A system that allowed millions of dollars to disappear as a result of alleged fraud at the highest level has left Huntsville residents without a stable hospital.

Walker County Hospital Corporation — the non-profit organization responsible for the operation of Huntsville Memorial Hospital — is preparing to file bankruptcy after losing millions due to inflated salaries, alleged insurance fraud and failing attempts to establish a network of clinics. This has been confirmed by officials with the corporation and the Walker County Hospital District.

The troubles have also placed a burden on taxpayers, with the public taxing entity — the hospital district — providing nearly $6 million in forgiven rent payments and cash infusions to keep the doors open.

“We knew we had to provide the $2.9 million subsidy for the hospital to keep the doors open,” district chairperson Anne Woodard said of subsidies that were awarded at the end of 2018. Approximately $1.6 million of which was in the form of rent forgiveness.

So, how did the Walker County Hospital Corporation and Huntsville Memorial Hospital get in the position that it has been facing since the dismissal of former CEO Shannon Brown in February 2017?

Hospital district and corporation officials have confirmed that under Brown’s leadership, the hospital became involved with a laboratory that allegedly engaged in an elaborate scheme that charged tens of thousands of dollars more for routine tests.

To conceal their activity, the labs submitted “pass-through” bills using the names and information of in-network hospitals, leading to millions of dollars in fraudulent payments over a four-year period, according to a complaint filed by Aetna in Harris County District Court in 2018. The alleged scheme ultimately forced at least one hospital out of business. Aetna claims the labs paid doctors in illegal kickbacks to obtain specimens.

According to Woodard, the insurance companies were holding back payments to the hospital to recoup their losses in the scheme. Those issues have since been resolved.

However, that was just the start of it.

Around the same time, the Walker County Hospital Corporation began expanding their network of healthcare facilities. Those included a physicians organization, a free standing emergency room in Madisonville and clinics in Riverside and Coldspring.

The clinics were all met with financial woes, causing the profitable hospital to lose $9,581,588 in 2016, according to financial documents filed with the Internal Revenue Service.

In that same year Brown received a base compensation of $409,423, with $102,003 in bonuses from the hospital corporation. At least three physicians were receiving large payouts from both the hospital corporation and physicians organization, totaling nearly a million dollars.

“There were a lot of shady things going on with that hospital and it should be investigated,” Woodard said. “We always felt that it was not the appropriate time to do that while we were in the middle of a transaction. We are getting this deal done now.”

“When it comes down to it and you look at the money coming through, they (hospital corporation) had more than enough to operate the hospital, along with some extra to spend on relevant projects.”

The Walker County Hospital Corporation is currently under investigation by the Office of the Inspector General. Officials with the OIG declined to provide any details on the investigation.