St. Rose, physician embroiled in litigation over closed billing subsidiary

Friday, Sept. 1, 2000 | 11:28 a.m.

HENDERSON -- A St. Rose Dominican Hospital subsidiary that folded despite branding itself an "experienced physician management organization" is the focus of litigation between a doctor and the hospital.

The subsidiary, Nevada Physicians' Choice, billed patients and insurers and performed other business functions for six physicians and two of the Henderson hospital's clinics.

But the company barely was a year old when it folded last year. Its demise came at a time when St. Rose's San Francisco parent, Catholic Healthcare West, was under financial pressure.

Medical professionals familiar with Nevada Physicians' Choice say the company was riddled with incompetency. They say the company hired inexperienced clerks who sent erroneous bills to patients and insurers and generated paperwork with wrong physician addresses and phone numbers.

The physician involved in the litigation, Dr. James Barber, alleges that the company cost him about $191,000 in lost billing revenue after he opened his practice in September 1998. Barber, who specializes in obstetrics and gynecology, has since replaced Nevada Physicians' Choice with a new billing agency.

His wife and corporate administrator, Karen Odell-Barber, said the doctor's practice will continue regardless of the outcome of the litigation.

"We are devastated by having to be involved in litigation to resolve problems," she said. "This is not what we believe in or had intended. It's had a very devastating impact on our practice."

Rod Davis, St. Rose president and chief executive officer, declined to comment about the failed subsidiary because of the litigation. Instead the hospital issued a brief statement, noting that "positive relations with our physicians are integral to the quality of care we provide."

"St. Rose Dominican Hospital approaches all of its dealings with its more than 800 affiliated physicians -- and all of its business practices -- with honesty, integrity and full respect to legal guidelines."

But in an Aug. 3 letter circulated throughout the local medical community and obtained by the Sun, Davis defended the hospital while blasting Barber.

Davis wrote that as the result of an Arthur Andersen audit paid for by Nevada Physicians' Choice, the company initially offered to pay Barber $39,853 to settle their dispute. Davis also stated that Barber owed the hospital $235,915 in unpaid office rent and for a loan to help him start his practice.

"In spite of numerous, and repeated good faith efforts, with assistance of objective third-party adjudication, St. Rose has been unable to resolve this dispute with Dr. Barber," Davis wrote. "Unfortunately, Dr. Barber has responded with a vindictive retaliation against my personal character and reputation, against the reputation and integrity of St. Rose Dominican Hospital and against Catholic Healthcare West."

While wishing Barber success in his practice, Davis added that the hospital "will not be intimidated or bullied into an inappropriate and unjust resolution."

But Odell-Barber said in a court affidavit that her husband's practice lost about $191,000 because Nevada Physicians' Choice "made numerous errors in billing Dr. Barber's work." She added that her husband never paid the rent in question because he never signed a lease for his Henderson office, which is owned by the hospital.

In a counterclaim filed last week, the Barbers also allege that Nevada Physicians' Choice never properly obtained credentialing to enable the doctor to see patients with health care plans. They also said the subsidiary made errors on about 65 percent of the bills it sent out on behalf of the doctor and made changes to bills without his permission.

The company also listed the doctor with the telephone company as "Dr. Barber James," the Barbers alleged. They also said the Aug. 3 letter from Davis "falsely accused Barber of improper actions and/or omissions, while neglecting to mention his own defalcations."

One of many physicians who side with Barber is Dr. Stephen Montoya, chief of OB/GYN services at Sunrise Hospital and Medical Center. Montoya, who has practiced in Las Vegas since 1984, said he knows of no physician who has had as many problems with a medical billing agency as had Barber.

"James Barber is a very honorable man," Montoya said. "I've known him since he was an intern. He's an honorable man and he'll pay his debts, but the other side has to admit their mistakes, too.

"My overall take is that the Barbers went in with wide open eyes. They went in with good intentions and came out on the short end of the stick."

The complex financial arrangement between Barber and St. Rose wound up in Clark County District Court after the hospital sought to evict Barber from his office. But District Judge Michael Cherry granted Barber a stay of eviction until Sept. 29 to give the doctor and the hospital an opportunity to resolve their differences. In any event, Odell-Barber said the practice will remain open.

Nevada Physicians' Choice was incorporated as a for-profit arm of the nonprofit hospital in January 1998. Davis was listed as the subsidiary's initial president, but a new president, Michael Mikich, was named that July and Barber became its first client that summer.

The St. Rose subsidiary became Southern Nevada's second physician management company to be owned by a hospital. The first was Oasis Health System subsidiary Oasis Management Directions. Oasis is a subsidiary of Valley Health System, which operates Valley, Desert Springs and Summerlin hospitals.

Medical professionals say St. Rose formed Nevada Physicians' Choice largely because it needed new patients to boost revenue. They say the hospital was hurt because of the discounted rates it gave to customers insured by health maintenance organizations and other third-party payers.

The hospital conceded that point in an Aug. 11 press release in which it urged Congress to restore Medicare and Medicaid funding that was cut because of the Balanced Budget Act of 1997. St. Rose said the federal legislation reduced Medicare and Medicaid payments to hospitals by $86 billion, about $25 billion more than Congress initially intended.

"Unfortunately, the Balanced Budget Amendment's Medicare and Medicaid reductions have increased the strain on hospitals and is compounded by lower payments from private insurers," Davis said.

In May 1999, the state reported that St. Rose made $2.3 million in profits in 1998, but that was 32.8 percent below the previous year. Hospital profits statewide dropped 7 percent.

In June 1999, Moody's Investors Service listed Catholic Healthcare West as a candidate for potential downgrade of its bond rating, a move that would have forced the hospital conglomerate to borrow money at higher interest rates. The Los Angeles Times quoted Catholic Healthcare West officials in November as stating that the conglomerate planned to report $80 million in operating losses for the fiscal year that ended June 30, 1999.

When Nevada Physicians' Choice shut down in October, resulting in a loss of 11 jobs, it was merely one of many subsidiaries under the Catholic Healthcare West umbrella that were either eliminated or reduced last year.

The subsidiary failed in part because it was unable to reach an agreement with PacifiCare Health Systems Inc. It also was hurt by cutbacks from another insurer, Humana Health Plan.

But executives with other Las Vegas medical billing companies say Nevada Physicians' Choice also failed because it tried to perform too many functions and served only one hospital. Kathy Silver, chief executive officer of Oasis Health System, said her billing service has succeeded because it serves five hospitals and has a more narrow focus than St. Rose's failed subsidiary.

"We have a lot more exposure to the medical community," Silver said. "We concentrate only on billing and credentialing for physicians whereas Nevada Physicians' Choice was more of a mixed bag. We have a very clear business strategy, but it was hard for Nevada Physicians' Choice to be understood in the medical community."

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