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Illinois AG’s Healthcare Bureau investigating suspicious Cottage Hospital bills

Galesburg Cottage Hospital closed in January 2022, and the building is now owned by OSF HealthCare. But people have been getting years-old bills in the mail from Cottage that are postmarked in Michigan.
Jane Carlson
Tri States Public Radio
Galesburg Cottage Hospital closed in January 2022, and the building is now owned by OSF HealthCare. But people have been getting years-old bills in the mail from Cottage that are postmarked in Michigan.

Following numerous consumer complaints, the Illinois Attorney General’s Office is investigating suspicious medical bills from Galesburg Cottage Hospital, which has been closed for more than two years.

A mediator with the Illinois Attorney General’s Healthcare Bureau contacted owner Sanjay Sharma of SBJ Group earlier this year, saying the consumer complaints cast doubt on the legitimacy of the bills.

“Many consumers believe that these bills were already covered by their insurance or that the dates of services are outside the limitations allowed for collection,” reads a Feb. 5 letter to Sharma from the mediator.

TSPR obtained copies of the consumer complaints and related correspondence via a Freedom of Information Act request.

However, the Public Access Bureau withheld two emails from the records request, pursuant to a FOIA statute that exempts disclosure of records that could interfere with pending law enforcement action.

The emails determined to be exempt contain information about the ongoing investigation and “reasonably contemplated law enforcement proceedings” of the Illinois Attorney General’s Office.

The Public Access Bureau stated release of those records would interfere with the investigation “by revealing legal theories of the investigation.”

More about the complaints

SBJ Group of Austin, Texas, acquired Cottage Hospital and its affiliated clinics in 2020 from Quorum Health, for $1 million plus $800,000 in net working capital.

This was initially to be a cash purchase, but SBJ Group later changed its offer from an asset transaction to a purchase of the equity interests of Cottage, according to Quorum Health bankruptcy filings.

In early 2022, the hospital closed its doors after losing Medicare participation due to numerous violations. SBJ Group then filed for bankruptcy for Cottage’s clinics and the hospital’s license was revoked.

Within a few months, the clinics also closed and OSF HealthCare purchased Cottage properties for $4 million.

But last year, as previously reported by TSPR, medical bills postmarked in Michigan with the Cottage Hospital logo began arriving in former patients’ mailboxes for medical services performed years earlier.

Copies of consumer complaints about the bills obtained by TSPR show a range of concerns, including difficulties in reaching an agent for discussion and whether former patients could be taken to collections for years-old medical services.

“It would be nice to have some level of confidence that my credit will not be affected if the bill gets transferred for collection activity as threatened,” wrote one consumer.

The same consumer mailed a check for $500 to the address listed on the bill, but it was returned as undeliverable.

While some consumers reported they did not believe they ever had the medical services listed on the bills, others said they remember the services but were not previously billed for them.

“I have received an invoice that states I owe $6,665 for a medical stay in the hospital from October 2021,” wrote another consumer. “I was under the understanding that my medical insurance had paid for my medical costs … I am retired and have a limited amount of funds. Is there any help for me in this situation?”

Others immediately suspected the bills were not legitimate.

“I believe this to be a scam bill sent to me by someone that either owned, managed, or worked at the former hospital or got ahold of their records,” wrote that consumer. “I would like it looked into to prevent other people in the area from getting scammed … or getting further victimized by people connected to this hospital.”

Personal information such as names, addresses, and medical data was redacted from the copies of complaints obtained by TSPR.

More about the investigation

The letter to Sharma from the Healthcare Bureau mediator asks a number of questions to gain clarity on the situation, such as whether SBJ Group inherited the debts and open accounts from Cottage, notwithstanding bankruptcy.

The mediator also asks if SBJ Group is aware of the statute of limitations on the accounts and if the purported billing office actively reviews timely filing data.

Insurance companies have timely filing limits. It varies by company anywhere from 90 to 365 days, but if providers want payment – they have to file claims within those limits.

TSPR previously reported that Cottage was not billing patients in the months before the hospital closed because of problems with an electronic health record system implemented by Sharma.

The mediator also asks if the purported billing service offers financial aid and what the procedures are for consumers to apply for assistance.

Per the Fair Patient Billing Act, all Illinois hospitals are required to notify patients of the availability of financial assistance and provide detailed billing information before sending a patient to collections.

It’s not clear whether the Healthcare Bureau has received responses from Sharma.

But in a local lawsuit, officials had difficulty serving Sharma a summons.

OSF HealthCare is suing Knox Clinic Corporation in Knox County for nearly $48,000 for breach of contract and damages over unpaid rent.

As part of the sale of the sale of Cottage properties to OSF, Sharma signed a lease for $23,628.46 a month for use of the Medical Arts building for remaining clinic operations.

The lease terminated at the end of June 2022, but the lawsuit filed in Knox County court in October alleges the Knox Clinic Corporation “wrongfully failed and refused to pay the amounts due.”

Knox Clinic Corporation is the legal entity of the former Cottage clinics.

OSF HealthCare has now filed an order of default for failure to plead in the case.

Tri States Public Radio produced this story.  TSPR relies on financial support from our readers and listeners in order to provide coverage of the issues that matter to west central Illinois, southeast Iowa, and northeast Missouri. As someone who values the content created by TSPR's news department please consider making a financial contribution.

Jane Carlson is TSPR's regional reporter.