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These two reporters investigated a rural hospital closure. What they found surprised them.

These two reporters investigated a rural hospital closure. What they found surprised them.

Picture of Kathleen McGrory
Oswego Community Hospital in southeast Kansas suddenly closed in February, prompting reporter Jonathan Riley of The Morning Sun
(Photo courtesy Jonathan Riley/The Morning Sun)

If you cover health care in a small- or medium-sized market, chances are good you’ve written about a struggling rural hospital. More than 100 have closed over the last decade and many more are barely staying afloat. 

By now, the reasons may sound familiar: Rural populations are shrinking. Reimbursement rates are low. Hospitals across the country are merging and centralizing their operations to save money and increase market leverage. 

But a June report from The Morning Sun in Pittsburg, Kansas and GateHouse Media’s National Data and Investigations Team is a good reminder that there can be much more to the story.

Jonathan Riley is one of two reporters at The Morning Sun. In February, his editor asked him to look into the abrupt and unexpected closure of a hospital about 45 minutes from Pittsburg. Riley wasn’t sure where to start, he told me in an interview. He typically covers local government. So he drove to the shuttered Oswego Community Hospital, posted up at a nearby gas station and started asking around.

It wasn’t long before a former hospital employee showed up at the gas station with information to share. (Oswego is a “small town, even compared to Pittsburg,” Riley said. The population is about 1,800.) As it turned out, many of the people who had been laid off were at a job fair that day.

Riley headed in that direction.

To his surprise, people were willing to talk. Almost everyone Riley interviewed mentioned Jorge Perez, the Miami businessman who managed Oswego Community before it closed. Perez had been accused of dubious business practices at the rural hospitals he managed elsewhere in the country. Former Oswego Community employees suspected similar issues there, too.

“It became clear that what was going on here in southeast Kansas was just a small part of a bigger picture,” Riley said.

Riley tried writing that story, he said, but quickly realized he didn’t have it. He filed something much narrower that week — a story explaining how the hospital had failed to pay employees and vendors for weeks before it closed. Then he and his editor connected with Michael Braga of GateHouse’s national team.

Braga was intrigued. He’s a veteran investigative reporter and editor who has unearthed fraud and dug deep into hospitals. “This just smelled like a penny-stock company right from the start,” he told me. 

Braga started looking for records and data that could help untangle what had happened at Oswego. He began by examining income statements for all of the hospitals Perez had managed. “We wanted revenues. We wanted losses,” he said. “Basic numbers.”

Then, he and Riley pulled all of the news clips he could find on the facilities. That led them to lawsuits, bankruptcy proceedings and a damning audit from Missouri state officials in 2017 that exposed questionable billing practices.

Their big break, however, came when Braga stumbled upon a National Bureau for Economic Research website that contained data from the federal government’s Healthcare Cost Report Information System. It provided an inside look at utilization, costs and charges at individual health care facilities across the country, including those that Perez had run. 

“Some people in the industry hadn’t seen that data,” Braga said.

The data didn’t have headers, and Braga needed to line it up with a data dictionary to make sense of it. But once he knew what he was looking at, a striking pattern emerged: At several of the rural hospitals Perez managed, billing for urine and blood tests spiked when he took over. 

The trend was key. The Missouri audit found similar spikes in billing and identified them as fraudulent. In Missouri, the tests were being run at out-of-state labs for patients who had nothing to do with the hospital. Some insurers found the practice alarming and stopped paying the hospital’s claims. 

Perez hadn’t been able to orchestrate the scheme at Oswego Community, the reporters found. He ran out of time and money, they surmised. Instead, the hospital succumbed to financial pressures from the fraud at other hospitals and the lawsuits that followed.

Riley and Braga weren’t done. After publishing their investigation into Oswego Community Hospital and drew connections among Perez’s associates, they wanted to take a 10,000-foot view of rural hospital closures. They mapped out where rural hospitals were most likely to close or lose money. Again, they were surprised by what they saw. 

“It looked like a map of the Confederacy,” Braga said. 

Their main finding — that rural hospitals were foundering in states that declined Medicaid expansion under Obamacare — spread across the internet, thanks partly to a tweet by former CMS Administrator Andy Slavitt. Other findings were surprising, too, like the fact that rural hospitals in Utah were among the most profitable from 2011 through 2017. 

“There you have this really conservative state but it really cares about its rural people,” Braga explained.

The reporters also published data that can be used to assess the financial position of hospitals across the country. You can search by state and city and easily see gross revenues, net income and profits.

Riley and Braga are continuing to follow the story. Separately, Perez and his hospitals were the focus of an outstanding Kaiser Health News report by Barbara Feder Ostrov and Lauren Weber that published in August. Perez told Kaiser Health News he had operated in good faith but was worried about the possibility of going to jail.

I asked both Riley and Braga what they took away from their reporting experience. Riley was reminded of the importance of sourcing at all levels. Recall it was the low-level hospital employees who tipped him off to the bigger story. For Braga, it was that data can help you see stories that may not otherwise be obvious. 

Hospital finance stories are often complicated and nuanced. And the narrative isn’t always obvious. As evidenced here, thorough digging and smart data analysis can lead to unexpected yarns.

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