,000 annual salary out of county hospital funds without board approval. He also received reimbursement from the hospital for at least $5,000 in questionable expenses, including alcohol, cigarettes, car washes and golf outings.

Galloway has turned audit records and information over to state and federal law enforcement authorities.

The complete audit report for Putnam County Hospital is available here.